Every year, thousands of lives are affected by hospital acquired infections (HAIs). For many, the story is all too familiar. A friend or family member is admitted to the hospital for a routine illness or medical procedure. While in the hospital, they pick up an unrelated infection circulating in the facility. At best, these complications result in heightened clinical care and a scare for the patient. Other times, the outcomes are less fortunate.
For hospitals, HAIs represent a significant clinical and financial challenge. Much of the care associated with treating HAIs is not reimbursed by payers, leaving the facility vulnerable to unforeseen and difficult to control costs.
In the spring of 1999, a professor at the University of Chicago published seminal research that for the first time put a price-tag on treating HAIs. The average cost – $14,000. The research also found that HAIs could be reduced if their causes could be identified and eliminated.
Around this time, G.T. LaBorde received a call from a high school friend, Steve Brossette. Steve was completing his MD/PhD at UAB, and as part of his dissertation, had developed a disruptive technology to monitor the spread of infectious disease within a hospital. He had received a compelling offer to continue his research at a large healthcare company, but he and another high school friend, Pat Hymel, a medical school student at LSU, were interested in building a business around Steve’s research. They wanted G.T. to join them.
The three spent the next 12 months crafting their plan. They were young—G.T. was 30, Pat and Steve were 28—but they were an impressive combination. Steve was brilliant. His clinical research and computer science background would provide the team’s technical foundation. Pat’s medical background would allow him to manage the clinical side of the sales process, customer implementation, and customer relationships. And G.T.’s sales, finance and operational acumen rounded out the team.
In the spring of 2000, the guys borrowed a small amount of money from G.T.’s father-in-law and Pat’s dad. MedMined was born. With Steve and Pat still completing their med-school residencies, G.T. left his job in New Orleans and relocated to Birmingham to open MedMined’s first office as its only full-time employee.
MedMined’s core product mined laboratory and patient movement data to detect areas of risk for the spread of HAIs. After demonstrating efficacy in a pilot at UAB, the guys secured four customer contracts in their first year. It didn’t matter that the initial technology was built in Microsoft Access and running out of a computer in the office closet. These customers allowed the team to measure outcomes, document customer ROI and refine the sales pitch.
“We knew it was time to raise capital. We had an ROI model, and Pat and Steve needed the runway to resign from their residencies and join the company full-time. We also needed to hire a sales force and a product development team to build out the solution,” says G.T.
Drew Deaton, who was an auditor at Ernst & Young and later became MedMined’s Director of Finance, introduced Paul Reaves to the company. Paul, Emerson and Tina were investing out of Southeastern Technology Fund II (SET), and MedMined fit squarely within the fund’s investment focus. “I sat down with them in their office in Birmingham. They had very little revenue at the time, but it was apparent that they understood the issue and had developed an innovative solution. After meeting with them, I felt pretty strongly that they were going to figure it out and be successful,” says Paul.
“We were excited about the prospect of Paul joining our Board,” says G.T. “He hit it off with our team, and we could quickly tell that he had deep healthcare domain knowledge and operating experience.” SET closed a $2.4 million investment with the company in March 2001 – just in time, as the company had $200 in its operating account the morning the wire went through.
At closing, MedMined hired a new, more experienced CEO to lead the young management team. Over the course of the next twelve months, the new CEO hired additional technologists and a remote sales force. In the process, the company’s cash balance dwindled and they were only able to pick-up one new customer contract.
“It was a difficult situation. We (Pat, Steve and I) felt like the business was headed in the wrong direction. We were burning cash and we were behind on our sales targets. We wanted to make change at the top, but needed our investors to agree with the decision,” says G.T. “We understood the concerns of turning over the reins to a young, inexperienced management team. But our investors were willing to trust the founders’ advice, terminate the CEO, and work with an unproven management team to right the ship.”
Immediately, the remote sales force was eliminated and the company re-architected its sales model. Paul recommended that MedMined hire Harvey Nix and Derek Cunningham, two of Paul’s top reps from one of his previous companies, TXEN. “Harvey and Derek turned out to be spectacular sales people who played a big part in our success,” says G.T.
MedMined closed 16 deals over the next 4 months and was cash-flow positive within 9 months. “Our investor’s role was critical as we stood up the business. They took a very commendable ‘how can I help’ approach. I don’t think an entrepreneur could ask any more from a VC. You need the right type of partner, with the right experience, relationships, temperament and constructive attitude, for it to be successful. They had all of these.”
A major breakthrough came when MedMined built a strategic partnership with its first payer, Blue Cross and Blue Shield of Alabama. Paul introduced MedMined into a senior BC/BS executive that he knew from his first company, SEAKO. BC/BS of Alabama initially agreed to pay for the solution for 12 months on behalf of 6 pilot facilities. Per diem reimbursement in the state meant that a reduction in HAIs corresponded with a direct cost reduction for BC/BS of Alabama. After the initial pilot, BC/BS of Alabama rolled the solution out to 20, 40 and eventually over 100 healthcare facilities across the state. Payers in other states (TX, NJ, NY, CA, LA) followed suit, which fueled the company’s already rapid growth.
Emerson Fann joined the Board in 2003. The team spent the next two years working purposefully to prepare the business for an exit event. “Pat, Steve and I knew our exit objectives, and Emerson and Paul worked with us to formulate the metrics we needed to hit for us to reach our exit target,” says G.T.
In early 2006, Cardinal Health made an unsolicited offer to acquire the business. The deal closed at an above-market multiple at over $100 million in total consideration. “The exit negotiations were a challenging time, but also one of the most fun experiences in my career,” says G.T. “Emerson and Paul were helpful and thoughtful advisors as we negotiated back and forth with the acquirer. I look forward to working with them again in the future.”