When Norwalk, Conn.-based Collegiate Health Care began managing health services at colleges and universities in 1992, industry professionals looked on with interest, waiting to see what would come of it.
Six years later, no one else has entered the game.
Collegiate, founded by Columbia University (N.Y.) graduate Brett Prager, who is acting chief executive officer, is the only healthcare management company specializing in the college market. Some local hospital systems, physician groups and independent facilities, however, are considered Collegiate competitors.
With its developing network of campuses, Collegiate has used increased buying power, staffing changes and new programs to reduce expenditures, complete renovations and increase student satisfaction at the health centers it operates.
For example, through a joint venture with East Alabama Health Services Foundation at Auburn (Ala.) University, Collegiate reduced expenditures at the student health center from $2.1 million annually to $700,000. The partners made staffing changes and increased revenues collected from third parties, largely healthcare coverage under existing parental insurance plans.
They also provided a half-million-dollar investment to renovate the student health facility and information systems.
"They have done an outstanding job and have been very successful in enhancing patient satisfaction," says Grant Davis, Auburn's assistant vice president for student life. "Based on the survey results . . . the student body is much more satisfied with healthcare on campus."
Starting small. Collegiate has management contracts at 11 schools, down from 16 in 1996. Most contracts are at small colleges like the University of Hartford in Connecticut and Rollins College, Winter Park, Fla. Its most recent addition is Hofstra University, Hempstead, N.Y. Some of the schools no longer contracting with Collegiate had enrollments of fewer than 1,000 students, and one school closed.
In 1996, Collegiate added Auburn, its largest school, with 22,000 students.
Despite a drop in the number of contracts, Collegiate's revenues have grown at about 25% per year, says marketing director Randall Wheeler. The company expects to bring in about $5 million in revenues this year. Collegiate declined to provide more detailed financial information.
Collegiate employs 20 people at its Norwalk headquarters, including an accreditation coordinator, recruiters and employees who work in finance, marketing and information technology. The rest of Collegiate's 130 employees work across the country and include regional sales staffs and business managers, physicians and health educators.
Collegiate was launched with about
$2 million in venture capital, and the company has raised $27 million in venture capital to date. Major investors include Bank America Ventures, Chase Capital Partners, Conning Private Equity and CIBC Capital Partners.
Innovators. Most schools contracting with Collegiate have switched from a walk-in system to one requiring appointments (except for urgent care), which has reduced waiting times at campus facilities. All schools are offered a 24-hour "nurse line"-a toll-free number for round-the-clock medical advice. Collegiate also implements quality assurance programs and takes over such administrative burdens as tracking student immunizations and purchasing supplies and prescription drugs.
"Colleges face the challenge of how to integrate student health services," says Richard Schenkel, Collegiate's former CEO who left the company late this summer.
Collegiate takes a financial risk with some contracts with its guarantee to run the health center at a specified cost. If it runs the center for less, the company earns a profit; if it spends more, Collegiate posts a loss. With other contracts, Collegiate is reimbursed for its expenses and is paid a management fee.
No windfalls. Little money is to be made in student health, which is more consumer- and prevention-oriented than most other medical services, says Kevin Patrick, health services director at San Diego State University. Patrick served on Collegiate's advisory board for a few years when the company started.
"What Collegiate has found is that it's a more complex process than first imagined," Patrick says. "The culture of student health is not exactly the same culture as food services and janitorial services."
With a focus on education and prevention, student health centers tend to be closer to the core missions of a university, Patrick says.
The reluctance of some colleges to outsource their health services is only one obstacle Collegiate faces.
Full- and part-time students, many of whom have left home but are not yet covered by an employer, sometimes have little or no insurance. That may be one reason few companies are targeting this market.
"It isn't as if there is a lot of money out there in primary healthcare services for this population," Patrick says.
The large initial investment required to provide healthcare services also has kept competitors away, Schenkel says.
"You need to build an infrastructure to enter this business," Schenkel says. "Everyone is waiting to see how big (Collegiate gets)."
Wheeler estimates Collegiate's payroll has more than doubled in the past five years, with major growth occurring after the addition of Auburn.
Collegiate has "some strong growing opportunities," Schenkel says. "This is a very large business."
Big targets. Collegiate would like to go after larger schools with bigger health budgets. But larger schools are better able to manage their own health services.
The health center at Ohio State University, Columbus, for example, caters to a student population of 50,000, employs more than 100 people and has been able to maintain constant revenues.
"The larger schools have so many resources and have the ability to keep with the market and the changes in healthcare," says Ted Grace, Ohio State health services director. "We felt for the costs and with the large operation we had, we were able to do it ourselves more economically."
But the proper marketing and an approach tailored to the education community could make a place for a company like Collegiate, says Stephen Beckley, a Littleton, Colo.-based healthcare consultant. "It's not going to be easy. There are many vested parties-and it's a challenge to know how to work in that environment," Beckley says. "There are a large number of college health services that have quality concerns and have a need for change on many different levels."