Milt Capps
Published Wednesday, July 23, 2008 7:56 am
|
Economically, of course, there's a big difference between building, owning and managing hospitals – versus running a business that provides hospitalist physicians who care for patients while they're hospitalized.
Nonetheless, there's mounting evidence that hospitalist ventures may ignite the next Big Bang in healthcare services – shaping healthcare quality, policy and payments at a velocity surpassing even that which followed the creation of Hospital Corporation of America, here in Nashville 40 years ago.
Brentwood-based Cogent Healthcare is one of several U.S. companies that seem determined to serve as Ground Zero for the second Big Bang.
Perhaps CEO Gene Fleming had the Big Bang in mind 15 months ago when he relocated Cogent from Irvine, Calif., to Nashville's Brentwood suburb. True, Fleming's longstanding personal ties to Nashville might have proven enough to relocate Cogent. After all, prior to joining Cogent in 2005, Fleming served as president of a $3 billion HCA division, CEO of Surgical Alliance Corp. and COO for Quorum Health.
However, in a sense it was the Feds who sharpened the case for Cogent's relocation to Nashville: Federal pressures to reduce healthcare spending and eliminate patients' preventable complications have created what many regard as a boon for hospitalists. At the same time, Nashville – with its increasingly rich mixture of healthcare management, e-health, and medical research and development assets – has a strong claim to being the nation's crossroads for healthcare innovation, and thus a point-of-leverage for Cogent.
No surprise, therefore, that in announcing Cogent's move to Nashville last year, Fleming explained “Nashville is a logical choice for a centralized operation and will offer our company and our employees an exceptional business environment and quality of life,” said Fleming. “More importantly, it will give us the ability to make quick, quality decisions in an evolving, rapid-growth industry.”
As a result of Fleming's calculations, middle Tennessee is now home to Cogent, which has about 350 employees, all but a couple dozen of whom are physicians working outside Tennessee, at more than 50 customer facilities.
'NICELY PROFITABLE', STILL EVOLVING
In an interview with VNC July 9, Fleming said Cogent has maintained a roughly 35 percent compound annual revenue growth rate the past five years, producing what is now a $90 million company, which Fleming describes as "nicely profitable."
Cogent's annual revenue growth rate is slightly ahead of the 31 percent annual increase in the number of hospitalist physicians reported in a recent Society for Hospital Medicine study. Hospitalists nationwide are projected to pass the 30,000 mark by 2010, in constrast with more than 23,000 today; 12,000 in 2005; 7,000 in 2003; and, about 100 in 1995. The specialty began to emerge in the mid-Eighties, and was dubbed "hospitalist" in 1996.
Overall, Cogent's situation suggests no immediate need to replenish investments made earlier in Cogent by the Bay Area's Versant Venture Management LLC and Hartford-based CCP Equity Partners.
Even so, venture capitalists are doubtless following the hospitalist sector, which had its first IPO in January. Yesterday, David Ward (at left) of Salix Ventures told VNC he sees the hospitalist segment as a truly "interesting area," and the involvement of Cogent investor Versant, with which Salix has been a co-investor in other deals, heightens that interest, further. Salix has not been an investor in Cogent.
Cogent contracts with hospitals to provide hospitalists, physicians who are stationed full-time in hospitals. Research shows hospitalists who assume responsibility for inpatients from primary-care physicians in the community can (results vary) substantially shorten lengths-of-stay, reduce readmissions and allow primary-care physicians to avoid schedule-busting hospital rounds. Data also indicate that while hospitalist groups often draw subsidies from the host hospital, hospitalist programs typically produce positive return on investment.
During his interview with VNC, Fleming said he wants Cogent to remain focused on hospitalists, but added, "we are
moving into" providing intensivists, a specialty Fleming views as "just an extension of what we already do." He said Cogent has been asked to provide such staff by a half-dozen customers and plans to move ahead in two of those. Intensivists are physicians who specialize in treating the most critically ill or injured patients, often in intensive-care units.
It's worth noting that the use of intensivists is spreading. For instance, responding to a general question from VNC about Vanderbilt University Medical Center's possible use of hospitalists, VUMC spokesman John Howser said, "Currently we do not employ hospitalists. I think you’ll find this may be a standard approach for academic medical centers to not use hospitalists due to the structure of attending faculty, fellows and residents all in house 24/7." Howser added, "We do however have intensivists. Several of the faculty in the Division of Allergy and Critical Care Medicine, and at least one faculty member from the Division of Trauma, have additional training and are boarded intensivists. They are among us to manage patients’ severe medical complications in the ICU setting."
GROWTH AND COMPETITION
Regarding future revenue growth, Fleming told VNC that Cogent will rely primarily on new direct sales and growth among
existing customers. He would not, however, rule out mergers or acquisitions. Addressing competition, Fleming (at right) and other hospitalist companies' CEOs are on record saying they believe they're competing with small local physicians groups, as much as with one another.
That said, it must also be noted that publicly held IPC The Hospitalist Company, based in North Hollywood, Calif., recently announced a major contract with Nashville's IASIS Healthcare. Soon after IPC's coup, 12-year-old Cogent announced its first Tennessee hospital customer, the identity of which the company has not disclosed.
Inadvertently or not, IPC and Cogent also compete in claiming leadership. IPC (which serves more than 300 hospitals) brands itself "The Hospitalist Company" and during its May presentation to investors referred to itself as "Nation's Leading Provider of Hospitalist Services" and "Largest Pure-Play Hospitalist Provider."
Cogent, meanwhile, is stressing quality over scale, telling its website visitors Cogent is "now acknowledged as the industry leader in quality and adding value for our hospital partners." A Cogent spokesperson told VNC yesterday that Cogent's claim is based on an assessment of stakeholder perceptions conducted by Jarrard Phillips Cate & Hancock, Cogent's Nashville-based PR firm.
In his recent communications, Fleming has also stressed the company's "relentless spirit" and its long-standing involvement in shaping the hospital-medicine specialty. The message strategy seems intended to reinforce Cogent's focus on the kind of healthcare outcomes that are under scrutiny by the Centers for Medicare and Medicaid Services (CMS) and others.
The "relentless" theme may also help differentiate Cogent from other providers who emphasize, e.g., filling emergency-department shortages. Cogent's values-oriented positioning could, among other things, give Cogent a leg-up in recruiting and retaining physicians, who are reportedly in short supply, even though hospitalist compensation is rising steadily.
To expand from its new mid-South headquarters in Nashville, Cogent will doubtless need to cope not only with IPC, but also with Knoxville-based TeamHealth. On Monday, an IPC spokesman told VNC that in its filings with the SEC the company's statements regarding key competitors mention only Dallas-based EmCare (Emergency Medicine Services Corporation) and TeamHealth, both of which are primarily ER-staffing companies with hospitalist divisions. IPC has apparently not yet felt obliged to characterize Cogent as a key competitor.
MANAGEMENT TEAM
Since Fleming set into motion Cogent's relocation from California, he's also been busy developing a management team of prominent and influential executives.
Some members of Fleming's team have been much involved in national debate of quality of care, provider efficiency, reimbursement and related issues.
For example, Cogent COO Rusty Holman, M.D., (at left) just completed his term as president of the hospitalists' Society for Hospital Medicine, and Cogent Regional Medical Director Eric Siegal, M.D., is chairman of the Society's public policy committee, which sets the legislative agenda for the society's grassroots network. SHM constituents were among those who recently mobilized to overturn President Bush's veto of legislation designed to protect reimbursement for physicians' services. Another Cogent regional medical director, Shaun Frost, heads SHM's membership committee and serves on the SHM board.
Cogent also hired Doug Mefford as corporate legal counsel. Mefford was previously corporate counsel for Community Health Systems and division legal counsel for Gambro Healthcare. Earlier, he was associate general counsel for Phycor and a partner at Bass, Berry & Sims.
In addition, less than a year ago Fleming named former HealthStream CFO Susan Brownie (at left) to the same post at Cogent. The announcement of her appointment stressed her involvement in "more than 20 initial, secondary and private offering and finnacing transactions and more than 30 acquisitions.
Reflecting Cogent's value-added positioning, and the importance placed by CMS upon training and
communication, attention should also be paid Fleming's recruitment of Diana Bigham (at right) as the company's first chief learning officer (CLO). Bigham was previously responsible for training and education programs for Amgen and Eli Lilly.
As reported earlier, Fleming also announced the appointment of Antoine Agassi as Cogent chief information officer. In a joint interview July 9, Fleming and Agassi told VNC that technology is decidedly not the company's leading edge, but is a "differentiator" and a critically important enabler of healthcare operations and business-process improvement. They'll use improved processes, best practices, standards and other drivers to achieve both needed efficiency and vital relationships. In contrast, competitor IPC touts its IPC-Link data system and "virtual office" portal as key resources for improving hospitalists' efficiency. (Related article on hospitalists and IT resources, here.)
Agassi (at left), who previously played a role at the intersection of healthcare policy and technology, brings additional network resources to Cogent. Agassi was previously director of Gov. Phil Bredesen's eHealth Advisory Committee; COO/CTO for Spheris Corp., the transcription company; EVP/CIO for WebMD Business Services; and, VP-IS for a Blue Cross Blue Shield plan in New York. Agassi remains active as chairman and advisor to the Bredesen eHealth group, and serves on several corporate and foundation boards and committees.♦