Proxymed, Inc.

1854 Shackleford Court, Suite 200

Atlanta, Georgia 30093
(770)-806-9918

www.proxymed.com

Sales

$72 million

Business Description

ProxyMed, Inc., incorporated in Florida in 1989, is an electronic healthcare transaction processing services company providing connectivity services and related value-added products to physician offices, payers, medical laboratories, pharmacies and other healthcare institutions. We maintain an open electronic network for electronic transactions with no equity ownership in businesses engaged in the front-end (i.e., physician practice management software system vendors and other physician desk top vendors) or in the back-end (i.e., payers, laboratories and pharmacies). Our business strategy is to leverage our leadership position in connectivity services in order to establish ProxyMed as the premier provider of automated financial, clinical and administrative transaction services primarily between small physician offices (offices with one to nine physicians) and payers, clinical laboratories and pharmacies. With our neutral position, we believe that we can better attract both front-end and back-end partners who may be more comfortable doing business with a non-competitive partner.

Our electronic transaction processing services support a broad range of financial, clinical, and administrative transactions. To facilitate these services, we operate Phoenix™, our secure, proprietary national electronic information network, which provides physicians and other healthcare providers with direct connectivity to one of the industry’s largest list of payers, the industry’s largest list of chain and independent pharmacies and the largest list of clinical laboratories. Our corporate headquarters is located in Atlanta, Georgia, and our products and services are provided from various operational facilities located throughout the United States. We also operate our clinical computer network and portions of our financial and real-time production computer networks from a secure, third-party co-location site also located in Atlanta, Georgia. All of our revenues are generated domestically.

Current Products and Services

We offer a variety of financial and clinical electronic processing services through our suite of Windows®-based1 products, through our Internet portal, ProxyMed.net and through various direct network connection programs. Each of these entry points connects physician offices to our network and then routes transactions to their contracted payer, laboratory and pharmacy partners.

Claims submission and reporting, insurance eligibility verification, claims status inquiries, referral management, laboratory test results reporting and prescription refills are all available today through ProxyMed.net. We continue to expand our offerings through ProxyMed.net to include new financial and clinical transactions such as claims response management, electronic remittance advices, encounters and new prescriptions. All of our existing web-based applications can be private-labeled and are being marketed through our channel partners to increase distribution opportunities. Our recently completed acquisition of PlanVista also adds a suite of cost containment and business process outsourcing solutions to our payer customers.

1 Windows is a registered trademark of Microsoft Corporation.
 
Payer Services

Over the course of 2003 ProxyMed completed the integration of MedUnite’s products and services into ProxyMed’s existing suite of products. This combination has resulted in a broad suite of products that fit the transaction processing and connectivity needs of all physician offices, regardless of the technology that they use. This suite of products covers platforms as old as DOS but also includes solutions for those that have the latest in Internet platforms.

We offer several Windows and Unix based desktop products, including claims submission through ProxyClaim and claims tracking through our ProxyTracker product. We also offer Statlink, that can be used to submit claims, eligibility and claims status. We also offer a non-computer based solution in our point-of-service terminal that allows for a low cost, stand-alone solution for electronic eligibility verification, patient statement processing, paper claims printing and Explanation of Benefits (EOB) scanning.

For physicians who prefer to use Internet based services ProxyMed had developed and had been operating our provider transaction services web portal, ProxyMed.com, for over three years. With our acquisition of MedUnite and its MedUnite.net web portal, we started the 2003 year operating two provider web portals. However, in July 2003, we launched a consolidated new portal, ProxyMed.net, that integrated the MedUnite.net individual application services with the ProxyMed.com menu system, user access management, enrollment and other infrastructure components. By the end of 2003, the majority of transactions and customers had been migrated from ProxyMed.com and MedUnite.net to the new portal. ProxyMed.net’s available web-based financial and administrative transactions now include claims submission and reporting, eligibility verification, claims status inquiries, referral management and pre-certifications.

In addition to working directly with physician offices, ProxyMed offers software developers, large customers and partners an Application Programming Interface (API) to connect to the ProxyMed real-time transaction platform and directly submit XML or X12 based transactions. This service is sold as ProxyMed’s business-to-business (“B2B”) offering. The platform which supported the B2B offering was based on MedUnite’s proprietary XML transaction format. The platform and the API as implemented were not HIPAA-compliant and MedUnite had an ongoing project to bring the platform and API to HIPAA-compliance. We completed this project in mid 2003 and all transaction types are HIPAA compliant.

In addition to remediating the physician side of our connectivity services to be HIPAA compliant. ProxyMed also updated all payer side connectivity platforms to be HIPAA compliant. This project was completed in 2003. The parallel effort to work with each connected payer to remediate its connection for HIPAA-compliance is continuing in 2004. We anticipate completion of this project by mid-year.

Prescription Services

In our Prescription Services business unit, we offer both new prescription ordering and refill management through our PreScribe® family of products. There are currently over 1,200 physician clients using PreScribe®. PreScribe® and Phoenix™ support the largest and oldest electronic and fax gateway infrastructure with connectivity to over 30,000 pharmacies nationwide. We also offer a private-label version of our web-based refill prescription application.

Laboratory Services

Our Laboratory Services business unit offers lab order entry and results reporting through our recently announced QuickReq product. We believe the QuickReq advantage is its enterprise scope with a modular approach, giving even the smallest labs the ability to deploy an order entry and results reporting solution. In addition to QuickReq, we offer a family of intelligent remote reporting devices for communicating lab results to physician clients. Our devices are installed in more than 100,000 physician offices throughout the United States. Our FleetWatchSM monitors and reports the status of individual remote reporting devices within a fleet. This service is valuable to laboratories in its ability to detect and proactively resolve problems, many times before clients ever notice a disruption in service.

Medical Cost Containment Services

Through our recently completed acquisition of PlanVista on March 2, 2004, we now provide medical cost containment and business process outsourcing solutions for the medical insurance and managed care industries through our operating subsidiary, PlanVista. PlanVista’s customers include healthcare payers such as self-insured employers, medical insurance carriers, third party administrators, health maintenance organizations, sometimes referred to as HMOs, and other entities that pay claims on behalf of health plans. PlanVista also provides network and data management business process outsourcing services for health care providers, including individual providers, preferred provider organizations, sometimes referred to as PPOs, and other provider groups.

PlanVista provides healthcare payers with access to its preferred provider network, known as the National Preferred Provider Network, which offers payers discounts on participating provider medical services. The National Preferred Provider Network is a “network of networks,” comprised of more than 30 local PPO networks and independent physician associations with which PlanVista contracts, as well as directly contracted independent physicians in some cases. PlanVista’s National Preferred Provider Network includes approximately 400,000 physicians, 4,000 acute care hospitals, and 55,000 ancillary care providers. In addition to offering payers in-network discounts, PlanVista has added medical bill review and negotiation through key strategic alliances. PlanVista’s cost containment customers also benefit from its advanced claims repricing and network and data management services.

PlanVista has leveraged its leading edge technology and management expertise to offer its clients network and data management outsourcing services that are independent of the National Preferred Provider Network access business. In late 2001, PlanVista launched its PayerServ business, which helps payers manage all of their network relationships, whether or not the payers also access the National Preferred Provider Network. PlanServ, the other business initiative PlanVista implemented in late 2001, provides claims repricing and network and data management services that help PPOs support all of their payer relationships, not simply payer relationships that they maintain through the National Preferred Provider Network.

Business Strategy - We plan to grow operating revenue and profits by increasing the market share of PlanVista’s medical cost containment business, building its existing network and data management business process outsourcing businesses, introducing new medical cost management solutions for its customers and accessing our significant payer customers. PlanVista’s strategy to date has been to market its established National Preferred Provider Network brand as a leading national preferred provider network and to provide a broad array of technology-based business process outsourcing services to existing and new customers. This strategy is designed to help customers maximize their total savings on medical claims and administration through PlanVista’s advanced network and administrative capabilities.

Focused Penetration of Payer Market — We believe that we can increase PlanVista’s market share by marketing its claims repricing technology, its ability to capture discounts on a large percentage of claims due to the size of its National Preferred Provider Network, and the attractiveness to payer customers of its percentage of savings revenue model. PlanVista also cross-sells its PayerServ products to its existing National Preferred Provider Network access customers. Additionally, because PlanVista’s National Preferred Provider Network is a network comprised in part of a number of regional PPOs, we believe that PlanVista’s ability to market its products to PPOs is enhanced because, in operating the National Preferred Provider Network, PlanVista has gained experience in managing the back office, automation, and technology challenges that most PPOs face.

Emphasis on Superior Technology - We intend to continue differentiating PlanVista as a technology leader by using its electronic claims repricing technology to increase its customer base. In June 2003, PlanVista completed the migration of all its clients to its “MedEngine” repricing system on the Oracle Database, thereby updating its technology-enabled services to further improve speed and accuracy and achieve greater operational efficiencies and enhanced claim data integrity. This technology update took place over the course of two years and represented a significant achievement for PlanVista, allowing it to handle the most demanding claim repricing tasks.

The latest version of PlanVista’s Internet claims repricing system, ClaimPassXL® v3.5, allows PlanVista to shift claims repricing submissions from paper or fax to the Internet, which reduces its claims processing costs from between $0.75 and $0.80 per claim to $0.15 per claim, and reduces turnaround times from three business days to real-time for most claims. We believe that faster turnaround of claims repricing will become more important to payers as state insurance regulators increase their scrutiny of claims payment turnaround times. Since the March 2001 release of ClaimPassXL® v3.0, the predecessor to ClaimPassXL® v3.5, PlanVista’s volume of Internet repriced claims has increased steadily.

National Preferred Provider Network - The National Preferred Provider Network is comprised of PPOs, independent physician associations, and individually contracted providers that offer discounts on medical services. These providers and provider groups participate in the National Preferred Provider Network to increase patient flow and benefit from the National Preferred Provider Network’s prompt, efficient claims repricing services. Healthcare payers access the National Preferred Provider Network to benefit from the discounts offered by participating providers. The size of the National Preferred Provider Network and the level of National Preferred Provider Network discounts provide PlanVista’s payer customers with significant reductions in medical claims costs.

The National Preferred Provider Network access agreements generally require PlanVista’s customers to pay PlanVista a percentage of the cost savings generated by the National Preferred Provider Network discounts. In the medical cost containment industry, this payment arrangement is called a “percentage of savings” revenue model. A typical percentage of savings customer maintains arrangements with more than one PPO network. Most of these payer customers utilize the National Preferred Provider Network as an additional network to contain costs when a covered person obtains medical services from a provider outside of the payer’s primary PPO network. When PlanVista receives a provider bill for medical services that are covered by the National Preferred Provider Network discount arrangements, PlanVista electronically reviews the bill and reprices it to conform to the negotiated discounted rate, which is typically lower than the invoiced amount. PlanVista charges payers an average of 18.0% of the savings that the payer realizes from the discount. PlanVista derives the balance of its National Preferred Provider Network operating revenue from payer customers that pay a flat fee per month based on the number of enrolled members. These customers generally access the National Preferred Provider Network as their primary PPO network.

PlanVista’s contracts with PPO participants and other participating providers generally have renewable terms ranging from one to two years, but in most cases are terminable by either party without cause on 90 days’ notice. The termination of any PPO contracts would render PlanVista unable to provide customers with access to the PPO’s provider discounts, and therefore would eliminate PlanVista’s ability to reprice claims and derive operating revenue accordingly. More than 80.0% of PlanVista’s participating providers have been part of the National Preferred Provider Network for more than three years, with some relationships spanning more than nine years since the beginning of the National Preferred Provider Network’s inception in 1994. Since the majority of the provider arrangements are through other networks, PlanVista depends on its contracted networks to maintain provider relationships and ensure provider compliance with the terms of the network arrangements.

Electronic Claims Repricing - In connection with its National Preferred Provider Network access business, PlanVista provides electronic claims repricing services that benefit both its payer clients and its participating providers. A participating provider submits a claim at the full, undiscounted provider rate. The provider sends the claim directly to PlanVista or to the payer, which then forwards the bill to PlanVista. Because there are a wide variety of provider systems for submitting claims, PlanVista accepts claims by traditional methods such as mail and fax, as well as through the Internet and by electronic data interchange. PlanVista converts paper and faxed claims to an electronic format, and then electronically reprices the claims by calculating the reduced price based on its National Preferred Provider Network’s negotiated discount. PlanVista returns the repriced claims file to the payer electronically, in most cases within three business days.

PlanVista’s ClaimPassXL® Internet and electronic data interchange services speed the claims repricing process for its customers. By logging onto PlanVista’s ClaimPassXL® Internet site, a payer can input claims information directly into PlanVista’s claims system. PlanVista electronically reprices the claim and delivers the repriced claim information to the payer customer through the Internet. PlanVista’s electronic data interchange (sometimes referred to as “EDI”), system provides an alternative way for customers to simplify the claims repricing process. EDI customers do not have to key claims information into PlanVista’s Internet site. Instead, PlanVista’s EDI system interfaces directly with the payer’s claims file configuration, which allows the payer to send PlanVista its claims file in its existing electronic format. After PlanVista electronically reprices the claims, PlanVista sends the customer an electronic file of claims information that the payer can incorporate into its claims database automatically.

Although PlanVista does not charge its network access customers a separate fee for claims repricing, PlanVista believes that its advanced repricing system provides significant benefits that make PlanVista’s network access services more attractive to payers. It is time consuming and expensive for a payer to load PPO rates and demographic information into its claims system and to create a system that accepts the various forms in which claims information is submitted. PlanVista offers a turnkey solution that requires only a limited number of payer personnel. PlanVista can reduce claims turnaround times and provide efficient claims transmission options. PlanVista’s system also can reduce lost claims, reduce the number of undiscounted claims, support high claim volume customers, and improve accuracy over manually processed claims. PlanVista’s customers are also relieved of some of the burden of complying with the Health Insurance Portability and Accountability Act, sometimes referred to as HIPAA, which imposes privacy and data configuration requirements that apply to claims repricing. PlanVista believes that its claims processing procedures are in material compliance with current HIPAA requirements and will be compliant with future requirements. Providers also benefit from PlanVista’s streamlined claims system, which helps increase the speed with which they get paid and the accuracy of the claims payments.

Network and Data Management — PlanVista uses its information system capabilities to provide network and data management services for the payers that access the National Preferred Provider Network. For some network access payers, PlanVista acts as the payer’s mailroom for receipt of all provider claims, converting payer and fax claims to an electronic format, identifying the correct network fee schedule applicable to each claim, and electronically repricing the claim accordingly. PlanVista prepares detailed reports regarding repricing turnaround times and the savings that each payer realizes, itemized by the total number of claims incurred, the number of claims discounted, and the average discount. Payers can use this information to help design health plans that effectively control costs, enhance member benefits, and yield a more favorable loss ratio, which is the ratio of paid medical claims compared to collected premiums. As a provider of data management services, PlanVista maintains provider demographics and fee schedules and updates provider directories. PlanVista integrates several components of certain licensed reporting software to provide both payer clients and participating PPOs with quick access to claims data, allowing them to produce a variety of analytical reports. PlanVista generally does not charge its National Preferred Provider Network access customers any additional fee for its standard network and data management services.

Bill Review and Negotiation - In April 2002, PlanVista began offering optional medical bill review and negotiation services to its payer clients. Many of PlanVista’s percentage of savings clients send PlanVista all claims that fall outside their primary PPO network arrangements. Traditionally, PlanVista identified and repriced the claims that were subject to the National Preferred Provider Network discount arrangements and returned the non-National Preferred Provider Network claims to the payer without applying any discount. PlanVista now offers payer customers the opportunity to realize cost savings on these out-of-network claims through PlanVista’s affiliations with bill review and negotiation companies. PlanVista can electronically transmit non-National Preferred Provider Network claims to experienced professionals at the contracted bill review and negotiation companies. These professionals use proprietary medical software to analyze each claim to detect any incorrect charges or billing irregularities. Once that phase of the analysis is completed, the detailed charges are compared to a proprietary database to determine the competitiveness of the charges in the provider’s geographic area. The bill negotiator then contacts the provider to discuss PlanVista’s findings, and in many cases is able to reduce the claim amount. The reviewer obtains signed agreements from each provider to prevent the provider from later contesting the reduction or billing the patient for the balance. The bill review and negotiation vendor then returns the electronic file to PlanVista, and PlanVista forwards it to the payer along with the payer’s other repriced claims. Payers pay PlanVista a percentage of the savings that are generated by the bill review and negotiation service.

Advance Funding - In 2002, PlanVista launched a program to provide advance funding services for payers and providers. Through an arrangement with established advance funding companies, PlanVista offers participating providers the opportunity to receive claim payments in advance of the due date. In exchange, the providers agree to accept a discount of the original billed amount. This service provides both a reduction in claim costs for payers and rapid payment for providers.

Business Process Outsourcing - PlanVista traditionally provided claims repricing and network management services only with respect to claims that its National Preferred Provider Network participating providers submitted to one of PlanVista’s network access payer customers. Through its network and data management business process outsourcing business, PlanVista has expanded its scope to offer payers and providers services that are independent of PlanVista’s network access business.

PayerServ - Healthcare payers typically contract with more than one PPO network. While historically most payers’ claim systems and applications could handle simple percentage discount repricing calculations for a single network, PlanVista believes that most are not well suited for current PPO contract terms requiring detailed, often complex, repricing calculations. Each of the networks with which a payer contracts may have different discount methodologies and rates, greatly adding to a payer’s administrative burden and increasing the complexities of processing and repricing claims.

Through PayerServ, PlanVista uses its existing technology and management expertise to help payers manage all of their network relationships, whether or not they also access the National Preferred Provider Network. A payer can outsource its network and data management obligations to PlanVista, and PlanVista will assume the responsibility for moving, tracking, and repricing healthcare claims among all of the PPO networks with which it has contracts. By maintaining provider fee schedule and demographic information for all of the providers in a payer’s provider configuration, PlanVista eliminates bottlenecks in the payer’s claim work flow, expedites claims repricing, and improves accuracy.

The PayerServ services may include acting as the payer’s mailroom for receipt of all provider claims, converting paper and fax claims to an electronic format, identifying the correct network fee schedule applicable to each claim, and electronically repricing the claim accordingly. PlanVista also can provide reporting and other network management services with respect to all of the payer’s networks. PlanVista can prepare customized reports for payers that capture information regarding repricing turnaround time, cost management, demographics, case management, provider services, diagnoses and procedures. PlanVista believes that its PayerServ customers benefit from reduced operating expenses, streamlined network management, HIPAA-compliant procedures, and electronic repricing with rapid turnaround times. PlanVista does not require customers to pay upfront network loading fees and monthly maintenance fees, which are features of many of its competitors’ systems.

PayerServ customers typically pay PlanVista for claims repricing and claims and network and data management services on a per-claim basis. For each PayerServ customer, PlanVista analyzes the customer’s service requirements, including claims work flow, claims volume and types, and PPO network configurations. Then, based on its proprietary pricing model, PlanVista determines the pricing for each claim transaction.

PlanServ - PlanServ uses the same technology and management expertise that supports PlanVista’s PayerServ business to offer claims repricing and network data management services to PPOs. PlanVista’s PPO participants generally maintain relationships with payers that are independent from the PPOs’ affiliation with PlanVista’s National Preferred Provider Network. Many of these PPOs are seeking cost-efficient ways to develop their own automated claims handling and repricing systems and to manage the provider data necessary to update their provider directories efficiently and otherwise support network access. By outsourcing repricing functions to PlanServ, a PPO can achieve advanced electronic capabilities for its payer clients without incurring the high cost of systems development. PlanVista can serve as a mailroom for PlanServ clients, receiving paper and fax claims and converting them to an electronic form for repricing, so that the PPO never touches the claims. PPOs that take advantage of the PlanServ offerings do not have to distribute their rates to their payers, manually reprice claims, or be concerned with HIPAA requirements related to claims repricing. The PPO’s payer clients benefit from reduced turnaround times on repriced claims and escape the burden of loading the PPO’s rates. PlanServ products also include web hosting capabilities, featuring customized, private label web access that enables a participating PPO’s customers to reprice claims electronically through the Internet. Each PPO’s website includes the PPO’s logo and other material chosen by the PPO.

PlanServ also offers PlanVista’s PPO customers management reporting products that capture important claims data, including repricing turnaround times, claim volume, and savings amounts. PPO customers can use this information to negotiate better physician and facility discounts. PlanVista believes that obtaining and analyzing information is increasingly important to PPOs because this information is necessary for them to properly establish their discount levels. PlanVista also provides PlanServ customers with database administration, including provider directory updates and maintenance of provider demographics and fee schedules.

Like PayerServ, PlanServ generally charges customers a per-claim fee, which is calculated based on the extent of the customer’s service requirements, including claims work flow and number of payers.