Products
Orca develops and markets information technology products and services to
the "alternate site" healthcare marketplace. This includes home healthcare,
extended care facilities, nursing and acute care facilities (such as hospitals).
The initial product line, CuraSys(TM), is a software application that fully
automates both the field-based and the administrative operations of the health
care customer. All applications within the CuraSys system provide workflow-
based management capability through a proprietary means by defining and
automating clinical processes rather than by providing a system that merely
collects and prints billing claims. The CuraSys product line uses a patented
means of collecting detailed patient care data that, when aggregated, provides
for significant clinical diagnoses and analyses, and mitigates both financial
and regulatory risks for the users of the system. The Company has engineered
all applications with the system using reliable, scalable, best-of-breed
technologies. The Company believes these features enhance its goal of becoming
a leader in this new business sector. The newly assembled management includes a
capable team with over 17 years of successful operating experience in the
alternative site healthcare market, whose work has been characterized by their
innovation and contributions to the growth of the market.
With the acquisition of MONITRx, the Company acquired a suite of powerful
applications focused on driving the business of improving quality patient care
through advanced network-based products and services. The strategic premise of
the effort was to develop and validate that through providing "point-of-care"
automation to field-based care providers (nurses, therapists, aides, etc.), home
healthcare agencies are expected to realize significant and immediate gains in
operating efficiency. The prototype of the product was tested in a pilot
program at the Fremont, California branch of Coram Healthcare, Inc. Coram is a
major US home healthcare agency located in the San Francisco Bay Area. The
results of the pilot program were generally very positive.
The home healthcare market has been characterized by inefficient operating
practices. The inefficient nature of the market developed in large part as a
result of an overall lack of payer-based incentives because of heavy subsidies paid by government reimbursement programs through HCFA and Medicare. As a result of government mandates, however, home healthcare providers have now been forced to accept a radical, risk-based, reimbursement environment called the "Prospective Payment System." To remain profitable under the Prospective Payment System, home healthcare agencies must find a way to cut operating costs by as much as 35% while continuing to show that they consistently provide quality patient care. The Company believes the opportunity to assist these providers with new technology provides a market for its CuraSys products.
The Company's suite of network-based software products is marketed under
the CuraSys(TM) brand name. The hallmark of the suite is its use of advanced
technologies to deliver information and analysis to assist home healthcare
agencies achieve rapid efficiency in their operations. The products become
especially efficient when linked with the Company's ORCANet Intranet
technologies.
According to studies conducted by the Company with cooperation of
prospective customers, the use of the Company's products reduces operating costs
as a result of the following:
. Providing home healthcare agency operations managers with a detailed
understanding of the clinical, operational and economic procedures
will effectively bring the desired outcome of treatment.
. Defining risks to both clinical efficacy and profitability.
. Increasing operating efficiency through the dissemination of effective
standardized, disease-based, operating procedures to all users of the
system.
. Eliminating inefficient labor intensive, paper-based operating
procedures and transcription costs.
. Dramatically reducing Days Services Outstanding by assuring that all
documentation required for payer reimbursement is available for
submission in a timely fashion immediately following completion of
reimbursable services.
Due to the open, network-based architecture of the Company's products,
there is a significant opportunity for integrating physicians, payers and other
customer business partners via the ORCANet into the CuraSys products. These
applications will take advantage of low-cost, rapidly developed, browser-based
technologies which access patient care data at customer sites via the ORCANet.
The most significant competitor of the Company is HBO & Co., a billion-
dollar healthcare information systems company. Both HBO and the Company are
introducing similarly staged products into the marketplace. The market is
estimated to consist of 15,000 home healthcare agencies, with a total
penetration of less than 20%. The home healthcare market in the US provides
post-acute care patient services through a number of delivery segments. The
majority of market activity involves providing care for post-operative,
geriatric, terminal and chronically ill patients outside hospitals.
Organizations serving the market are both for-profit and not-for-profit and
range in scale from single site community-based nursing agencies to national
for-profit managed care organizations. In total, the market currently maintains
over 15,000 registered home healthcare agencies in the following market
segments: . Local Home Nursing Agencies
. Regional Home Healthcare Agencies
. Regional Managed Care Organizations
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. Hospital-based Home Healthcare Agencies
. National Home Healthcare Agencies
. National Managed Care Organizations
The market receives most of its revenues from the US Health Care Financing
Administration (HCFA) as entitlements delivered under the Medicare/Medicaid
programs or from commercial insurers and managed care organizations. This
market represents the fastest growing segment of the US healthcare industry,
estimated at approximately 22% per year. This is evidenced in part by the
growth in annual reimbursements from $4 billion in 1990 to almost $20 billion in
1996 through Medicare/Medicaid alone. The rapid growth of the industry is
driven by:
. Lower home care costs (approximately 60% below hospital-based care for
similar services).
. A trend toward earlier discharge of patients from hospitals and other
critical care environments.
. Trends in payer reimbursement in critical care settings toward
negotiated group contract (capitation) or risk-based episodic models.
. The overall aging of the US population.
. Improved technology in acute care.
Since the mid-1980's, Medicare, HCFA and other payers have worked to revise
the reimbursement structure of the home healthcare market. The market has
evolved from a virtual cottage business to a $25 billion industry in less than
20 years. As the factors affecting growth discussed above began to affect
institutional healthcare in the late 1970's, home care was viewed as an
effective means of providing medical care to patients who would normally require
weeks or months of recovery from acute care situations in a hospital setting.
Subsequently, demand for home care services increased dramatically and within a
few years, thousands of home care organizations were developed and licensed
annually.
The typical home healthcare agency consists of field-based nurses, aids and
therapists managed by a central administration and operations management
resources. An agency can be either a single location or may be comprised of a
number of branch locations. Business is derived through contracts with local
hospitals or managed care providers to accept patients discharged by these
providers for care in their own home or in sub-acute or extended care
facilities. Agencies also contract with pharmacies, medical supply and
equipment companies, specialty care agencies, and other service providers to
adequately supply and deliver care to their patients.
With the rapid growth of the market in the 1980's, HCFA experienced
difficulty in preventing fraud and abuse in the reimbursement system. The
problems of the system were compounded by the practice of enforcing a largely
paper-based system of establishing the basis for reimbursement. The system
required that all participants in the continuum of care (Medicare, physicians,
home healthcare agencies, and individual care providers) manage hundreds of
thousands of handwritten notes documenting and proving that the care authorized
to be delivered to a patient was actually provided as prescribed within an
established plan of treatment. In the mid-1980's, the US government began to
investigate incidents of flagrant abuses and, in a number of highly publicized
cases, aggressively prosecuted numerous high profile agencies for blatant fraud
and abuse of the Medicare/Medicaid system.
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In the wake of these investigations, HCFA began implemented a series of
ill-fated policies that ultimately failed to provide adequate economic
incentives for home healthcare agencies to become efficient. The Federal
Government also instituted heavy handed enforcement tactics (e.g., "Operation
Restore Trust") in an effort to use fines and criminal liability to encourage
institution of controls and elimination of fraud and abuse. Finally, as a
result of cost-cutting measures affecting HCFA as part of the Balanced Budget
Act of 1996, HCFA announced its intent to proceed with a revised reimbursement
program referred to as the "Prospective Payment System" ("PPS"). Under the PPS
, HCFA determined to provide home healthcare agencies with fixed reimbursement
based on the nature of the disease of the patient and the desired outcome of the
treatment for the disease. This model is similar to the earlier DRG program
used to control hospital treatment costs which in many ways spawned the rapid
growth of home health care by prompting hospitals to discharge patients earlier
and to move many traditional hospital-based treatment programs to home agencies.
Under the PPS, a patient is referred to a home healthcare agency to be
treated for a specific disease or group of diseases. Based on national averages
identified by HCFA, the agency is provided with an initial distribution that
would cover the costs to treat the disease for a fixed period of time and/or
arrive at the desired treatment goals defined for the patient's care. The
agency must provide data supporting that the claim that the care being provided
is based on recognized quality standards and that the patient was actually
satisfied with the care received. The PPS has been implemented under pilot
programs in 150 agencies nationwide. The purpose of the pilot is to provide
standard cost data needed to fully implement the program within 2 years. In
October 1997, HCFA announced the implementation of the Interim Payment System or
IPS, which took effect in January 1998. Under the IPS, a mandatory 15%
reduction was implemented in all HCFA reimbursement to home healthcare providers
treating patients within the Medicare system. The industry views this as an
indication that full implementation of the PPS is expected and that the industry
must modernize and become more efficient if it is to continue to be profitable.
Despite the rapid technical advancements in many industries, the home
healthcare industry has been relatively slow to modernize its information
technology. Less than 20% of the market currently relies on information
technology of any kind to automate operations. A recent study confirmed this
when it reported that in 1995 less than 1% of all home healthcare visits were
performed using information technology to collect patient care and field
operational data interactively within the process of providing care. The
traditional reason for this lack of information technology and infrastructure
has been the lack of economic motivation for the market to become more efficient
and competitive. This has now changed with the moves to cut reimbursement
described above.
The trends in the home healthcare market described above were the genesis
for the Company's CuraSys products. CuraSys is designed to provide home
healthcare agencies and other customers a world class information system based
on simple to use applications utilizing commercial grade technologies. The
system includes:
. A scalable, system-wide network-based client/server open systems
architecture based on industry standard Windows-95(R) and Windows
NT(R) operating systems.
. Cost effective data networks that can be both sized dynamically
according to the needs of each customer and branch as well as used to
provide value added services to customers and business partners that
include physicians and payers as well as home healthcare agencies.
. Relational Database Management Systems (RDBMs) to collect, store,
analyze, and report branch, agency, and system-wide information.
. Proven development tools such as PowerBuilder and C++ that provide
rapid and efficient production of stable software systems.
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. Administrative and management functions to adequately and effectively
support the system's growth and expansion over time.
Pilots using the system have determined that it greatly increases efficacy
and productivity of agency operations. The bulk of the savings defined were
found as a result of driving inefficient, paper-based work processes out of the
daily operations of the organizations studied. The potential cost savings
provide customers with the ability to reduce both field-based and back office
labor costs and to increase patient population and revenues as a result.
The products are marketed through a number of channels. Primarily, Orca
employs a regional outside direct sales team focused on defined geographic
markets and niche segments. In addition to direct sales, the Company is also in
the process of launching a comprehensive VAR and channel marketing program that
will be offered to large consulting firms, management companies and technology
marketing agencies.
CuraSys is presently installed at three strategic sites nationwide. Each
location represents a specific segment of the market. The Company has recently
expanded its sales force and hired 4-5 regional sales managers prior to the end
of July 1998. Advertising and promotional campaigns are expected to support the
sales expansion effort of the Company by increasing name and product recognition
for the CuraSys products and services.
There are a number of companies that have entered the market with
technology designed to facilitate gathering and analysis of information required
for administration of home healthcare agencies. Administration services include
resource/patient scheduling, clinical operations, admissions and billing
functions. These systems have been in existence for a number of years and
provide basic value for their designed operations. At present there are very
few entrants capable of providing a viable product aimed at capturing and
analyzing operational and clinical data taken at the primary site of care.
Other companies that provide these "back office" systems (i.e., HBO & Co., Delta
Health Systems, InfoMed) have also developed or acquired point-of-care
technologies as add-on applications to their existing systems. The typical
approach has been to develop software that can be used by care providers via
notebook or laptop computer. In general, however, these systems have been
poorly received and market penetration has been limited. The major objections
of the customers have included high capital investments required for
installation of these systems and, more fundamentally, the resistance of the
nursing community to laptop computers. To use these systems, the provider must
master basic computer skills for input of data and must learn more sophisticated
tasks such as use of modems for downloading and uploading records. These
systems also tend to reflect biases of their highly technical designers and
often are developed in terms and logic that are not easily assimilated by the
end user. The Company is not aware of any such systems that are in significant
actual use.
One competitor has emerged with the first non-PC-based system for this
market. Patient Care Technologies, Inc., has developed this product utilizing a
Data General "hammer head" style hand-held unit or keypad. The Company views
Patient Care as its primary potential competitor, but believes its strategy and
the connection with the Company's own Network Services Group provide a means for
effectively competing in the market. However, there is no assurance that this is
the case.
The Company has two patent filings now pending before the US Patent Office
relating to the CuraSys system. In addition, the Company has a design patent (US
serial no. 29 043 280) and a utility patent (US serial no. 08 549 415).
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