Santa Ana-based managed-care provider Health Essentials LLC is targeting a different segment of senior citizens than most companies in the field.
Health Essentials serves senior citizens who are sicker than the norm, including those who are frail, disabled or at the end of life, with what it calls “coordinated care” delivered in patients’ homes. The company includes a medical group, hospices, a pharmacy and a durable-medical-equipment supplier.
Coordinated care involves providers working together to track patients’ care and avoid duplication of services.
“We’re dealing with people that might represent 5% of [our clients’] total revenue but represent 25% to 40% of their total costs,” said Alan Hoops, a veteran OC managed-care executive who is Health Essentials’ executive chairman.
The senior boom, fueled by the aging and retirement of the baby boom generation, a surge that’s excited many other healthcare executives and companies, “is a minor element in our next several years of growth” because of Health Essentials’ older demographic, Hoops said.
Instead, it will work to build relationships to get more client referrals.
“We will grow because we will affiliate with more and more partners in a deeper and deeper way,” said Hoops, a one-time chief executive of PacifiCare Health Systems Inc.
UnitedHealth Group Inc. bought PacifiCare in 2005.
Health Essentials evolved out of GeriNet, a medical group established in 1996 by Kim Phan, who has more than 20 years of experience in the field. Phan’s background includes working for FHP Inc. when it owned a nursing home and a hospital that’s now Orange Coast Memorial Medical Center in Fountain Valley.
GeriNet contracted with Medicare managed-care plans to take care of post-acute patients, or patients who’ve just been discharged from hospitals.
Health Essentials later “began to enter the world of palliative care” by establishing hospices, Hoops said.
That was followed in subsequent years by skilled nursing; homecare for high-risk patients with multiple chronic conditions; risk assessment; and care planning.
“The company became, arguably, a full-service company with high-risk, post-acute, end-of-life seniors,” Hoops said. “Frankly, the reason this company exists is because of managed care.”
He said Health Essentials can help control costs and “rationalize that chaos” in post-acute care for very ill seniors with multiple issues. Such care is traditionally expensive.
Health Essentials officials also market their services as a way to help Medicare HMOs deal with what Hoops called “revenue compression” stemming from federal healthcare reform, specifically their cost-control measures.
The privately held company has some 660 workers companywide and expects to have about $75 million in revenue this year, according to Hoops.
It operates in Southern California, Las Vegas and Tucson, Ariz.
Health Essentials now has more than 60 managed-care contracts and covers more than 85,000 seniors, Phan said in a news release.
And this summer, it tapped a new chief executive, Michael Radu, a 12-year veteran of Minnesota-based UnitedHealth, which has 3,900 workers in OC (see story, page 24).
Radu succeeded company founder Phan, who’s now serving as executive vice president of business development.
Radu was most recently chief operating officer of collaborative care for Optum, a UnitedHealth business unit.
He said he wants Health Essentials to “be the premier provider of care for frail elderly and medically complex patients” through lowering costs, improving health and providing better care.
“I’ve spent my entire career, as Alan mentioned, focused on the frail and the vulnerable and the chronically ill. So I’m very passionate and see the fragmentation and the poor quality that’s inherent to the systems that have grown up over time,” Radu said.
Health Essentials has “a whole-care team that will hover around these very vulnerable patients and help them live their last days with dignity and meet their needs and avoid unnecessary, very disruptive hospitalizations,” he said.
Health Essentials partners with hospitals, doctors’ groups and Medicare health plans to get patients, and it also does some community outreach, Radu said.
The company is an indirect Medicare payee—it’s “in the waterfall of Medicare payments a couple or three levels down” from providers that receive direct reimbursements, Hoops said.
Health Essentials nabbed a pair of venture capital investors about a year ago as it was transforming itself from operating only as a medical group and hospice-concentrated company to expanding into essential services.
SV Life Sciences and Bessemer Venture Partners, both of Silicon Valley, invested an undisclosed round of funding into Health Essentials for expanding services and geographies.
Hoops didn’t give a specific answer when asked about service expansion and geographies but indicated Health Essentials would look for other potential partners across the U.S.
“We have long believed in the power of care coordination to improve the quality and decrease the cost of healthcare delivered in our country,” Stephen Kraus, a Bessemer partner, said in a news release.
Bessemer had been “looking actively” to invest in a coordinated-care organization for a couple of years, Kraus said.
SV Life Sciences invested in Health Essentials because the country’s healthcare system is starting to “migrate away from volume-driven, fee-for-service arrangements toward outcomes- driven models,” added Tom Flynn, a partner at the firm.
Hoops said SV Life Sciences and Bessemer Ventures gave the company adequate capital to accomplish its goals and that it’s not considering an initial public offering.
“We’ve got a lot of building and growth to do before we think about our next capital event.”
