Operating in a growing health analytics industry, SCIO Health Analytics, aims to become a US $100 million company by 2017.
When Siva Namasivayam, Krishna Kottapalli and Karthik Krishnaswami were working in the U.S., they met regularly to discuss entrepreneurial ideas. Eventually, Krishnaswami returned to India in 2004, still undecided on the course of direction and they continued their brainstorming sessions from across the shores. But the trio, who held senior roles in large technology organisations like TCS, EDS and Perot Systems, were clear about one thing. They wanted to enter a market that was under penetrated and create differentiated offerings and take advantage of their deeper expertise in healthcare.
During that period, India already had large IT giants and the outsourcing sector was also fairly mature. They decided to enter the underpenetrated healthcare sector and set up SCIO Health Analytics in 2008 to offer healthcare companies actionable insights and meaningful outcomes through flexible analytics, services and technology that result in measurable improvement in their business performance like higher revenue and reduction in costs. While the founders are of Indian origin, SCIO Health Analytics was setup in the U.S. and the Indian company operates as the subsidiary of the U.S. parent.
SCIO (which means acquiring knowledge in Greek) utilizes the vast amount of disparate healthcare data, algorithms and technologies to focus on four areas of inefficiency in healthcare: reimbursement efficiency, managing the risk and health of population, measuring the quality and efficiency of physician networks, and effectiveness of commercial pharma operations. Its main target segments include health insurance companies, pharmacy benefit management companies, pharmaceuticals, care and wellness management organizations and hospital systems.
With just its idea in place, the company was on the lookout for funding and Sequoia Venture Capital invested in them in 2008, due to the track record of founders in building companies organically and inorganically. Since then SCIO has grown to become an organisation with a turnover of over US $65 million in 2015 and an employee base of around 750. Apart from Sequoia, the company currently has two other investors – Silicon Valley Bank that invested in 2009 and Health Enterprise Partners – a New York based VC whose limited partners are hospitals and health insurance companies. Over the next five years, the company aims to reach a turnover of US $200 million and expand into Europe and Asia.
The market potential
Explaining the analytics business, Krishnswami the co-founder and President of India operations says that the healthcare analytics sector has its own maturity curve and has four levels. One, descriptive analytics like regular monthly reports that are produced by mining current data, two, trending or forecasting, three, predictive and finally, predictive analytics which focuses on how a company can influence the outcome. SCIO provides automated solutions for Descriptive Reports through is proprietary platforms SCIOVANTAGE and SCIOMINE. It adopts a platform plus services delivery model for forecasting and predictive analytics. “Many of the analytics companies are in the descriptive business where they get defined data and produce monthly reports. That is the volume game within analytics as people do want timely reports. We provide automation solutions to reduce manpower involvement at this level and target predictive analytics, trending and forecasting and modelling as our differentiator. True clinical knowledge is required to provide high value add solutions and that’s our core competence, which many organizations lack,” says Krishnaswami.
The U.S. health care industry is almost US $2.8 to US $3 trillion in size and accounts for almost 18 per cent of the GDP. The healthcare analytics opportunity is estimated to be in the $100 billion range by industry consultants such as McKinsey. Enabling the transformation of healthcare organizations by assisting them in making decisions based on data was a major opportunity SCIO went after.
“Analytics as a service in the global healthcare market is just beginning to grow. Therefore, the buyer’s maturity has a significant role to play in translating this into business for us.”
“Our competition is not India based companies, but those who are based in of the U.S. with a local presence. We compete with well established large US healthcare companies head-to-head. We don’t compete on price or arbitrage. We compete on value and expertise.,” says Namasivayam. When the trio started the business, they didn’t have technology assets or capabilities and,therefore, they went about building their business through a combination of organic and inorganic investments. SCIO acquired small companies in this space that gave it a critical mass in terms of clients and capability. “And then we used India as a differentiator to do things faster, better. We utilize the India model for its inherent values such as availability of skills, ability to experiment with more resources, ability to customize solutions for clients, 24×7 operations. The US and UK teams work hand-in-hand with India teams to utilize the inherent benefits of this model. We don’t use the India model for cost arbitrage,” says he. The company built its technology platform by bringing in new algorithms and hence, India became a major value addition. He says, “When we started in 2008, the kind of knowledge required to build these products and services did not exist in India. We acquired companies in the U.S., built critical mass and those experts helped us train team in India. So much so, collaboration has worked so well that we have been able to groom a lot of experts here.” Its team now has deep domain knowledge that comes from the U.S., the technology, mathematical and statistical expertise and.
In the last 8 years, SCIO acquired four small companies that helped it to build the business expertise. It currently has over 750 employees, half of whom sit in India, another 45 per cent in the U.S. The SCIO life sciences business that contributes 10% of revenues is based out of the United Kingdom serving European companies.
The company gets almost 65 per cent of its revenue from the payer segment, while care and wellness organizations including providers, PBMs contribute 25 per cent. The remaining comes from the life sciences business.
But what’s the business all about?
The key value proposition in the health analytics business that SCIO focuses on is about measurable dollar savings for clients. Healthcare, compared to any other sector, is highly driven by immediate tangible savings as opposed to just soft savings. With increased competition and regulatory changes, organizations are always looking for the next dollar that can help sustain their profits and the areas where SCIO offers this is in areas including reimbursement optimization, quality reimbursement and care optimization. Citing an example, Krishnaswami says, “In care optimization, the care and wellness management companies get higher dollars from outreaching and managing patients that require preventive care. We provides predictive algorithms that identify such patients that require preventive care for chronic conditions, resulting in better quality of care and hence savings for its clients.”
SCIO provides such services by cleaning, integrating data from multiple sources such as claims, eligibility, pharmacy and third party data and running its algorithms through and identifying such opportunities based on the business need. SCIO processed data for over 80 million consumers in 2015.
Whatever be the business, SCIO brings one common pattern to its services – data and its own proprietary technology platform. Its customers have the option of just licensing the software alone, while some of them would like to go the whole nine yards with them. “We help pharma companies understand the team performance, competitive analysis, commercial effectiveness of their product and so on,” states Namasivayam.
On the Health systems side, Obamacare is a big driver for SCIO. Obama legislated and incentivised the healthcare providers to take on more risk. “There is a risk sharing program or gain sharing program which means that the participating hospitals will have to demonstrate that they are conforming to the various quality and patient care norms of these new regulations,” says Namasivayam. And SCIO plays a significant role in helping the health systems in this area.
Talking about what differentiates them from other players, Krishnaswami says, “It is their ability to build a cross functional team consisting of healthcare experts, claims analysts, statisticians, data scientists, clinical nurses and technology analysts, with deep understanding of the customers’ domain. The company has a clear hiring strategy which is to groom more experts and healthcare specialists. It does not go after freshers, but identifies people who want to specialise in this domain and then train them. SCIO also looks for people that can think outside the box, are analytical, and want to work in an entrepreneurial environment allowing people to get to understand the depth and breadth of the global healthcare industry. “The reason we have been able to attract people is also due to the learning opportunity that we offer them,” says he.The future is all about depth vs breadth and SCIO provides substantial training and expertise in the fast growing healthcare area – which is recession-proof and is now larger than the financial services industry globally. In Chennai, the company currently has about 400 employees and aims to increase this number to 500 by 2016.
“Analytics as a service in the U.S.healthcare market is just beginning to grow. Therefore, the buyer’s maturity has a significant role to play in translating into business for us,” says Kottapalli, co-founder and Chief Growth Officer. Usually, in traditional IT and back office services, the buyer knows what they want. In the analytics business, the key is to figure out new opportunities that can provide substantial savings to clients and build the solutions. This is a demand creation business and one needs to be patient for the market to evolve. “It cannot be too slow also and that is the reason why we need to have a diverse set of offerings,” says he.
At the same time, the company is working on certain strategic initiatives to grow its business. One of the most important things is to grow its talent. Krishna further adds “We need to be able to provide consistent quality of service and automate as much knowledge as possible. At the same time, there is always going to be expert eyes that need to look in to what we are proposing.” Another growth opportunity is to build strategic partnerships with larger organizations. One such partnership with Oracle was recently announced, where SCIO’s software will sit on top of Oracle’s health system data warehouse to provide insights about the population. Its move from a fee-for-service type of reimbursement to value-based reimbursement based on quality and clinical outcomes is another growth area for the client.
However, as always, everything comes with its own set of challenges and for SCIO, the challenges include the pace of client adoption, availability of talent, long sales and value realization cycle and also customer’s in-house initiatives. SCIO is overcoming the challenges by focusing on client value add enhanced by innovation and development of talent.
What’s in store?
The health analytics industry is a growing market which is almost US $ 100 billion in size and the companies are looking for depth in the services offered which is going to be a challenge for new entrants. “That is why we believe that we have a headstart even over many big companies in U.S. and India whoare not into healthcare analytics yet. Further their current factory type of model to train people and cost arbitrage based business models are the exact opposite of skillset and business models that are required to succeed in this business.,” states Namasivayam. In fact, within life sciences, SCIO is already expanding outside U.S, starting with Europe and UK, while identifying opportunities in the U.S. as well. It will also be consolidating and aligning market share in these three verticals. It recently acquired Clear Vision Information Systems out of Westlake California and this was funded through its internal accruals and debt.
Today, it has grown to become a US $65 million company (in 2015) with healthy profitability. It is also reinvesting its cash excess in research and development and acquisitions. Going forward, the focus will be on depth vs breadth and the company will focus on deepening its solutions in the 4 areas of focus.
It is now making focused effort towards improving its brand name and positioning. The company aims to become a US $100 million company by 2017 in terms of revenue with clear growth strategies in place for its three target verticals and four solutions, at the same time continue to gain market share and consolidate its position in this growing industry.