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Carmel-based Stratice aims to be Amazon of health care

January 16, 2016

Carmel-based Stratice Healthcare LLC’s mission is simple.

It wants to take the concept of electronic prescribing for drugs and extend it to most of the rest of the health care system.

Of course, actually reaching that goal is no easy task. But Stratice’s team of 20 employees thinks it has cracked the code in the most difficult sector of health care and can grow from there.

Stratice has developed software that can connect physicians with the 65,000 suppliers nationwide of durable- and home-medical equipment—things such as canes, walkers, wheelchairs, commodes and even hospital beds.

Since launching that software in fall 2015, Stratice officials said they signed up several hundred physician practices as customers.

It has funded itself so far by raising $7.5 million from nearly 70 individual investors, nearly all from Indiana. But company brass think it can raise another $15 million to $20 million this year to help it expand into new services for medical equipment suppliers and even into new areas of health care.

brady-john-mug Brady

“There’s a dire need of getting more electronic,” said John Brady, Stratice’s CEO, during an interview at Stratice’s office in Carmel’s City Center development. “Now more than ever, patients are expecting it.”

Pharmacies already have made the leap. Virginia-based SureScripts, which is owned by major pharmacy companies and trade groups, has connected more than 900,000 health care professionals and more than 3,000 hospitals to 95 percent of the nation’s pharmacies. SureScripts now processes 6 billion transactions annually.

Stratice is deliberately copying SureScripts’ model. It even hired two longtime employees of SureScripts—Ken Majkowski and Jeff Benning—as its chief strategy officer and chief financial officer, respectively.

farmer-jason-mug Farmer

“It’s just e-prescribing for HME and DME,” said Stratice President Jason Farmer, using the acronyms for home-medical equipment and durable-medical equipment.

Stratice tested its software, called eDMEplus, in Indiana and surrounding Midwestern states. It made the software available nationwide in November.

Brady and Farmer would not say how many users they have or how many transactions they are performing. But they did say physicians in 30 states are using the Stratice software.

Stratice has spent five years developing its software, which the company says can be integrated quickly into any electronic health record systems, or EHRs, currently on the market. Stratice has integration agreements with about 200 EHRs, but its big challenge is to sign agreements with the market leaders, such as Epic, Cerner, NextGen.

“To capture significant or much larger market share, we need to get integrated into the larger EHR systems,” Farmer said. Brady added that doing so is critical to Stratice’s long-term success.

The company’s biggest asset so far is that it has built out a nationwide network of medical equipment suppliers. Over 18 months, Brady and Farmer signed agreements that include 10,000 suppliers, which can cover nearly every ZIP code in the United States.

Texas-based MED Group, which negotiates medical equipment pricing for 2,000 suppliers, signed a deal with Stratice to make the software available at a discount to its members.

“We look at ways to drive cost out of the process,” said Jeff Woodham, general manager of MED Group.

A physician writes what is essentially a prescription on a piece of paper for a cane or walker or wheelchair. The patient then takes that piece of paper to a medical supply company, which sends a form back to the physician’s office to confirm the prescription and add the proper diagnostic code to authorize the equipment purchase by a health insurance plan such as Medicare or Anthem.

For more complex equipment, such as wheelchairs, motorized scooters or sleep-apnea products, several pages of documentation from the patient’s medical records also are required.

Those requirements can mean as much as 40 times more lines of information must be documented for a medical equipment purchase than is the case with a prescription drug.

“It’s a very paper- and labor-intensive process. I have a nurse in my office who’s basically paid to do that. It’s above standard secretary-level work,” said Dr. Dan Salvas, a urologist at the Greenwood office of Urology of Indiana.

Stratice estimates that as much as 30 percent of the $44 billion in annual purchases of medical equipment is spent on this paperwork processing.

At the same time, nearly half of all medical equipment orders are never filled, in large part because the back-and-forth of paperwork becomes a hassle for patients.

Stratice charges a $2.50 fee to process each equipment order. With nearly 367 million medical equipment orders occurring each year, Stratice could garner more than $200 million in annual revenue—even if it processed only one out of four of those orders.

If the company sold other services, too, that helped medical suppliers grow their revenue—such as patient and provider refill reminders or revenue cycle management that speeds up insurance claim processing—its revenue could climb even more.

Stratice officials also believe their software, because it’s already tackled the highly complex medical-equipment field, could be used to bring electronic ordering to such fields as rehab, home health and outpatient services for patients leaving hospitals.

“We’re in a blue water space. I can’t believe someone’s not doing this,” said Brady, Stratice’s CEO, who previously was an executive at Indianapolis-based Arcadia Resources, a pharmacy service that went out of business after selling its key assets to Illinois-based Walgreen Co.

Stratice noted there are other companies, such as Georgia-based BrightTree, that are providing billing software to medical equipment suppliers. But no one has built out a marketplace that connects with both suppliers and electronic medical records.

Salvas, the urologist, said that, because he saw a need for Stratice’s service, he decided to invest a “fair sum” in Stratice. He declined to specify how much.

Mike Miles, a longtime investment banker in Indiana who now works out of Florida, signed on last spring as the company’s executive vice president of corporate development.

Miles, who studied the company for about six months before taking the plunge, said it could become the Amazon of the health care industry—the standard platform for doing electronic ordering of nearly any kind of product or service.

“Most of the companies I work with have a somewhat limited market,” Miles said, but with Stratice, “there’s no competition, it’s a $44 billion market, and it’s begging for an electronic solution.”•

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