Avisena provides revenue cycle management (RCM) technology and services to medical practices à la athenahealth. The Avisena business model combines proprietary practice management technology delivered through the Web with a back-office service organization staffed with a team who manage collections and help physicians to better understand and improve their revenue cycles.
At present, physicians have the option of managing their practices’ revenue cycles in-house by hiring staff and purchasing hardware and software, outsourcing this function to local, less sophisticated billing companies, or outsourcing it to Saas ans SES companies such as Avisena and athenahealth. With the in-house option, technology and upgrades can be expensive with high up-front costs. In addition, medical practices must hire, train, and manage staff as well as shoulder the burden of keeping up with the ever-changing industry regulations and payer practices. This approach is difficult and time-consuming for many physicians. It takes them away from the actual practice of medicine and often leads to poor collection outcomes.
When outsourcing revenue cycle management to local billing companies, medical practices do not enter important information at the point of use. Rather, they collect and send stacks of paper to the billing company, which is charged with deciphering and posting the information. This approach can be problematic, as the practice needs additional time to explain discrepancies in information, and many practices experience long lags in payment from insurers when information is inaccurate or incomplete. Moreover, when outsourcing to these local services, there is little visibility of receivables and understanding of the fluctuation in collections. These solutions don’t have the reporting and business intelligence tools needed to make the revenue cycle transparent.
Avisena’s business model is designed to help physicians 1) collect more than they would with traditional revenue cycle management models; 2) share in savings created by economies of scale and better contracts with vendors; and 3) benefit from a dedicated representative to analyze data; walk physicians step-by-step through financial results and operating metrics each month; and provide actionable recommendations to help physicians gain greater control of their businesses.
The company’s solution helps medical practices to improve collections, on average, 10% to 20%. For Avisena client Urology Specialty Care (USC), a three-physician practice that operates under Urology Specialty Group representing 26 physicians in 19 offices across South Florida, collections increased 19% after the first 12 months after contracting with Avisena and 29% at the end of 24 months.
The company’s solution combines free software with personalized back-office services. Avisena stays on with clients after the technology is implemented: Avisena assigns each client a local account manager, who becomes intimate with the client’s business operations, office staff, and unique challenges. These managers analyze practice information, data, and reports generated from the Avisena Practice Manager along with industry best practices to develop actions designed to help the practice improve results. Avisena’s approach also includes back-office collection services, and the company assures physicians that it will chase any denied claim regardless of the dollar value of that claim. Unlike other service providers, Avisena doesn’t kick collections efforts back to its clients.
In addition, for those physicians who either do not employ billing staff (i.e hospitalists) or whose staff does not have billing and coding expertise, Avisena will provide these services. Currently, Avisena provides billing and coding services to 25% of its clients. The other 75% of Avisena clients do their charge entry at their medical offices through the Avisena Practice Manager system.
In addition to its technology and service model, the Avisena solution offers rich content that the company researches, creates, and manages. This includes information on billing and payment rules, payer information, provider information, and so forth, that it codified into the Avisena system to create a comprehensive knowledge base for all clients.
The $20 billion RCM market is based on Avisena’s average fee of 5.25% of collections generated by 743,166 full-time active physicians nationwide whose average annual collections amount to $500,000. Avisena works with more than 700 physicians in Florida, Georgia, and the Carolinas, from solo practitioners to large, multi-specialty groups with more than 40 practitioners. The company’s sweet spot is small to medium-sized practices with one to 15 practicing physicians. This market segment has the greatest need for RCM assistance due to its lack of scale, expertise, or technology to maximize collection results. However, Avisena also does well with larger groups that, in essence, operate like a set of small practices. The company tends to have a higher mix of specialists to general practitioners because of the strong ROI Avisena generates for specialty practices. The specialties the company addresses account for 85% of the physician market across the United States.
Over the past four years, revenue has grown 43% year-over-year, and the company currently has more than $15 million of annual recurring revenue. Initially, the company was funded with money from friends and family. In 2002, a local fund, The Astri Group, made its initial investment and, in 2004, WFD Ventures became a shareholder. Over the ensuing years, Astri and WFD have made several follow-on investments totaling $14 million. Avisena is currently seeking capital to support its plans to expand into new markets in the Southeastern United States over the next six months.
There are many types of RCM solutions in the market today, yet Avisena believes there is a need to have a comprehensive platform. Already, the company has seen a trend among EMR companies to acquire or build RCM products.
One company building such a comprehensive platform is athenahealth, which is a competitor not to be discounted. athena has been pushing its electronic medical records (EMR) product, athenaClinicals, following the signing into law of the HITECH Act, which offers incentives for practices to use electronic records. But it has also been successful with its revenue management product, athenaCollectorSM. Anthony Vendetti, director of research and senior health care analyst at Maxim Group LLC, recently praised athenaCollector as “great product” that has enjoyed “remarkable traction.”
In the future, there will most likely be a consolidation of best-in-class companies, and a roll-up strategy led by Avisena is something the company would pursue with appropriate funding. Here again it will face competition from athenahealth as more opportunities for growth in online healthcare emerge.
This segment is a part in the series : Deal Radar 2010