Fasttrack

Look over the shoulder of a clerk in a typical doctor’s office and you’re likely to see a sea of paper. Larry Lai, the chief executive officer of EDIComm Inc., sees an ocean of opportunity. Lai has developed software that streamlines the medical claims process, simplifying billing and collection operations and even helping doctors and hospitals to quickly check their patients’ eligibility for insurance coverage. In three years since EDIComm was launched, the Woodland Hills company has grown into a $1.2 million firm with some 150 clients in 20 states. This year, Lai expects revenues to increase fourfold to $5 million. Although other companies provide similar services, competitors typically work only with a single insurance company, so the service they provide to physicians and hospitals, which accept many different kinds of insurance, is limited. In contrast, EDIComm has carved out a niche because it works with 600 different insurance companies, and doctors and hospitals can integrate the software into their administrative systems regardless of the computers or software they are currently using. “They have an outstanding product. They have exceptional customer service, and third of all, they’re willing to customize the product to meet the needs of our organization,” said Gigi Wallin, director of business services at St. John’s Regional Medical Center and St. John’s Pleasant Valley Hospital, who has been using EDIComm for nearly two years. Traditionally, doctors and hospitals have filed insurance claims using a different form for each different insurance carrier. They must do a visual check of each form to make sure the information is complete and, when payments come in, they must manually check them against the individual claim for each individual patient and insurance carrier. For every 100 patients the doctor treats, there might be 50 different kinds of insurance claim forms to file different pieces of paper, different payments to track down and any number of chances that something will go wrong. With large volumes, it can take weeks for clerks to manage the paperwork on a single claim. With EDIComm software, doctors or hospitals fill out the same electronic form for each patient regardless of the type of coverage or insurance carrier. The information is then sent to EDIComm, either over a proprietary line or over the Internet, and EDIComm translates it to the format required for the particular insurer. If information has been omitted, EDIComm notifies the health care provider the next day. And when payments come in from each insurer, EDIComm consolidates them on a single statement and transfers them back to the health care provider by computer, making it easier for doctors to keep track of their accounts receivable. The company will also negotiate with the insurance carrier if claims are refused or other problems arise. And EDIComm provides eligibility information by computer, so a doctor can tell, with a push of a button, the type of coverage a patient carries and what services will be covered. “The biggest benefit is that it’s not just a billing tool,” said Mike Lozano, administrative analyst with UCLA Health Care Enterprise, which has been using EDIComm services for about a year. “We’re able to take the data EDIComm provides and generate feedback and reports.” An electrical engineer who came to the U.S. from Taiwan to study software development, Lai first applied his skills to the retail industry. After graduating from Stevens Institute of Technology in Hoboken, N.J., he settled in Los Angeles and, with partner Andy Baudry, set up Bonafide Management Systems Inc. in 1981 to provide electronic data interchange (EDI) services to video stores. The retailers needed a way to track their rental revenues and customers, and keep tabs on inventory from one store to the next. The software allowed each store to “talk” to the other, so that data from all the stores could be collected and consolidated. But video rental is a very specialized field, and Lai and his partner soon found that the growth potential for Bonafide was limited. Not so with health care, a growing industry in which the paperwork changes not only from one insurance company to the next, but from one delivery trend to the next HMOs, PPOs and so on. With each new method of delivering service comes new needs for capturing, retrieving and sending data. “I did a little market research, and I saw that the health care industry is huge,” said Lai. “Compared to retail, it’s like a pond compared to an ocean, and I wanted to catch fish in an ocean.” Using the basic EDI model developed for the retail industry, Lai began about eight years ago to design a system for the health care industry. As it turned out, the technology was the easy part. Lai needed certification from the different insurance companies to process the claims, and most were reluctant to work with an untested, small company. Not only were insurance companies reluctant to certify EDIComm, but doctors were wary of trying something new. “If you go to most doctors or hospitals, they have some kind of software (to process claims),” said Lai. “Either they like it or they hate it, but they’re not going to change. If I’m a doctor, I’ll probably hire more people to process claims than to change software.” A start-up process that Lai expected to take a few years ultimately took about eight years. Little by little, the company was able to win certifications from insurers, and each one helped to build credibility for the next. Ultimately, doctors were won over by the ease of using the software EDIComm software interfaces with any computer or software system a medical group already uses and the services the company provides, including the ability to customize programs to an individual hospital’s needs. “I have the staff place one phone call and they speak with the service folks and it gets handled,” said Wallin. “I know that sounds like it shouldn’t be a big deal, but they make it very easy.” This year, for the first time, the company will turn a profit, Lai said. Because most of the expense of setting up the system is now behind the firm, earnings are expected to increase in the future as well. “When I double the business, I don’t need to double employees,” Lai said. “It’s like a freeway. Once it’s done and you put in a tollbooth, every time a car passes you get paid.” The next step is to expand nationally, a strategy that Lai said will help the company further differentiate itself from the competition, although he admits the goal is ambitious for a company of EDIComm’s size. “Most companies (in this field) are regionalized,” he said. “We’re probably the smallest company trying to do it nationwide.” But the company’s flexibility will help to differentiate it from larger competitors, Lai said. “We have the technology, and that’s the key to the whole thing,” he said. “Sometimes, if you can’t beat them with finances, you beat them with service.” EDIComm Inc. Year Founded: 1996 Core Business: Developing software that streamlines the medical claims process Revenues in 1996: 0 Projected revenues in 1999: $5 million Employees in 1996: 4 Employees in 1999: 15 Top Executives: Larry Lai, chief executive officer, and Andy Baudry, chairman Goal: To become a nationwide leader in providing EDI service to the health care industry Driving Force: “In health care, everyone wants to cut costs”