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VeriType – Competition
There are no direct competitors to VeriType analysis. Clinicians currently meet the need for HCFA compliance review in several ways. Most medical records review is performed manually without the participation of the clinician. It therefore only addresses part of the problem. Sometimes physician practice groups hire firms such as RevMax to review medical records after charges have been submitted and recover more revenue where possible. Finally, there is only one firm, MedicaLogic that recently began offering a HCFA compliance check as part of its software. However, this software is a multimillion dollar electronic medical records system that needs to be installed on a hospital-wide basis.
There are two types of potential competition in the HCFA compliance software and education marketplace. The first could be a firm with prior expertise in manually auditing medical records for HCFA compliance. Examples include Maximus and RevMax (a division of DT Health Systems). Research indicates none of these firms use software for HCFA audits. It is conceivable that their expertise in the process would position them to develop software for this purpose.
The second type of competition could come from a firm in the Electronic Medical Records (“EMR”) market. While these firms may not have expertise in HCFA evaluation and compliance, they do have expertise in medical software development. Firms that provide EMR technology include: HBO & Co., Shared Medical Systems, IDS Systems, Cernet Corp., PeopleSoft, SAP, and smaller EMR firms such as MedicaLogic. Only MedicaLogic offers a HCFA component to its software. Their current market share is too small to be recognized. EMR technology also requires clinicians to build the majority of the medical record through drop down menus and prompts, which is a significant departure in behavior for most clinicians. Most physicians prefer to dictate records for later transcription. EMR technology requires a multi-million dollar investment on the part of an entire hospital or clinic.
VeriType offers a unique product that has several areas of competitive advantage. First, VeriType combines the point of service feature offered by electronic medical records system with the freedom to dictate a free form record. This combination of features was deemed desirable by doctors interviewed by VeriType, yet does not exist in the market. Second, the product is intended for stand-alone use in any medical environment where a desktop computer is available. This allows VeriType to be used in many more practice settings than a large EMR system. Finally, the VeriType team has a unique combination of prior experiences and education that will allow us to bring the product to market. For example:
- Jennifer Brunner developed software and decision support tools prior to completing her MBA. Her previous electronic marketing experience and contacts in the software development community will facilitate launch of the product. Ms. Brunner will also use her undergraduate degree in linguistics during development of the natural language module of the software.
- Wayne Gyllenhaal has 14 years of experience in patient care in physical therapy. He has practical experience with medical billing codes and firms such as HealthSouth. In addition, Mr. Gyllenhaal’s contacts in the health care community will facilitate product testing and launch.
- Scott Klewer, M.D. is a pediatric cardiologist based in Tucson. Dr. Klewer conceived the original idea for VeriType analysis based on his experience with HCFA code review. Dr. Klewer is in a unique position to provide consulting to the firm, alpha testing and beta testing facilities and lend his reputation and expertise to the firm.
VeriType will maintain the knowledge and expertise that the founding partners bring to the company by hiring and maintaining knowledgeable and expert staff. To augment this the company has budgeted for quarterly training seminars in HCFA compliance issues and software development.
SUPPLIER AND BUYER POWER
VeriType intends to license the natural language algorithm used in its software from the University of Arizona’s Artificial Intelligence lab. While this has the potential to create significant supplier power, Ms. Brunner has a working relationship with the AI lab director Dr. Chen, who is also a consultant to VeriType.
With respect to buyer power, some physicians practice groups and corporate medical groups will be able to exercise a certain degree of purchasing advantage over VeriType because of their size. However, since there are no other stand-alone HCFA compliance software products on the market, power will likely be expressed in a desire to customize the software for a practice with a larger medical records system. The firm will work with such practices to incorporate VeriType analysis into their processes, and use this experience to begin developing licensing relationships with these firms.
BARRIERS TO ENTRY
Development costs are the primary barrier to entry for VeriType competition. Entrants must invest significant programming time for each subspecialty they wish to address. In addition, entrants must develop or license a natural language processing (NLP) algorithm used to analyze text for HCFA compliance. By nature of VeriType’s relationship with the Artificial Intelligence lab at the University of Arizona, VeriType will have an exclusive license for its NLP software in our industry. Research indicates that there are very few commercial-grade NLP modules available. Where available, they are very expensive. For example, Xerox’s LinguistX module costs over $250,000 for a three-month development license alone, and the fees increase when production begins. If a company attempted to compete with VeriType in the HCFA compliance software arena, a lead-time of almost one year would be required to develop the software and logic if it licensed the NLP algorithm. It is estimated it would require at least twice that time without.
Barriers to entry exist for established medical software firms as well. For example, electronic medical record systems are built with very large and complex architectures that might prohibit the addition of HCFA analysis. EMR systems also operate only in large clinical settings. Finally, EMR firms focus on back-office applications such as billing and record keeping. This is where they are the strongest. These companies therefore have strength in the market at the wrong point of the physician’s value chain.
|Table of Contents||Appendices|
|1. Executive Summary
2. Company Description
3. Industry Analysis
4. Target Market
6. Marketing and Sales Strategy
9. Exit Strategy
10. Financial Projections
Summary of Cash Flow
Sales Forecast & Revenues
Marketing Support Costs
Cost of Goods Sold
Property & Depreciation
Capital & Debt
|All information herein is confidential and belongs to VeriType|