mulberry cottage blakeney ECHO Health’s sales grew 27
These days, a lot of startup companies focus on building a “minimum viable product” the simplest version of a product that a customer might actually buy.
Bill Davis didn’t do that.
The Westlake company was able to process $10 billion in health care claims last year partly because of a decision Davis made when he started developing the technology back in the 1990s: He wanted the software to be able to process billions upon billions of dollars if needed.
Granted, unlike other entrepreneurs, he didn’t have to build a series of cheap prototypes in an effort to figure out what customers would actually buy. Davis had an advantage, though. He originally designed the software for one customer and one customer only a joint venture formed by Chase Manhattan Bank and Tandem Computers.
So he knew exactly what they wanted: A system that would allow them to take lots of payments headed to the same health care provider and combine them into a single check. It had to work perfectly, and it had to be extremely scalable from the beginning.
“We were dealing with very big guys who said, ‘Oh, you’re going to want to design it this way, because, you know, you’re going to be processing $100 billion,’ ” Davis said.
But it didn’t really start needing massive scalability until 2010. That’s when ECHO Health released a technology that gave its clients an easy way to take advantage of a new payment option in the health care industry: The virtual card, which allows health care providers to accept payments via payment card networks run by companies like Visa and MasterCard.
The growing number of payment options presented an opportunity for ECHO Health. Not only did it start processing virtual card payments, but it developed a system that would allow its clients the third party administrators who manage corporate health plans to automatically select the best payment option, taking into account their preferences and the preferences of the health care provider.
In other words, the so called “waterfall” system would consolidate payments going to a single provider and then determine whether the money would be delivered via a virtual card, an electronic check or a printed check.
“We were breaking ground then. No one was doing anything like this,” Davis said,
noting that ECHO Health offers even more payment options today.
The company got two major clients to start using the waterfall technology in 2010, and “the volume just exploded from there,” according to Kristopher Kern, vice president and chief financial officer.
The result: ECHO Health’s revenue was more than 27 times higher in 2015 than it was in 2010. The size of its staff has grown, too. It employs 44 people today, up from 13 in 2010.
Notice that the revenue is growing faster than the staff. That speaks to the scalability of the company’s software and its business model, according to Davis.
He formed ECHO Health in 1997, after both Chase Manhattan Bank and Tandem Computers were acquired by other companies. The new owners had no interest in the health care payments industry, so Davis offered them a deal: The companies could keep the $1 million in cash that remained on the joint venture’s balance sheet if he could keep the intellectual property.
Though it turned out to be a fantastic bargain for Davis, times were tough in the early years. Like many entrepreneurs, he had to rely heavily on credit cards and his personal savings. But in the early 2000s, ECHO Health started winning more and more customers, since it allowed them to spend less time and money printing physical checks, shipping them and managing the process.
HealthSCOPE Benefits came on as a client about five or six years ago, after ECHO Health had started expanding its capabilities. HealthSCOPE CEO Joe Edwards said the Westlake company’s technology gave him confidence that he would know “where every dollar was going.” The Little Rock, Ark. based company gets daily records confirming the location of those dollars.
“The money is taken care of. There are no loose ends,” he said.
He also lauded the system’s scalability.
Davis is really hoping to see just how scalable the system is. By the end of 2016, ECHO Health expects to be processing claims at a run rate of $18 billion per year. And in 10 years,
the company aims to hit that dollar figure Davis has been preparing for since the ’90s: $100 billion in claims processed per year.