Credit Steve McHale for having a knack for putting himself in the right place at the right time.
Six years ago, McHale and partner Charlie Lougheed sold the previous company they founded, Everstream, for $15 million to Concurrent Computer. Everstream provided analytics and reporting around the then-emerging field of on-demand video.
Now, with their new company, Explorys, the two partners have jumped into health data management, a field that’s expected to explode in the coming years, thanks largely to $17 billion in federal incentives aimed at persuading doctors and hospitals to adopt electronic medical records (EMRs).
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With all that cash going toward EMRs, there’s a strong need for a means of making sense of that data and uncovering any trends it holds that could improve patient care. Explorys believes it can fill that need, and some deep-pocketed investors apparently agree.
Last month, Explorys raised an $11.5 million series C round of investment, led by Austin Ventures of Austin, Texas and Foundation Medical Partners of Connecticut. The round also included follow-on funding from Austin-based Sante Ventures and Cleveland Clinic.
The company has 25 employees, but anticipates such high demand for its software that it projects that number to hit 100 around the end of next year. Founded in 2009, Explorys has five hospital clients and has amassed EMR data on about 10 million patients. Explorys will need to quickly hike those numbers if the company is to hit its goals.
McHale recently chatted with MedCity News on the possibility of an Explorys IPO, why this is a “watershed” year for health data, and why the medical industry has been slow to follow other industries in adopting IT.
Q: In announcing Explorys’s latest funding, you called 2011 a “watershed” year for healthcare data. What exactly did you mean by that?
A: There are a number of forces that have really come together to provide this watershed environment. There are the economic forces like the fact that healthcare has become such a big part of our GDP, so the federal government has gotten involved to improve the delivery and efficiency of healthcare. All of that improvement is predicated on data. So, the government gave doctors money to put in systems to build that data. All the money that doctors and hospitals will get is all related to building systems that will ultimately help us understand how healthcare is being delivered and how it can be improved.
So, we’re coming in to bring value to that data. The systems today are really just about creating and logging the data in records. That’s good when you’re dealing with the patient face-to-face, but how do you leverage that data on a population level to improve medicine, both clinically and financially? You need to aggregate it and analyze it.
Q: What do you see as Explorys’s most likely exit scenario?
A: We’re not thinking about that. We’re in a position where we don’t need to. We see potential in a public offering at some point. I think that’s coming back into favor and it’s a real possibility for us. I wouldn’t say that’s an exit. I’d says it’s the next stage of the business. I think we’re a next-generation company like Google and Facebook with a really important mission.
Q: Why do you think it’s taken U.S. hospitals so long to use all the patient data they collect to enhance patient care?
A: A bit of it is the culture of who drives the healthcare system. Doctors are brilliant and that’s why they’re in healthcare, but they’ve been working with manual processes and that’s what they know. So, embracing technology wasn’t the first thing that would come to their minds like it would in other industries like banking, telecommunications or retail, for example. Healthcare was built on the expertise of the physician, not the technology. It’s a culture change, but even now there are still doctors out there who don’t want to change and don’t care about the government money. They’re more comfortable with the processes they use today. There’s no question healthcare is behind in the IT space compared to other industries. So, we’ve implemented disruptive platforms to manage this large-scale data and turn it into useful information and knowledge.
Q: In trying to sell Explorys’ services to hospitals, what’s the most common objection you hear from executives?
A: I think sharing your data is a leap. There’s a lot of ‘Hey, this is our data. It’s special and it’s unique.’ You always have to be careful about patient privacy, so that’s a concern. We have to quell those concerns by showing that’s at the top of our minds as well. It’s really an education process.
Q: Things are looking good for Explorys in the wake of your series C investment, but what’s the biggest challenge facing the company right now?
A: I think the biggest challenge for us is we’re like a puppy in front of a giant bowl of food; we don’t want to eat ourselves to death. We’ve been very good as a leadership team of not knee-jerking, but still focusing on opportunities that have the right balance where we can contribute real value and still get compensated for delivering that value. There’s tremendous opportunity and need in the health space around leveraging data. Data ultimately is the foundation of healthcare reform. It’s been the lack of data and information that’s stifled our healthcare system. You can’t understand what works and what doesn’t without data. Data is the underpinning of the whole process of transforming and improving healthcare in the U.S.
