How NaviNet Built the Country’s Largest Healthcare Communications Network

Xconomy Boston — 

If you’ve never heard of NaviNet, the builder of what the company claims is the nation’s largest real-time healthcare communications network, then the Cambridge, MA-based firm bears most of the responsibility, says company CEO Brad Waugh. The 11-year-old firm spent its first 10 years building the network and its customer base, and over the past year has the firm put a greater emphasis on telling health plans, doctors, and others about its multiple capabilities, Waugh says.

NaviNet helps doctors’ offices instantly access patients’ insurance information, such as their benefits eligibility and claims status, over the Web. So far it’s connected 770,000 doctors and other healthcare providers to the network, covering about 40 percent of the total market, according to Waugh. Big health insurers like Blue Cross Blue Shield, Aetna, and UnitedHealthcare are attracted to and use NaviNet’s services because they save money by accessing sharing information via the company’s Web portal rather than through costlier call centers, Waugh says. NaviNet makes the bulk of its money, he says, on transaction fees that insurers pay the firm to connect with doctors.

There are certainly other important details of NaviNet’s business to speak of. But the big question I had was how the company is adapting to the rapidly evolving landscape of the U.S. healthcare system, which is expected to undergo major reforms under the Obama administration. (Read on for my conversation with Waugh on this topic.) With the goal of driving down healthcare costs, among other things, the federal stimulus package passed earlier this year includes $19 billion in incentives for hospitals and practices that adopt electronic health records. While the exact rules governing how the money will be doled are still being worked out, Waugh says that his company already has the information “rails” over which the government and the healthcare system could move information smoothly and securely.

The 238-person company is already seven years into operating profitably, Waugh says, but because NaviNet is private, he doesn’t have to share actual financial numbers. He says the continued growth of the business will help support an eventual public offering. (I’m sure the company’s investors, such as Waltham, MA, venture firms North Bridge Venture Partners and Atlas Venture, wouldn’t mind an IPO either.) The CEO gave me no timeline for a public market debut, but I’m putting NaviNet on my IPO watch list all the same.

What follows is an excerpt from my interview with Waugh (who has generously invited me to go fishing for striped bass with him near his two homes in Rhode Island):

Xconomy: Does NaviNet stand to benefit from the government’s new multibillion-dollar push for doctors to use electronic health records?

Brad Waugh: Since there’s a lot of back and forth happening in Washington, quite frankly we just don’t know today what the federal government is going to come out with in terms of standards [for adoption of electronic records] and what that means for our company. So on one end we’re very enthusiastic that the Obama administration wants spend so much money to cut costs by using IT, but we also just don’t know what that will be.

X: What’s been NaviNet’s experience in working with the federal government?

BW: Providers have told us that it’s taking them a long, long time for them to get paid by the federal government. We heard numbers of two months to up to six months to get reimbursements from the federal government. And 44 percent of all their claims were sent back to doctors’ offices, and they would have to redo the entire form again. So we automated that process and came out with our own direct network connection to CMS [the Centers for Medicare & Medicaid Services at the Department of Health and Human Services] with what we call NaviNet Medicare Eligibility, which enables an administrator to fill out a reimbursement form online in real-time and send it to CMS. We’re seeing doctors get reimbursed from the agency in an average of 28 days today.

X: How does NaviNet plan to compete with IT giants like Google and Microsoft, both of which are moving aggressively into the healthcare market?

BW: They are trying to come up with an application that works with the patient community. Our network is a provider-payer network. We are beginning to do such things as clinical alerts to send critical information in real-time to both patients and providers. But what Google and Microsoft are doing is working directly with patient records and the permission statuses to transport those records to providers. We see Microsoft and Google as potential partners that could utilize our network, and I think everyone at my company is cheering on those firms. With the name recognition and capabilities they have, they could make a real difference. [Luke talked to renowned Harvard genetics professor George Church in May about the role Google and Microsoft could play in personalized medicine.]

X: In which ways is NaviNet innovating and developing new products to remain competitive?

BW: One of the things that we’ve been really pushing is our payment technology, which has the ability to make some differences in the lives of doctors. It enables doctors’ offices to collect payments at the point of service and set up payment plans with patients. We’re also looking at features that enable doctor’s offices to sell their bad debt, since it’s so expensive for them to collect payments from patients.

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3 responses to “How NaviNet Built the Country’s Largest Healthcare Communications Network”

  1. There is $34 Billion in stimulus funding that will begin to be spent in 2011. NaviNet is perfectly positioned to win and grow. The security and logistics of sharing EHR information for applications such as diagnosis, billing, and data mining is will be a major driver.

  2. Ken Ken says:

    physicians must use microsoft internet explorer to utilize navinet They can’t use chrome, mozilla or safari. This is not only a disservice but bizarre.