ET Bureau – Peerzada Abrar – August 12, 2013 – BANGALORE: A number of young Indian companies that make specialised software and analytics for global healthcare providers are recording a sharp upswing in business as millions of uninsured Americans enroll in a new healthcare system.
These firms provide data analytics, create and manage healthcare exchanges, electronic health records and help process claims and sell insurance as US companies prepare to adopt the Patient Protection and Affordable Care Act, otherwise referred to as Obamacare after President Barack Obama, that comes into force on January 1, 2014.
Chennai-based SCIO Health Analytics, Noida's hCentive which designs insurance policies, and cloud technology provider SmartRx are some of the firms gaining new customers and support from investors.
"We earn revenues by giving our clients a fishing rod or teaching them how to fish and sometimes catching the fish ourselves," said Siva Namasivayam, chief executive of SCIO Health Analytics.
The five year old company provides insights to insurance firms that help cut costs and tailor products according to the needs of the consumers.
SCIO, co-founded by Namasivayam with ex-colleague Krishna Kottapalli and a batchmate from the NIT Trichy, Karthik Krishnaswami, has recorded a near four-fold rise in revenue and aims to earn Rs 300 crore this fiscal, as demand for its services grows rapidly.
These ventures are looking to gain a toehold in the global healthcare benefits outsourcing market, estimated at $5.4 billion ( Rs 29,000 crore) annually by the Everest Group.
"Healthcare is the next Y2K problem in the US," said Ramesh Babu, a cardiologist who is now a venture partner with the Ventureast Tenet Fund. In April, the fund invested seed capital of Rs 2.7 crore in Bangalore-based SmartRx, which helps doctors implement a patient monitoring system.
"Due to Obamacare, we are expecting a ten-fold growth in our business," said Anil Kumar, founder of SmartRx and an engineer from the University of Mysore.
Experts said while IT services companies including Cognizant, Infosys, TCS and Wipro are also eyeing these opportunities, small firms are stealing a march. "Large IT services players are providing raw plumbing, but these young product companies are providing informatics which is intelligence," said Ajit Singh, a partner at venture capital fund Artiman Ventures.
"Insurgents don't have the inhibition of incumbents or large companies," said Singh whose fund has invested in Gurgaon-based data analytics company Guavus.
With nearly 45 million Americans expected to pick the right health cover on specially designed healthcare exchanges, private healthcare providers competing to offer the best cover are looking for critical data analysis.
"We can't wait for months to do this. Scio has been much more flexible, responsive and can adjust quickly" said Janis S DiMonaco, chief executive HMC HealthWorks, which offers health and wellness programs, and has worked with Scio for about three years to prepare policies and monitor patient care. "They allowed us to grow our business tenfold," said DiMonaco.
In Noida, hCentive's Sanjay Singh is building a marketplace where private firms can compete. "It was a mix of risk, timing and luck," said Sanjay Singh, CEO, hCentive, who took a risk in 2009 to launch the firm when there was no certainty that the healthcare reform law would be passed.
Singh, a former software engineer with Wipro, now works with states like New York, Colorado and Kentucky through system integrators. Out of the 450 employees of hCentive around 350 are building these technology platforms in Noida.
"We have been growing more than 200% for the last couple of years," said Singh, an alumnus of IIT Kharagpur, who expects his company to earn revenue of Rs 600 crore in the next three years. Growing acceptance for such solutions by US state governments is also boosting the confidence of these entrepreneurs.
"The insurance industry as well as other key stakeholder groups have provided input and are enthusiastic about (hCentive)" said Patty Fontneau, CEO of Connect for Health Colorado, which is the State of Colorado's health insurance marketplace.
Anurag Dubey, an associate director at consulting firm Frost & Sullivan who specialises in healthcare, is of the view that Obamacare offers young companies a chance to build innovative mobile technology applications. "Big firms won't chase these opportunities," he said.
Investors are taking note of the unique advantage that smaller firms are enjoying. SCIO which first raised Rs 60 crore from Sequoia Capital to start out, has now raised a total of Rs 140 crore from Sequoia Capital, Health Enterprise Partners and Saama Capital. The firm, which has over 500 employees, expects a top line of Rs 770 crore in the next three years.
The US healthcare industry is larger than India's GDP and even a small impact there would allow us to build a large company," said Shailendra Singh, managing director at Sequoia Capital.