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Software firm rides out dot-com fall photo by Bob Pennell Jorge Yant Plexis Health Care Systems of Ashland makes management tools By GREG STILES Mail Tribune ASHLAND - The prospects were incredibly rosy for Plexis Health Care Systems Inc. at the outset of 2000. The health care management software company had a new name; it was poised for an expansion and a merger. Sales were projected to quintuple - to $10 million. There was plenty of reason for Jorge Yant, chief executive officer, and co-founder Terry Dorries, chief technology officer, to believe the company they had founded in 1996 was ready to grab hold of an increasing share of a $20-$30 billion market. Within a few months the scenario changed. To be sure, Plexis remained viable, successfully following a demand shift within the industry it serves. It recently moved into a 14,000-square-foot building - tripling its size - on Williamson Way. Still, the dot-com implosion that hammered the high-tech sector tripped up the firm just as it was ready for a giant leap forward. Venture capital so readily available a few months before dried up and uneasiness involving large investments in technology stopped Plexis' growth in its tracks. "At the time, things were going nuts," Yant recalls of early 2000. "Money was flowing everywhere. Organizations were popping up all the time. We were in the process of raising $33 million." A planned merger with WebTPA of Dallas went by the wayside. "We had easily projected $12 million in revenue the following year," Yant says. "Then the financial markets retrenched and we decided to hold back. We had anticipated, between the two of us, having a $100 million company in the next few years. We still have the potential, but we're waiting for the financial markets to straighten out." Today the company serves 23 clients in 11 states and the Cayman Islands. Yant says the company had revenues of $2.4 million in 2000, $2.6 million in 2001 and projects growth to $3 million this year. "For organizations processing health care claims running into the tens and hundreds of millions each year, paying a few hundred thousand dollars for software is not a high cost," Yant says. "Some of our competitors won't walk in the door for less than a million dollars." The sector's lucrative rewards still draw investment, but it's not an easy market to enter. The complex needs of the industry, from investment and development to intellectual property, create a substantial barrier to entry in the market, Yant says. And cutting-edge technology capable of meeting federal requirements is valuable to a variety of clients, from third-party administrators (for self-insured clients) to union trusts. "Plexis provided us with better reporting and information than our less-sophisticated software," says Srin Vishwanath, chief financial officer for Efficens, a 3-year-old Burbank, Calif., management services organization for 40 oncologists who serve a half-million plan members. "The idea is to manage those dollars more efficiently and save administrative costs, and that allows us to allocate more dollars for patients ." Yant says the health-care reimbursement model began to shift in mid-1998, when many doctors were receiving a fixed monthly sum per patient - whether they had one visit or 20. The payment caps started going away and independent physician associations declined. Plexis had written programs useful for 90 percent of the insurance companies, health maintenance organizations and third-party providers. But as the Health Insurance Portability and Accountability Act of 1996 evolved from paper to reality, it altered many things and rendered previous software applications virtually obsolete. "HIPAA was sort of the Y2K of the health industry," Yant says. "I've read some estimates that as many as 50 percent of the third-party administrators could be put out of business by HIPAA." The reason is that many TPAs have home-grown systems built on older technology and were in need of a total overhaul. One of Plexis' competitors, TEXN, of Birmingham, Ala., anticipated that it would take 80,000 programming hours (the equivalent of 10 people working four years) to rewrite its system as a result of HIPAA. Plexis has partnered with WebTPA and has now built a full-fledged solution to the shift. "We've got $9 million invested in it," Yant says. "It's a very complicated piece of software. It's not a simple database. It's a mission-critical application, the lifeblood of these businesses." Reach reporter Greg Stiles at 776-4463 or e-mail [email protected] Mail Tribune Home | Ottaway Newspapers, Inc. | Dow Jones & Co., Inc. | Privacy | Contact Us Copyright � 2001 Mail Tribune, Inc.