Success, the steady way

ViPS: Avoiding the recent highs and lows of most tech companies, the Towson service has expanded slowly, nearly doubling revenue in the past five years.

May 25, 2002|By M. William Salganik | M. William Salganik,SUN STAFF

Don't expect, Jenny Morgan said with a smile, to see a ViPS Stadium anytime soon.

ViPS Inc., the Towson company that produces software and related services for health insurers, hasn't been one for splashy promotion. And when some companies grew rapidly during the tech bubble of the late 1990s, ViPS remained steady.

"I used to have to apologize because our growth rate was only 17 percent," Morgan said.

But over her five years as chief executive officer of ViPS, the quiet and steady growth has added up.

Revenue has nearly doubled, from $24.5 million in 1997 to $45.2 million last year. The employee count has grown from 220 to 343, nearly all based in the Towson offices.

"They have a good position in the market," said Cynthia Burghard, an analyst for Gartner Group, a consulting firm that advises companies about technology.

Five years ago, people were predicting that health software companies would consolidate, and a few large ones would control the market, meaning potential trouble for smaller players such as ViPS. It hasn't worked out that way.

"What's happened in the last five years," Burghard said, "is that even if a vendor acquires all the pieces, they can't necessarily put them together in a way that offers the client added value." Instead, she said, companies such as ViPS have done well specializing in one or a few types of products.

ViPS' historic strength - indeed, its original reason for being - was software to process claims for Medicare and other government programs. Wilson T. Gildee worked as a software developer for the Health Care Financing Administration, now Centers for Medicare and Medicaid Services.

After the agency decided to buy, rather than write, software, Gildee founded in 1979 a company he called Viable Information Processing Systems. The company has since shortened its name to use just the initials, which it pronounces not as letters but as a word to rhyme with "zips."

When the founder retired and Morgan (who joined in 1984 as a programmer) took over in 1997, the government programs work still represented two-thirds of ViPS' revenue. The company, however, was beginning to develop products aimed at commercial insurers - one to detect fraud, another to analyze claims data.

This meant changing its marketing. Previously, it was dealing with one primary customer, HCFA, and a limited number of other "intermediaries" who process Medicare claims under HCFA contracts.

"We had a sales guy, but we didn't have a sales force," Morgan said.

In the five years since, its revenue from commercial customers has tripled and now outstrips that from government-related work. It has 38 commercial insurers and 30 Blue Cross plans among its customers.

Its "professional services group" has also grown rapidly, providing initial training and installation, consulting and outsourcing services. For example, Morgan said, in addition to providing fraud-detection software, ViPS now employs fraud investigators, who will follow up on patterns shown in the software or teach customers how to do that.

Helping its growth were Y2K concerns and new federal regulations on electronic data and privacy. Both caused an increase in demand for new software or for consulting to update old software.

Also "a huge boost," Morgan said, was a change in ownership. Gildee sold ViPS in 1993 to a company that was then acquired by First Data Corp., a $6-billion-a-year giant that owns Western Union and TeleCheck.

"We were a little IT company buried in this giant company," Morgan said. With management participating, ViPS was spun out of First Data in 1998. In the deal, Cornerstone Equity Investors LLC of New York acquired a controlling interest.

Cornerstone has helped ViPS by funding one acquisition, rights to a software product to process the health data, such as immunization rates, that HMOs report to employers.

Over the next five years, Morgan said, ViPS hopes to double in size again. It is developing, or considering, products for case management, risk modeling and tracking physician compliance with clinical guidelines.

When it's large enough, and when the market is right, Morgan said, ViPS may go public.

Meanwhile, she confessed to having a little trouble adjusting to its new size.

"ViPS used to be the little guy," she said. "Now, customers say, `You're so big, we don't know if we will get good service from you.' That gives me a belly laugh."

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