Doctors an untapped market for small tech firms

A Florida physician explains why his electronic claims appeals company pitches its product to large health systems.

By Tyler Chin — Posted Oct. 25, 2004

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Since 2002, William D. Kirsh, DO, MPH, a hospitalist in Miami, has been selling an electronic disputed claims product that he thinks fits physicians to a T: It's easy to use, inexpensive and offers a quick payback.

Miami-based eAppeals LLC charges doctors a $150 monthly subscription fee for unlimited use of the Internet-based version of his product, which automates the process for appealing disputed claims, said Dr. Kirsh, the company's CEO and founder. Hospitals pay either a licensing fee or 8% to 30% of the recovered amount. (See correction.)

In an interview with AMNews, Dr. Kirsch discusses the difficulty of marketing to physicians and why companies like his tend to concentrate on signing up hospitals and other large health care organizations.

Question: Why don't you market directly to physicians?

Answer: Here's the issue. There's a lot of us around, and it's not like we're in major group practices. To be able to sell to each individual physician requires a very large sales force, and for young companies, that is not really easily obtained.

As a small company, you have to go out, inform and educate and tell about the services you have to many, many physicians individually. That's hard.

We have a number of physician groups using our system, but our largest volume is through the Veterans Administration system, as well as through large tertiary care hospitals and nationwide home health and laboratory companies. The way we picked up most of the [physician] business is, I've done lectures at different physician meetings. And word of mouth. That's how we handle the physician [marketing] side.

Q: So from a marketing standpoint, you're in the same boat as many companies that market much more complex and costly software, such as electronic medical records software, to hospitals rather than physicians.

A: Absolutely. I look at it even in terms of when I had my own office staff. I had two or three people working with me [when he operated a solo practice] ... How much leeway do you have in terms of having a company come in to spend time with you, educate you and things like that? It's very, very difficult. So what happens is smaller practices kind of lose out. Things that could be marketed to small practices sometimes are not because it's just so difficult.

Small practices don't have the infrastructure to spend a lot of time. I mean, they are taking care of patients.

To try to go talk to Dr. Smith after he's been through 40 patients a day, has to run to the hospital, then the nursing home and convince him to spend a few minutes with you to improve efficiency, it's hard!

Q: How does your product help doctors?

A: The average physician has somewhere between 15 and 25 disputed claims a month. Each disputed claim on average is worth about $150. So if we to do the multiplication, say the low end -- 20 disputed claims times $150. That's $3,000 a month sitting in a pile of claims that has to be worked manually for that particular physician. The average rate of return on that -- if you use some national rate of averages -- is roughly 40% to 50%.

Say you get a 50% return rate on $3,000, you get $1,500 back. To use our [online] system would cost [a doctor] $150 a month, and their staff time would be minimal. If they were to use their own staff at [a cost of] roughly $30 to $35 a claim [manually] ... what we are offering is a more efficient and organized system to provide physicians with more dollars in their pockets. (See correction.)

Q: That should be easy to sell to doctors. And yet you market to hospitals.

A: What happens is you have a higher volume. One physician is willing to give you, say, 20 to 25 disputed claims a month, whereas with a large company that does 10 million transactions, like some of the large laboratory companies, you might end up with about a million, a million and a half transactions to handle disputed claims. It's really quite different in magnitude.

Q: What's your annual revenue?

A: We're a private company, so I prefer not to discuss what my revenue is. But I can tell you ... I've processed a quarter of a billion dollars of disputed claims so far this year.

Q: What's your success ratio in overturning underpaid and denied claims?

A: We've built a database ... where we're actually able to predict based upon the types of claims that are coming in, by insurance plan, by CPT and ICD-9 code ... what the overturn rate is. Depending on those combinations and age [of a claim], it's anywhere from about 15% to about 70%.

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