Building an Exciting Healthcare IT Company From Chicago: LaunchPoint CEO Terry Ryan (Part 4)

Sramana Mitra: Healthcare IT has been a very active field in terms of startups and innovation in the last 10 years, maybe. What was the next level? As you double-clicked down on healthcare, what are the other sets of choices? What was the next level of process to determine where in healthcare you were going to focus?

Terry Ryan: That’s a really good question. We reminded ourselves that all the good things we’ve spent the last decade doing in the data space were all concentrated around the biggest, hairiest, and most complex types of data that you want to throw out. We were, at times, known as the consultant’s consultant. We pulled back and said, “If we’re really going to continue that experience, where in healthcare are we dealing with enormous concentrations of data? Where in healthcare are we dealing with complex data?” Once we studied that a bit, we decided to get down to the claim level.

We weren’t really debating consumer versus business or provider versus payer. We wanted to basically go after everyone’s claim data. What value proposition can we bring to the market now that we have access to that data?

We then started talking with a lot of people about what the challenges were in the data that people know or didn’t know about or didn’t have the horsepower to think they can go after. We were the experts in that kind of stuff. The cost of CPU is dropping down. The cost of storage is going through the floor. The machine quality and throughput is going up, so we knew that we can go after data in ways that people had never gone after. We even dabbled in the genome studies. What we ended up focusing on was in the area of pre-imposed cost containment, which is the payment integrity space that I mentioned earlier. Basically, it’s looking for problems within the data and how it’s being paid or accounted for. Is there some fraud going on?

We’re looking for natural things you can see within the data and also unnatural things that people have never seen before at the most atomic level. That’s how we got into offering product lines that really try to answer those types of problems. You’re running a very effective business but 3% to 5% is being done wrong. What does that mean? You’re paying claims that you shouldn’t. There’s all kinds of way that stuff happens. Our solution set depends on that volume of data to make better mining decisions to get our clients focused on the right areas.

Sramana Mitra: Excellent. That 3% to 5% that goes wrong in your client base, what does that quantify to? What is the ROI of your solution?

Terry Ryan: Healthcare is this multi-trillion dollar animal. It’s not hard to put together value propositions around the sheer size of the problem. If I take just our solution set that we have live today, which is about half of our vision that will be in the next two years, it’s about a $30 billion opportunity for our clients. If you boil that down within there and you get 3% to 5% of it, you’re talking about a multi-billion dollar solution set that can be put together. I haven’t had clients ask for ROI in a long time. Expectations are almost off the chart with the type of solutions you bring them. Our classical client will pay us hundreds of thousands of dollars a year. I’ll give you an example. They’ll pay us $700,000 a year in a three-year contract to run one of our seven live solutions today. That one solution set will recover $45 million for them.

This segment is part 4 in the series : Building an Exciting Healthcare IT Company From Chicago: LaunchPoint CEO Terry Ryan
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