Informatics Corp. 'no longer a startup', imagines IPO
By Milt Capps Last Updated 11:46 a.m.
Published Monday, April 27, 2009 10:18 am
Informatics Corporation of America asserts it has graduated from the ranks of health IT startups.
The pronouncement by Gary Zegiestowski, CEO of the West End Avenue company, comes at a time of growing national demand that technology improve U.S. healthcare outcomes and reduce costs.
Zegiestowski would not reveal ICA's financial results during his recent interview with VNC, but said the enterprise has "really passed the startup company stage" and expects to reach profitability in 2010.
When asked about the longer term Zegiestowski acknowledged, "I think our thought is that we would eventually consider an IPO," adding that a public offering is "a direction that is possibly on the horizon."
He also stressed that, for now, ICA remains focused on securing and expanding its position in an "emerging" industry.
He said ICA currently has no plans to seek outside capital beyond previous investments by San Antonio-based Medcare Investment Funds. Zegiestowsky, himself, is a co-founder of ICA.
The scale of ICA's capitalization has not been revealed publicly, but Zegiestowsky says investment has, as intended, been sufficient to see the company through three years of ramping-up (following its initial two years of development). He said he believes ICA is now "on track" toward become self-sustaining.
"We're an established company now and have credibility in the market now, because we've proven our ability to deliver," he continued. He explained that as a key licensee of intellectual property developed at Vanderbilt University Medical Center, ICA has not only proven its ability to adapt technology for commercial markets, but also to deploy those tech solutions with relative speed, following initial customer contract signings.
The CEO said he believes ICA is "emerging as a core player" in the informatics sector, with two major forces propelling the company: the "dramatic increase" in efforts to create regional health-information exchanges (HIEs); and, the emphasis on health information technologies embedded in the recently enacted federal economic-stimulus program.
Zegiestowsky's characterization of ICA seems to represent a slight notching-up of the company's public self-appraisal, all-the-more noteworthy given the vagaries of the economy and federal policy.
This morning, in fact, the American Hospital Association reported that 80 percent of hospitals AHA surveyed reported cutbacks in "clinical and information technology [projects] planned or already in progress."
In October, when VNC reported the company's plans for a larger headquarters, the CEO indicated 2009 would probably be the year in which it became clear whether or not ICA's annual growth would remain somewhat exponential. At the time, Zegiestowsky said his company's revenues were projected to double again this year, equaling the rate of growth for each of the two previous years.
The jury's out on this year, of course. Among other variables, the company's mix of customers has shifted, with HIE-linked hospitals and clinics now 50 percent of the customer base, up from 20 percent a year ago.
Zegiestowsky said ICA technology currently supports 40 hospitals and about 100 clinics. The 40 hospitals are owned by just five "umbrella organizations," he said, three of which are HIEs. All the current business was booked prior to 2009, and no new customer has been publicly announced, thus far in 2009.
ICA continues to bank heavily on its ties to Vanderbilt University (at right), where physicians developed the core clinical-information software ICA uses. ICA's commercial offerings now integrate with dozens of disparate technologies from other vendors who are already embedded in healthcare institutions' infrastructure. The goal is to contribute to creation of seamless electronic health records and other tools populated with data from across each client's enterprise and regional networks.
In addition, the early involvement of Vanderbilt informatics experts and, subsequently, ICA in a regional health information initiative that is strongly supported by Gov. Phil Bredesen and closely watched nationally – the Memphis-centered Mid-South eHealth Alliance (MSEHA) – has burnished ICA's credentials.
Zegiestowsky said ICA's link to VU Medical Center's quality-of-outcomes-oriented technologies and ICA's growing presence among community-based HIEs afford the company very strong positioning versus such competitors as Microsoft (allied with AT&T and Covisint); dbMotion (Pittsburgh); and Medicity, the latter the Salt Lake City-based company that claims to be "the market leader."
He noted that in addition to drawing on Vanderbilt's inpatient clinical experience, ICA will also leverage Vanderbilt's experience with outpatient care and disease management, which could further broaden its prospects for both customers and business allies. Earlier this year, ICA was touting its relevance for disease management in press releases. Hypothetically, at least, ICA's broader universe of partners might include such companies as Franklin-based Healthways Inc., a company once entirely focused on disease management, but now broadening its own mission.
The CEO said his own priority remains building ICA sales and reputation, and he has been freed to spend more time on that by the recent promotion of John Tempesco (at left), formerly ICA's director of client services, to vice president for client services and marketing.
No telling the odds at this point, but it's possible Zegiestowsky will also get more help from VU Medical Center CEO Harry Jacobson, who is a senior advisor to ICA and who is retiring in a few weeks as Vanderbilt University vice chancellor for health affairs. Jacobson has not announced any further entrepreneurial plans he might have.
In October, Zegiestowsky pegged ICA's workforce at 50 authorized, but partly unfilled positions, and said that within a year or so the number would reach 100. In an update last week, he said employment is now just 45, but recruiting continues, with emphasis on software developers, integration engineers and salespersons.
He also indicated ICA is placing more emphasis on synchronizing hires with customer-implementation schedules, and will probably rely more heavily on outsourcing IT and development staffing, as needed. He said ICA is in talks with a number of a staffing vendors, which he declined to identify.
Prior to joining ICA in late 2005, Zegiestowsky was COO of a $500 million division of Cendant Corporation, with 6,500 customers. He began his career with General Electric and also served as a director of the strategy consulting practice with Arthur Andersen LLP. ♦