Managing Managed Care

When HPR Inc. moved to larger quarters in August, 1995, Marcia J. Radosevich, 43, the company's charismatic and quirky CEO, asked her physician, traditional Chinese doctor Wong Cho, to perform a feng shui, a procedure to dispel lingering spirits. Wong picked up bad vibes in the corner office--where, it turns out, the previous occupant had seen his business go belly- up. Radosevich chose another office.

But if Radosevich's company had tried to get its HMO to cover Dr. Wong's fee, HPR's CodeReview billing software would have nixed the claim, dubbing the feng shui a nonstandard procedure.

Ferreting out extraneous health-care expenditures has helped make the Cambridge (Mass.) HPR No.12 on BUSINESS WEEK's Hot Growth list. Today, some 250 large HMOs and insurers use HPR's CodeReview software. Since HPR's IPO in August, 1995, sales have jumped 50%, to $17 million, for the nine months ended March, 1996, with operating income up 72%, to $4 million, from the year-ago period.

The seed for HPR was planted in 1987, when Caterpillar Inc., a self-insured company, began to check out its claims for the first time. Caterpillar asked Boston University's Health Policy Institute to help develop a system that spots anomalies in the claims process. Once development was complete, the university asked Radosevich, a health-care consultant on staff, to turn it into a business.

Radosevich set up HPR, which now licenses CodeReview, an outgrowth of the system, for $50,000 to $400,000 annually. CodeReview finds claims that don't comply with standards. It can show that a lab is separately billing a series of tests when they should be submitted as a package, for example. CodeReview flags about 20% of all claims and automatically reduces payment to doctors.

In the tightfisted managed-care world, that's good news for employers and insurers. "The market is unpenetrated," says Ann C. Gallo, an analyst with Alex. Brown & Sons Inc. HMOs seem satisfied with the software and report few disputes. Robert Chin, chief information officer at HealthSource Group Inc., a 3.5 million-member HMO, says HPR software saved HealthSource $16.4 million in 1995. "After they pay our fees," says Radosevich, "that money falls to their bottom line."

Yet HPR doesn't benefit everyone. Potential losers include health-care providers--who may get paid less--and patients who risk undertreatment. So HPR has developed a program called Quality Manager to try to spot insufficient care. HPR also employs six full-time physicians and convenes 200 doctors annually to review its criteria. "There are more savings that we could be generating, but it's not worth it to be controversial," Radosevich says.

With a head start on rivals GMIS Inc. and Health-Chexx Inc., Radosevich has a good shot at sustaining HPR's health. But she'll have to pay for the feng shui.

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