Certus Corp., an Irvine-based hospital consulting and business services company, has raised an additional $7.5 million from its principal investors.
Certus plans to use the money in its shift away from transaction automation technology to services that help hospitals recover more revenue, said William DeZonia, chief executive of Certus.
The company seeks to help hospital chief financial officers catch billing mistakes and implement other business improvements.
“We are not a technology company. We are a healthcare services company,” DeZonia said.
Certus’ clients include Tenet Healthcare Corp., which has 10 hospitals in Orange County, University of California, Los Angeles Medical Center, Loma Linda Medical Center and Stanford University Medical Center.
Triumph Capital Group of Boston and Kline Hawkes & Co. of Los Angeles are Certus’ principal investors. The firms have invested $37.5 million in Certus so far, according to Jeffrey Lane, a partner at Triumph Capital’s San Francisco office and Certus’ new chairman.
Douglas Shannon, the company’s chief financial officer, also was brought in by Triumph and Kline Hawkes last fall in a bid to help the struggling company turn around.
Certus had been “behind the eight ball,” according to Lane.
“It was not atypical of a startup,they over borrowed and the (previous) management had not executed,” Lane said.
At the time of Certus’ formation three years ago, its funding included $65 million in credit with CIBC World Markets, besides the funding from Triumph and Kline Hawkes.
“The next step was to get the company healthy again and alleve itself of debt,” Lane said.
Along with the latest funding, Certus said it paid back $60 million of debt with cash, unrealized assets and common stock warrants.
Certus’ original business plan focused on providing electronic services and was geared toward an initial public offering, according to DeZonia.
“Technology was the cornerstone. We were going to take the clients and convert them to technology,” DeZonia said. “Unfortunately, we lost sight of our core skills. We neglected client services.”
The new management team was brought in to analyze Certus and determine whether the company was viable, according to DeZonia.
“(The business) was losing money at a dramatic rate,” he said.
Certus now is cash-flow positive and expects revenue to be between $28 million and $30 million for 2001, he said.
Certus’ other turnaround actions included what DeZonia called a “rationalization of the workforce” through attrition.
For now, Certus’ backers say they are not thinking about an exit strategy. Instead, Kline Hawkes wants the company to grow and become profitable, according to Alain Rothstein, an associate at the firm.
“Basically, they’re helping hospitals maximize their revenue potential,” Rothstein said. “Some hospitals aren’t being run as efficiently as they should.”
Certus was created in 1998 from the merger of four companies: Carlson Price Fass & Co., ELACOR Resources Group Inc., Healthcare Financial Advisors Inc. and Medical Reimbursement Advisors Inc. It employs around 300 people overall and 25 in Irvine, DeZonia said. n
