Why hospitals are seeking out SearchAmerica

What do detectives and hospitals have in common?

Both need to find people who don't necessarily want to be found.

That's why a Maple Grove company that used to cater to private investigators and collection agencies has remade itself for the health care industry as hospitals and clinics struggle with rising bad debt.

Dan Johnson, a former telecom executive, started SearchAmerica by combining various national computer databases to help clients search for individuals. Now, hospitals use his software to verify the identity of patients, screen them for financial assistance eligibility and predict the likelihood they will pay their bills.

SearchAmerica's roster of about 1,000 clients includes California's Kaiser Permanente as well as Allina Hospitals and Clinics, Fairview Health Services and HealthEast Care System in Minnesota.

Last month, the company was sold for $90 million to Experian PLC, a Dublin, Ireland-based financial services giant.

Johnson, SearchAmerica's president and chief executive, explained why hospitals around the country want to do business with him.

A I started the company in 1994; my background is in the telecoms industry. What I know how to do is connect databases together geographically. [The system] was used by billing companies, collection agencies and private investigators to find people who were hard to find.

Q When did you decide to focus on health care?

A I sold that company in 2000. There were two pieces -- SearchAmerica and MedServe, which processed insurance information. In 2001, my business partners and I bought back the piece that was SearchAmerica. I was at a health care finance conference and the speaker said: "You all need to become good at collecting money." People in the audience said: "What do you mean? We get all our revenue from insurers." They had no experience in collecting money from patients. We saw an opportunity to help them deal with the rising [number of] self-pay [patients] by financially clearing patients at registration.

Q Now, of course, all clinics and hospitals are dealing with the problem of how to collect money from the uninsured and those with high-deductible health plans. Tell me how your software works.

A It works in three parts. First is identity verification. Are they who they say they are? Second, we screen patients for financial assistance programs, whether Medicaid, Medicare, any local programs or the hospital's own charity program.

A This replaces a human, manual process with a nondiscriminatory, automated, auditable process. The difference is that the charity and financial assistance programs are more accurately distributed. You'd be amazed. ... I can come in and lie myself into a charity program very easily, and very seldom do hospitals check. There's quite a bit of fraud.

Q How fast can you do all that?

A It's a 6-second transaction. A pop-up will tell them what to do, ask for ID if there's a discrepancy or refer for financial counseling.

Q Can a hospital decide to make an exception?

A The hospital can always override the system.

A After the service is provided, we provide the billing and collections department with an idea of how likely a patient is to pay the bill -- high, medium or low -- by accessing the patient's credit report from the credit bureaus. Hospitals do not turn away patients. Before, they treated everyone the same [when pursuing payment]. You got three letters, then the phone calls. ... Now they can simply target those with a high likelihood of paying. We see a rise in collections.

Q How do you charge?

A It's a flat monthly fee based on patient visit volumes.

Q What is your revenue?

A We're expecting north of $20 million in 2009. We're profitable.

A That's coming. We're in a good position to extend payment plan options. For example, in Experian's auto business, when you go into an auto dealer, the dealer screens the buyer and lines up funding sources and you walk away with the car. SearchAmerica can do the same thing. Right now, the hospital is the bank, and that's not its core business.

Q If you make medical loans more easily available, won't that raise the potential for bad debt?

A It may. But consumers are going for the low-monthly-premium, high-deductible health plan. We're going to provide a quick, easy way to finance the deductible. Nobody plans to get sick.

Q It seems to me that your service would be most useful in America and less useful in countries with national health systems where hospitals don't collect money directly from patients.

A Experian sees the world health care system -- once like the U.K. -- moving towards a U.S.-style system. SearchAmerica is seen as the platform to deliver those services.