Two physician-executives who once headed the contracting arm of Boston-based CareGroup Healthcare System have formed a private company that will sell software systems designed to reduce costs through drug-utilization management and quality improvement programs.
MedVentive, formerly the Provider Service Network, will offer relatively inexpensive software programs to help hospitals and physicians reduce cost and boost quality through claims analysis, care management, a data warehouse and other functions, officials said.
Jonathan Niloff, director of gynecologic oncology at Beth Israel Deaconess Medical Center and the former president of the Provider Service Network, will serve as president at Cambridge-based MedVentive as the start-up software venture enters a market crowded with dozens of companies offering similar products. Stanley Hochberg, who was chief operating officer and medical director at the Provider Service Network, will take over the same roles at the new company.
Niloff said much of the proprietary software that the company is now selling was developed during its time as an administrative arm of CareGroup, which has a network of about 2,300 doctors and five Boston-area hospitals, including Beth Israel Deaconess. Caregroup members will form the core of MedVentive's new clients, Niloff said.
"We started very early doing a lot of proprietary software development that led to much of the contracting success of the network as it evolved over time," Niloff said. "We found ourselves in a situation where we had developed all this really terrific stuff and decided to continue it as an independent, entrepreneurial endeavor. We had this backbone, this foundation, of legacy customers. And we heard from a lot of others who wanted to get access to this."
Niloff declined to provide any details about the financing of the privately held firm or how it was spun off from CareGroup other than to say "there was consideration paid" for the company and the proprietary software developed by the Provider Service Network. Niloff said the network and its software saved CareGroup about $100 million on pharmacy subscribing alone. He estimates the savings on pharmacy costs at about $5 per member per month for his new customers.
Aside from its ties as a client of MedVentive, CareGroup has no business relationship with the new venture, Niloff said.
John Szum, executive vice president and chief financial officer for CareGroup, said he was "not at liberty to disclose any of the specific terms and conditions of the private transaction." He said the deal was "part of Caregroup's continuing effort to consolidate and focus on core operations -- namely our hospitals and physicians -- along with the need to prioritize our own access to capital. We felt it was in our best interests to divest ourselves of that."
MedVentive enters a tough market with several dominant players and scores of smaller companies all scrambling for a piece of the pie. David Wilkins, a spokesman for Thomson Medstat, one of the market leaders, described it "as a very competitive market. It's really a challenging market to break into."
Wholly owned by Niloff and other members of its senior management team, MedVentive currently has about 2,000 physician clients, he said. It is targeting smaller- and medium-sized health plans, as well as self-insured employers, as its future customers. Niloff said MedVentive would help these groups "better understand where their healthcare dollars are being spent." Pricing is dependent on volume, he said.
As an application service provider, MedVentive delivers its products through the Internet, a simple and relatively economical way to incorporate these types of programs, Niloff said.