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Conexia
Argentina
Country:
Luis Navas & Sebastin
Healthcare (IT)
Industry:
Letemendia
2000
130
Employees:
US$ 5.5 million (2009)
Not currently seeking capital
Financing
US$ 7.2 million (2010e)
Stage:
www.conexia.com.ar; lnavas@conexia.com.ar, sletemendia@conexia.com.ar
To provide real time adjudication of patient benefits for the healthcare industry
by capturing, transferring, and transforming data that in turn reduces costs,
increases efficiency, and improves quality of care.
Note: Luis Navas and Sebastian Letemendia first presented at Endeavors May 2009 International Selection Panel in Miami. Luis
and Sebastian have been working with Endeavor Argentina to address feedback from that panel (for more detail, see section 5).
2. THE BUSINESS
2.1: Products/Services
Conexia is a Software as a Service (SaaS) company that provides online validation of medical benefits for health insurance
companies, reducing costs, increasing efficiency, and improving quality of care. Conexias solution includes a software suite, data
capture points, datacenter services, hardware and communications, technical support, and training all of which it sells to
healthcare insurance companies, who then provide Conexias tools to end users like doctors and patients.
The software suite is comprised of data capture points, a system administration module, a medical audit, a contact center, and a
management information module.
Data capture points: Conexia installs data capture points at the providers offices and integrates with the ERP systems of high
volume providers (hospitals, laboratories, and certain pharmacies) to avoid duplication of data entry. The integration occurs through
web services or a system of directories. It provides POS terminals, similar to the ones used in stores to validate credit card
transactions. Conexia also offers a PC-based solution; in this case, providers connect via a browser, the web page guides data
entry and (as with ERP integration), peripherals (magnetic band and barcode readers provided and maintained by Conexia) speed
up the input of data. Additionally, an Interactive Voice Response (IVR) system allows a regular telephone to act as a data capture
point and is used for providers with less volume or as a backup method. Lastly, cell phones provide a mobile data capture point.
The system administration module is the backbone of Conexias solution. The insurer enters data for its beneficiaries, providers,
plans, medicines, and pathologies and establishes the business rules, including both administrative and medical, used to approve or
invalidate a transaction. The business rules are the most important element of the service and depend on the specific challenges
and needs of each client. Transactions that are not approved (typically 10-15%) may be sent to an audit team who, using the
medical audit module, authorizes, rejects, refers, or gathers more information. For those beneficiaries who wish to interact directly
with their providers, Conexia offers a contact center system, which organizes incoming calls and enables operators to access
information from the databases. It also provides a management information module through a customized dashboard.
Technical support, through third-party employees, includes a 24-7 help desk and field technicians to provide support to
practitioners. Lastly, onsite training is provided to educate end users (e.g. receptionists, nurses, doctors, technicians).
Conexia is ISO 9001:2000 and Capability Maturity Model Integration (CMMI) Level 3 certified. ISO 9001:2000 specifies
requirements for a quality management system. CMMI Level 3 is a service mark owned by Carnegie Mellon University that signifies
high quality standards for the software development process. Less than 20 companies in
Argentina have this mark.
Conexias service provides advantages to insurers, providers and beneficiaries:
Benefits to insurers:
Decreases medical costs by 10% by blocking uncovered practices and decreases
administration costs by 15% by simplifying processes through technology. Medical
costs typically make up 85% of health insurers costs while administration costs make
up the other 15%. Thus the service reduces total costs by approximately 11%.
Reduces fraud and abuse with identity verification
Provides online audits to correct mistakes and deviations
Generates statistics for preventative medicine
Benefits to providers:
Ensures the identities of patients
Reduces offline processes of medical care (80% are processed online)
Ensures certainty and speed of collection by eliminating claims processing
CONEXIA
Beneficiary
presents card
ERP Integration
Beneficiaries
Internet
Practitioner
requests
identity
Web Server
Database
Real time
information
Loads Diagnosis/
Procedures
POS
Health Cards
Beneficiary
pays copayment (if
needed)
IVR
Conexia
validates &
authorizes
procedures
Business
Rules
Database
Contact Center
Database
Database
Cell Phone
Payment ($)
Implementation:
Implementing a new Conexia system is similar to implementing an ERP system. It involves three phases over roughly five months:
1. Requirement & Analysis (2 months): Conexia works with the client to understand their specific needs.
2. Development & Testing (2 months): Conexia writes the appropriate code for the client, including the business rules.
3. Field Implementation (1 months): Conexia puts the system in place, installs data capture points at practitioners offices
(which can range from 100 to more than 2,000 locations), and issues cards.
Conexia charges a signing fee plus additional fees at other stages. By month six, a new implementation breaks even. Upon
completion, Conexias solution evolves with the client, who can experiment with and amend business rules according to user
behavior. While the business rules are customized, the basic setup of gathering data, storing information on servers, and issuing
cards is fairly standard for each customer. The greatest challenge of implementation is motivating professionals to change their
behavior, and implementation includes different incentive strategies depending on the client, including increasing compensation.
Sales Cycle:
Conexia has 5 salespeople in Argentina who sell to an insurers CEO, CFO, or Medical Director. Because implementing a Conexia
solution means changing a clients entire work flow, the sales cycle can be quite long. On average it takes 9 months to sign a
contract, but Conexia has worked with clients for anywhere from a couple of months to seven years. Also, another hurdle leading to
lengthy sales cycles particularly in the state sector is that not every insurer is keen on transparency and effective administration.
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2.3: Market
Worldwide: The worldwide market for healthcare IT solutions is growing at a rapid rate. According to a new report by
MarketsandMarkets, it is estimated to be worth $53.8 billion by 2014, growing at a CAGR of 16.1% from 2009 to 2014. The market
is moving towards integrated information systems that bring providers, payers and consumers closer, and low market penetration
offers significant opportunities to healthcare IT providers. Additionally, an ageing population, a proliferation of health insurance
providers, and a growing awareness among healthcare consumers are fostering a demand for consumer-centric systems designs.
The market is currently very fragmented with most players offering highly integrated systems.
Argentina: According to Conexias internal estimates, the potential healthcare IT market in Argentina is valued at US$108 million,
of which US$20 million is electronic transactions (versus paper-based). The electronic transaction market is split roughly equally
into pharmacy and medical, and Conexia has a 60% share of the medical transaction market. The majority of electronic transactions
for the pharmacy market are through Siemens, though Conexia has a 10% share. Conexia estimates only 10% of health insurers
have implemented IT solutions. The companys growth strategy in Argentina is up-selling existing customers and expanding market
share to the large paper-based insurance market as it transitions to electronic validation.
Mexico: Mexico is attractive as it has one of the highest income levels in Latin America, spends roughly US$600 per capita on
healthcare, and services 110 billion people. Healthcare spending is expected to rise from US$61.4 billion in 2008 to US$92.6 billion
in 2014, representing a CAGR of 5.4% in local currency terms and 11% in US dollar terms. Surprisingly, Mexicos public healthcare
system is inefficient, ineffective and poorly funded, ranking 108 out of 191 countries on the World Health Organization composite
index. Mexicans are so dissatisfied with the state of public care that around 55% of healthcare spending is out-of-pocket for private
care, even though private payers are still nascent. The government has introduced reform efforts that extend coverage of medical
benefits yet fail to address the underlying structural problems. Currently, no IT solution exists and insurance companies still have
paper-based, manual validation procedures. With government healthcare suffering and an underdeveloped but growing private
sector, Conexia would be a natural fit for this market. Conexia could take advantage of the upheaval in the public system and
introduce its product, as well as introduce a new paradigm to the private market while it is still young.
2.4: Clients
Conexias clients are public, private and union-based health insurance companies. Since many health insurers in Argentina are
state-run, the public sector makes up 50% of Conexias client base. In total, Conexia serves eight million beneficiaries, processing
more than 1.5 million transactions per month from 14,000 physicians, hospitals, laboratories, and pharmacies. Conexias target
customer is one with over 50,000 beneficiaries and a mostly closed provider network. Conexia expects to add six clients this year,
and by 2013, it will be working with most of the 25 provincial health providers in Argentina and three new clients in Mexico and
Colombia.
Clients
Number of Clients
Public Sector
5
Private Sector
8
Union Based
3
Specific Clients
2.5: Competitors
In Argentina, Conexia primarily faces competition from subsidiaries of large information technology companies. According to internal
company estimates, Conexias 60% market share makes it the largest player in the medical electronic transactions sector in
Argentina. The companys three primary competitors are listed in the chart below. Siemens, the strongest competitor, is focused on
the pharmacy electronics transactions market and has kept out of the medical market. Since Conexia has entered the market, the
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Name
Estimated
Annual Sales
Electronic
Transaction
Market Share
Number of
Customers
Strengths
Weaknesses
Siemens Itron
Business Services
US$6 million
60% pharmacy
market
Prominente /
Traditum
(Grupo Roggio)
US$2.6 million
26% medical
market
Tecnet (Grupo
Ibermatica)
US$0.7 million
7% medical
market
Established track record: After 12 years in the industry, Conexia has a well-developed, niche-specific technology
(benefits management) that is attractive to health insurance providers. Luis and Sebastian have worked with over 15
health insurance companies and are quite familiar with the specific and unique needs of the industry. They have
developed a deep understanding of their clients businesses and how their benefits management services can reduce
costs, provide information needed to make important managerial decisions, and improve quality of care. As the market
leader, Conexia is setting the standard for the industry, allowing it to have increased pricing power and higher margins.
Competitive value pricing: Conexias service offering is competitively priced in Argentina, built to allow for consistent
profits to Conexia and maximum value to its customers. Recurring revenue made up 90% of Conexias 2009 revenues. In
the Latin American market, Conexias prices will be very competitive as Luis and Sebastian are able to capitalize on lower
operational costs in Argentina.
Entrenched technology: Adopting a system like Conexias involves a significant upfront investment of time and money.
Data capture points must be added to each individual providers office, and providers are trained and become
accustomed to using the system. This substantial initial investment makes Conexia a fairly entrenched technology, and
providers have a strong incentive to stay with Conexia. Thus far, Conexia has not lost a single client to a competitor.
Certification: Unlike its competitors, Conexia is ISO 9001:2000 and CMMI Level 3 certified. These international
certifications will help Conexia establish credibility as it looks to gain new clients in Argentina and in new markets.
2.7: Challenges
International expansion: Currently, Conexia does not have a presence outside of Argentina. It has one full-time sales
person in Mexico developing leads, and a few others are splitting their time between Mexico and Argentina. Once
Conexia has its first client, it can begin establishing its track record in Mexico; however, without that initial traction, it may
prove to be a longer process than anticipated.
Exposure to inflation fluctuations: Conexias revenue is based on five-year contracts negotiated in Argentine pesos,
and any renegotiation of the agreed-upon price extends over a long period of time. In the case of inflation, Conexia will
receive less money from its clients while Conexias costs will remain the same. This imbalance could potentially threaten
Conexias financial stability or, at the very least, impact investments in R&D.
Human resources: As it grows, the company must attract and retain talented new employees, particularly sales people,
in international markets that they are not familiar with.
Potentially long sales cycles: The flip side of Conexias entrenched technology is that Conexia may struggle to
convince new clients to adopt their service. Additionally, a client must be willing to change its entire work flow and
reengineer its core procedures upon implementation, which is not easily done. Knowing the entrenched nature of existing
technologies and the fundamental changes an insurance company must make to its work flow, Conexia will need to plan
for potentially long and tedious sales cycles as it tackles new markets.
Expand throughout Latin America: Luis and Sebastian intend to expand into Latin American markets, focusing first on
Mexico, and replicate the success they have accomplished in Argentina. Conexias value-add in Latin America is two-fold:
bring an IT solution to an archaic, paper-based industry, and allow for real-time information flow. To that end, they have
conducted substantial market research for Mexico and have independent agents in Mexico generating contacts,
predominantly in the private sector. Once a contract is in place, Conexia will set up a local operation, structured as an
independent subsidiary. Lead times can be quite long, but Conexia expects revenues from Mexico by 2011. Mexicos
CONEXIA
failing healthcare system and rising private sector make this market a promising first step. To facilitate its international
expansion, Conexia is also setting up an international marketing department to strengthen its internet presence. Beyond
Mexico, Conexia is researching Colombia as potential next target market. After expanding to Mexico and Colombia, the
entrepreneurs plan to acquire an existing competitor in Brazil. The Brazilian market is quite developed, although with a
slightly different model than Argentinas. They previously operated Conexia in Brazil when it was still part of Impsat, and
although this operation closed, the entrepreneurs have a very good understanding of the market.
Innovate: In the near future, data collection will take place entirely over the Internet and/or through web services. As
Conexia and its competitors move in this direction, Conexias ability to cater its solution to clients requirements will be
paramount. To continue their success, Luis and Sebastian realize they must innovate and add to their existing products
and services and up-sell existing clients. An important part of these efforts will be directed towards the financial and
payment side of the business, such as allowing beneficiaries to pay co-pays with their health cards. They will continue to
invest time and capital in ongoing research and development and explore how Conexia can cater to a more diverse
customer base to create greater value, new revenue sources, and stronger barriers to entry.
Develop stronger information management systems: As Conexia grows, the company will focus more on the quality
and integrity of its technology, specifically its servers and software offerings, so that it can scale while maintaining security
and quality of service.
3. THE ORGANIZATION
3.1: Organizational chart
Conexia employes 130 people in Argentina. In the diagram below, the oval represents the factory where client value is created.
The five teams each have between 10 to 20 employees and are responsible for up to four clients. These groups can modify the
cosmetic appearance of the software suite for clients but cannot change the core coding. The Product team, which is 10 to 15
people, works on the core product code.
CEO
Luis Navas
HR
Virgina Carena
COO
Sebastian Letemendia
Team
leader
1
Project
Leader
Administration
Silvena Lema
Quality
Emilio Etlis
Team
leader
2
Team
leader
3
Programming
& Analysis
Team
leader
4
Account
Execs
Project Management
Dino Ronconi
Commercial
Director
Alfredo Semeniuk
Team
leader
5
Client
Support
Sales
Mariela Blanc
Product
Guillermo Fernandez
Conexia is based in Buenos Aires and has additional offices in Neuqun and Resistencia.
Role in company
CEO
COO
Once Impsat filed for Chapter 11 in 2002, Luis and Sebastian lacked confidence that Conexia would survive under the umbrella of
Impsat. They saw great potential in the service and knew their leadership would be vital to Conexias success. Together, they
bought the company for US$650,000. Current shares reflect each entrepreneurs initial investment.
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4. THE ENTREPRENEURS
4.1: Entrepreneurs strengths
Complementary team: Luis and Sebastian have incredible qualifications and form an excellent team. Luis brings
managerial expertise, lofty ideas, and executive presence while Sebastian brings financial skills, practicality, and the
patience needed to connect with prospective clients. As true entrepreneurs, they share a common vision of where they
want to take Conexia and have the know-how to get there.
Commitment: Luis and Sebastian have proactively learned more about the industry to create an international expansion
strategy, illustrating their commitment to increasing their knowledge and tailoring their technology to the ever evolving
healthcare needs of countries around the globe. They regularly attend conferences to stay on top of industry news,
technology, and key players. They have a vision for the future and work hard to understand how their vision will fit into an
existing, complex system.
International experience: As Luis and Sebastian expand Conexia globally, they can draw on their extensive international
experience. Luis spent six years in Beijing, three in Switzerland, three in Hong Kong, and studied in the US. Sebastian
studied, lived and worked for three years in the US and has traveled extensively.
Pragmatism: When Luis and Sebastian speak about Conexias past and its future, they articulate how every component
of the business will come together and function in an ever-changing industry. They realistically acknowledge that
challenges will arise and explain how they will start small, test new markets, and innovate throughout the entire process.
Luis and Sebastian are certainly not novice entrepreneurs they are seasoned corporate executives, familiar with the
business world, and whose vision, actions, and words invoke a unique level of confidence.
IT and healthcare training: Luis has an engineering background, while Sebastian has a financial and managerial
background. They are not information technology specialists nor are they healthcare specialists. They have acquired an
extensive knowledge of the industry (largely through self-education), but as they move forward, they must seek expertise
and guidance from IT and healthcare professionals to ensure that their solution addresses the needs and limitations that
exist within the industry.
Milestones
Luis and Sebastian have worked with Endeavor Argentina, a BCG
consultant, and a group of MIT MBA students to evaluate the
opportunities and challenges in entering the Latin America and US
market.
Using this work, the entrepreneurs have clearly defined the
companys future strategy.
Based on research and meetings with Endeavor mentors,
Conexia will enter the Latin America market first, since the need
for their system is greater and less complicated than the US.
Luis and Sebastian hired a Marketing Manager through Endeavor
to develop more professional marketing material.
Additionally, Conexia is reorganizing its organizational structure to
prepare for expansion. The entrepreneurs created an international
marketing department staffed with two Endeavor-sourced
employees in the Commercial department, a first organizational
step towards international operations.
Growth strategy: Endeavor has been an invaluable resource over the past 10 months as Luis and Sebastian reevaluated
their growth strategy. They could benefit from Endeavors continued help as they explore other markets in Latin America
including Colombia and Brazil.
Finding key employees: Endeavor introduced Luis and Sebastian to their two new international marketing employees.
Without Endeavor, they would never have been able to meet these individuals, and they could benefit from Endeavors
network as they look to hire talented salespeople abroad.
CONEXIA
Business strategy development: Endeavor could provide experts in the healthcare industry who can help Luis and
Sebastian refine their business strategy, including further developing their approach in new markets. Also, as they do not
have outside directors, having access to mentors who can examine their business and ask tough questions would be very
valuable.
Unpredictable business environment in Argentina: Conducting business in Argentina can be unpredictable. Half of
Conexias clients are in the public sector, exposing them to government corruption and deferred collections.
6. INTERVIEW HISTORY
Conexia participated in the Miami ISP (May 2009).
Category
Nominator
nd
2 Opinion Reviewers:
Financial Reviewer:
Final Reviewer:
Local Panelists
(March 2009):
Name
Alejandro Gorodisch
Jorge Grad
Pablo Antonini
Gerardo Garbulsky
Ezequiel Glinsky
Alejandro Mashad
Liliana Ferreiro
Martin Sommer
Gaia De Dominicis
Santiago Bilinkis
Alfredo Nieto
Pablo Saubidet
Martin Umaran
International Panelists
(May 2009):
John Hamm
Charlie Walton
Liliana Ferreiro
Ex-CFO, Holdinvest
Agustin Gattas
Director, IBM
Endeavor Entrepreneur, Founder Guia Oleo,
decidir.com
Endeavor Entrepreneur, Co-Founder Zott
Producciones
Endeavor Entrepreneur, Co-Founder Zott
Producciones
Karena Strella
Pat Morin
John Rutledge
David Spreng
Local Panelists (March
2010):
Esteban Brenman
Rodolfo Montes de Oca
Entrepreneurs Coach:
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