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American CareSource Is Focused On Becoming A
Substantial Presence In The Servicing Ancillary Care Space Which Is A
Rapidly Growing Segment Of The Healthcare Services Industry
Healthcare
Specialized Healthcare Services
(XSI-AMEX)
American CareSource Holdings, Inc.
5429 Lyndon B Johnson Freeway, Suite 700
Dallas, TX 75240
Phone: 972-308-6830
Steven J. Armond
Chief Financial Officer
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published – April 18, 2008
BIO:
Steven J. Armond
Chief Financial Officer
Mr. Armond joined ACS in October 2007. As Chief Financial
Officer, he has responsibility for the development and execution of
financial strategy, business planning and analysis, accounting and
administrative functions, as well as full P&L and cash flow oversight. Prior
to joining ACS, from 2003 to 2007, Mr. Armond served as Chief Financial
Officer of Data Return, LLC, a company providing enterprise-class strategic
IT operations services. While there, Mr. Armond was instrumental in helping
to lead the company through five consecutive years of growth and
profitability, culminating in a successful strategic sale of the business in
May 2007.
Prior to joining Data Return, Mr. Armond served as a founding executive of
divine, Inc’s hosting division. In this capacity, Mr. Armond financially led
the growth of the division from technology startup to a $65 million
profitable leader in the managed services industry. During his tenure, he
led the acquisition and integration activities of three acquired entities
and was responsible for the management of the division’s financial,
strategic vendor and key alliance relationships.
Before that, Mr. Armond was a corporate executive with The Quaker Oats
Company. During his tenure at Quaker Oats, he led strategic planning
initiatives for the high growth segments of the business as well as cost
improvement processes and various system implementations. Among his
responsibilities was the financial management of a $1 billion annual budget
for the Gatorade brand, as well as financial leadership on strategic sales
and marketing initiatives with Quaker's largest accounts.
Mr. Armond is a CPA. He earned his MBA in finance and economics from the
University of Chicago Graduate School of Business, and his bachelor’s degree
in accounting from Purdue University .He is an active member of various
accounting and financial institutions.
Company Profile:
American CareSource Holdings, the
first national, publicly traded ancillary care network services company,
offers a comprehensive national network of approximately 25,000 ancillary
provider sites. Through its product offerings, American CareSource helps its
clients reduce the cost of ancillary services rendered through its network
of providers in more than 30 service categories. The Company's ancillary
network and management provides a complete outsourced solution for a wide
variety of healthcare payors and plan sponsors including self-insured
employers, indemnity insurers, PPOs, HMOs, third party administrators and
both federal and local governments.
CEOCFO: Mr. Armond, you are fairly new to
the company, what attracted you?
Mr. Armond: “There were a number of
factors including the fact that the business is under new management and we
have a new CEO who had been with the business for a number of years
previously, David Boone. I had an opportunity to sit down with David and
talk to him about the vision and the strategy for the business moving
forward and where we could potentially take the business together. I thought
it was compelling. American CareSource is in the right place servicing the
ancillary care space which is a rapidly growing segment of the healthcare
services industry, and had a number of assets which were dramatically
underutilized and if we can gain some traction in a few key areas then we
could turn this into a substantial presence and a force in the industry.”
CEOCFO:
Please tell us about the business model today and what you are looking to do
going forward.
Mr. Armond: “Today we are a publicly
traded company that is solely focused on the ancillary healthcare space. We
have developed the broadest national network of ancillary healthcare service
providers in the country. Through our relationships with these providers we
are able to bring our clients choice in the type of services that they are
getting and expanding the number choices. We are able to bring favorable
economics and we are able to effectively be the outsourced agent for our
clients in this category of expertise where they haven’t historically
focused.”
CEOCFO:
What are ancillary service providers?
Mr. Armond: “Ancillary care in laymen’s
terms are all of the healthcare services that one would receive that are
outside of the traditional hospital or doctor-based, physician based
networks. Think about ancillary care as all of the secondary care that one
might receive and there are about thirty categories of ancillary care. A
sample of a few of the larger categories in which we are focused are lab or
diagnostics, dialysis treatment, durable medical equipment, infusion
therapy, third party surgical centers, diagnostic imaging, are some of the
key examples.”
CEOCFO: Are
these health services not covered through Blue Cross for example?
Mr. Armond: “The big four insurance
providers in the country certainly have the scope, resources, and put the
focus behind developing their own networks of ancillary care providers. The
Blue Crosses of the world and the Cigna’s and Aetna’s and United Healthcare,
they have gone out and done this and they have sufficient national scope and
they have made the investment historically in building out these networks on
their own but there are quite a few regional PPOs, HMOs, smaller
organizations that exist in a given geography or a particular state which
haven’t necessarily devoted the time and attention and resources in building
out their ancillary care networks. They have stayed true to their primary
mission which has been the development of their physician and or hospital
networks which most insurers are probably most noted for. Where we come in
is we are able to bring over 2,500 providers in the ancillary care space to
their existing networks on a fairly turn-key basis, provide their patients
or their insured within their networks immediate choice and an expansion of
the places that they can go to get healthcare and do it with economics that
make sense. A lot of our clients are making the choice to either build the
capability inside of their company or to outsource to our company.”
CEOCFO: Who
is your typical client and what would your arrangement be?
Mr. Armond: “We are typically catering
to PPOs and HMOs. One of the larger clients that we announced in the middle
of 2007 was an organization known as Texas True Choice, which is I believe
the largest regional insurer in the state of Texas. Effectively what we have
done with Texas True Choice is we have become their outsourced provider of
ancillary care services and have taken over the management of their
ancillary care network for them. They rely on us each day to ensure that
they have a network which is then credentialed, that has been contracted
where agreements are in place to effectively manage or provide for patient
volume who are visiting these various provider sites. They are looking to us
to manage all the administration from the billing of the ultimate claim all
the way on to the collections process in an outsourced format. We are
providing a lot of value and I think what they are looking for us to do is
continue to help them to strategically expand their network and provide
value in those key areas, both in choice and economics.”
CEOCFO: Are
ancillary services in general growing today?
Mr. Armond: “They are and they are
growing disproportionately relative to a couple other areas that one might
typically think about when they think about healthcare spending. For example
since 1980 there has been a reduction in the percent of care that is
actually being delivered through traditional hospital based networks and to
a lesser extent even through traditional physicians. If you look at a graph
of what ancillary care spend looks like between 1980 and today, ancillary
care spend in 1980 was roughly 25% of the overall healthcare spend at that
point in time in the nation, today it represents north of 30% which makes it
a nearly $600 billion market for services. It is taking a larger share of
the pie and is expected to do so over time. For us we feel like we are
uniquely positioned in the space. We are not aware of another business
similar to ours which has developed as broad an ancillary network and
certainly not national in scope. For us it positions us to not only play in
the regional market with the Texas True Choices of the world but to open
that up to insurers across the whole country who might be able to benefit
from a very diverse set of providers.”
CEOCFO: Is
there a trend towards outsourcing for insurers?
Mr. Armond: “As I would characterize this
group of insurers below this big four, we talked about the big four and the
resources that they have to go focus. The next tier down which is broad is
at the point where they are making a case, to go invest the time, people,
energy and capital to go build these networks or partner with businesses
like ours and a lot of them are seeing the benefit now of outsourcing that
through utilization of an organization like ours. They can take advantage of
our network, the underlying agreements which we a have negotiated with these
2,500 providers, the opportunity to leverage an organization that has been
one hundred percent focused on ancillary healthcare since the beginning.
They believe there is tremendous value there. It is a legitimate choice.”
CEOCFO: How
do you ensure the quality of your providers?
Mr. Armond: “One of the things that we
do to ensure quality of providers in the network is that we go through a
process that is known as credentialing. We have credentialing resources
inside of our business that work with third party independent credentialing
resources as well through committee that enable us to certify the providers
in our network. Those certifications are done before we will sign up a
provider into the network, then on a periodic basis afterwards and that is
an important value add. It is yet another thing that we do to ensure we have
the right providers in the mix and that they are going to ensure that they
are not only delivering cost effective solutions but a high quality
solution.”
CEOCFO:
What is the financial picture like?
Mr. Armond: “It is really exciting
because the business is going through a fairly aggressive growth curve. In
2006, the company generated about $11.4 million in revenues. In 2007, we
already released our revenues and we were able to share with the street that
we generated $23.5 million in revenues. If you were to look at what is
happening quarter-to-quarter throughout 2007 what you would notice is an
interesting steep growth quarter-to-quarter. In the 1st Quarter
we generated about $2.3 million in revenue, the 2nd Quarter four
million, the 3rd Quarter $7.1 million and the 4th
Quarter $10.1 million. With an annualized run rate coming out of Q-4 in the
36 to $40 million range. It is an exciting time and that is a result of the
success and traction that we have gotten in the marketplace in some of the
recent client wins during 2007. We signed five new clients to the business
in 2007, one of the larger of which I have already mentioned in Texas True
Choice.”
CEOCFO: Is
the investment community paying attention?
Mr. Armond: “They are starting to. Prior
to this, frankly, we were a small business and in the range at which we were
operating it is hard to get a lot of attention. Now that the business has
taken off the way it has and we have gotten a lot of success in signing new
deals and now I would say there is a renewed energy and focus around what it
is that we are doing. We are starting to see that in the form of stock price
improvements, the calls we are getting from various would-be investors, we
are starting to have conversations with analysts that might be interested in
covering us which I think is the next important step from a street point of
view. All of that is a result of gaining traction, signing deals, getting
the top line going in the right direction and starting to post up positive
earnings and cash flow numbers.”
CEOCFO: Why
should the investment community be interested, and what do people overlook
that they should understand?Mr. Armond:
“Healthcare is a great place to be no matter what is happening in the
broader economy. There are a few things that people are going to consume no
matter what and one of those things is healthcare. They are going to take
care of themselves, they will have needs and there is going to be spending
in this area and that spending is expected to grow. The ancillary care space
in particular is a disproportionately growing segment of healthcare in this
nation. We feel like there is a large and growing market. We are the first
in this space addressing a highly fragmented market of service providers
which we have already begun to successfully aggregate and have turned into
what is now the broadest ancillary care network in the nation. We have
turned the corner on profitability; we began to generate profits in the
third quarter of 2007. The business is flowing cash with continued great
growth potential and we have just gotten to the point where we have really
begun to scratch the surface of that. The business is poised for rapid
growth, with plenty of scale and opportunities to create a powerful leader
in what is an emerging category in this industry.”
CEOCFO:
What should people remember most about American CareSource?
Mr. Armond:
“They ought to keep their eye on us. We are emerging as a leader in
ancillary healthcare services. We have developed a great stable of
candidates and with tremendous growth potential. We have a business model
which has demonstrated an ability to not only generate a profit today but to
scale up and really create a business with both powerful growth and earnings
potential and I think it is something people ought to take a look at.”
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