Dick Youngblood: As the rules on elder care grew, so did their firm

I don't understand why anyone would choose to earn a living helping clients understand government regulations, particularly in the senior health care field where there are hundreds of rules to contemplate.

I mean, if you're that far into self-flagellation, wouldn't it be a lot easier just to buy whips?

But a trio of entrepreneurs with long experience in the elder-care field has turned that mountain of state and federal complexity into a consulting business that's on the way to grossing more than $9 million in 2007.

Welcome to Pathway Health Services Inc., a White Bear Lake company that helps more than 300 nursing homes, assisted-living facilities and home health care agencies figure out how to comply with regulations that target both quality of care and qualification for reimbursement.

The founders -- CEO Debby Schuna, 52; chairman Duncan McDougall, 60, and managing partner Kim Hysjulien, 57 -- do not appear to have any emotional aberrations. Indeed, they've cogently built a successful business in a field that once was dominated by CPA and law firms.

Their challenge is to lead clients through a labyrinth of more than 560 state and federal regulations affecting the senior-care industry, a daunting task in anybody's office since about 10 percent of the rules change every year.

"That's a lot of what keeps us in business," Schuna said.

Beyond the regulations, Pathway also offers consultants who can help clients build a variety of clinical programs in a rapidly changing long-term care industry.

How do they do it? With experienced people, many of whom are knocking on the door of geezerhood -- in short, my kind of crowd. Pathway's consultants average 25 years of industry experience and their average age is 53.

The company's growth pattern has had a few bumps amongst its spurts, however: Revenue has flattened or declined three times in the past eight years. Results in 2007 are an example, with revenue this year expected to match the $9.3 million gross in 2006.

But the owners are unconcerned: "We've leveled off several times to absorb growth," said Schuna, who noted that 2007 results also compare with a year in which some major projects ended. More important, 2007 revenue is more than double the total four years ago, which figures out to a creditable 18.6 percent annual growth rate.

Besides, progress is being made, even if it doesn't show up on the P&L, Schuna said: During such lulls, the partners focus on expanding the number of smaller clients, their rationale being that first-timers often turn into larger, long-term clients. And so far in 2007, they've added about 80 of those clients, a 35 percent increase.

Meanwhile, larger clients keep the company humming along, including Pathway's first client, Sioux Falls, S.D.-based Evangelical Lutheran Good Samaritan Society (ELGSS), the second-largest nonprofit nursing home company in the country.

It's also where the Pathway partners came from: Schuna was the ELGSS director of specialty services, McDougall the director of strategic planning and Hysjulien the regional operations director.

They started the company in 1997, when the senior-care industry was in the midst of dramatic change, McDougall said. The emphasis on long-term residence in nursing homes was shifting to a focus on specialty care: Alzheimer's units, short-term rehabilitation units, assisted living facilities and home health care operations, he said.

This meant not only that regulations were becoming more complex, but clients needed help developing effective programs to comply with those rules and contend in an increasingly competitive field.

The list of manuals the company offers provides a notion of the broad categories for which Pathway provides consultants: One offers a guide for implementing an effective safety program, another provides strategies for developing a state-of-the art Alzheimer's program, a third presents comprehensive risk assessment, prevention and treatment procedures for dealing with various ulcer cases.

There also are manuals on resident protection and abuse prevention, Medicare management, infection control and even spiritual resources, among a much-longer list.

"We saw a need and an opportunity as the regulations became more and more complex," McDougall said.

The company started with the three founders as the only employees. As it grew, they added clients with multistate facilities, which persuaded them to add offices in Milwaukee, Chicago, Columbus, Ohio, and Grand Rapids, Mich. Plans are underway to add locations in Colorado and Florida.

As Pathway has grown, the company began circulating satisfaction surveys at the end of every project. So far, the satisfaction rate is running at 98 percent. And what about that discontented 2 percent?

"Those cases are turned over to me," Schuna said, "and I fix the problems."

The emphasis was on the word "fix."

Dick Youngblood • 612-673-4439 • yblood@startribune.com