Nearly 18 months after calling off a buyout deal, LifeMasters Supported SelfCare Inc. has emerged with an eight-figure funding and plans to grow as a stand-alone company.
“Right now, the most important thing for us is to stay focused on our business at hand,” said cofounder Christobel Selecky, who returned as chief executive to run the Irvine-based company, which helps patients with diseases manage their conditions.
LifeMasters is moving ahead with its business plan after raising $15 million earlier this month. The money, which came from its existing venture capital investors, will be used to expand its programs for patients.
The privately held company sells disease management programs to health plans, including Medicare and Medicaid, employers, pension systems and healthcare trusts run by labor unions.
Services include allowing patients with conditions such as diabetes, congestive heart failure and chronic obstructive pulmonary disease to track their medical records, appointments and prescriptions, and interact with nurses and other healthcare providers.
The programs are aimed at helping insurers and others control health costs.
LifeMasters expects to do $100 million in revenue this year.
The company was poised for major growth in 2006, having scored several contracts from the federal government to manage Medicare beneficiaries’ diseases.
A big part of that planned growth: a $307.5 million sale to Healthways Inc., a larger competitor from Nashville. The deal was announced in May 2006 but never done.
“Combining with Healthways was, in the opinion of our board and senior management, the fastest and best way for us to secure LifeMasters’ mission and our commitment to excellence for the long term,” said David Strand, LifeMasters’ then chief executive who took over from Selecky in 2004.
LifeMasters sought out a deal with Healthways, which had roughly three times its revenue, for several reasons. One, Selecky said, had to do with access to money for expansion.
“This is a very labor-intensive business. If you build a call center, you will spend a few million dollars,” she said.
But the LifeMasters-Healthways combination didn’t come about.
The companies called off the deal in late 2006, two months after a third-party company provided incorrect data about LifeMasters’ revenue to Healthways. The error affected financial projections Healthways was relying on to make the deal.
“It was material enough that it killed the deal,” Selecky said.
Supportive VCs
When the Healthways deal fell through, “that gave us time to step back and assess what our future would be. Fortunately, we have supremely supportive (venture capitalists),” Selecky said.
VantagePoint Venture Partners of San Bruno, one of LifeMasters’ earliest investors, took part in the latest funding. Saints Capital, based in San Francisco, and Menlo Park-based Opus Capital also participated.
Shortly after LifeMasters and Healthways called off the deal, Selecky said Strand told her that the process “took a lot out of him” and he felt it was time to move on.
Strand, who Selecky recruited as president and chief operating officer in 2003, left LifeMasters a year ago. The company’s board then put Selecky back in the chief executive’s spot.
“I wouldn’t say I was guaranteed (to return). Even though I was the chairman, I was still an employee,” Selecky said about coming back to take the reins.
During her time away from the chief executive’s role, Selecky worked in building up the disease management industry. She served as chair of the American Disease Management Association earlier in the decade.
“I was spending 80% of my time on industry issues,” Selecky said.
If she were to do it again, Selecky said she would insist on a shorter lead time between when a deal was announced and when it actually closed.
“Our company was focused heavily on integration. We were not as focused on executing the day-to-day business That was very distracting and we will not do that again,” she said.
Selecky, who once worked at FHP Inc., now part of UnitedHealth Group Inc., and David Goodman, a Harvard University-trained doctor and bioengineer, founded LifeMasters in 1994. The company now has 1,000 employees, 25 of whom work in the Irvine corporate office.
