Though he and Louie are resolutely moving Market Insights forward, the whole episode still embarrasses Milano. "I feel crazy telling you this," he says. "I feel like an idiot. I have to chalk it up to inexperience. Otherwise I'd have to chalk it up to stupidity."
Market Insights started out with a bang. In 1993, Louie and Milano--then ages 25 and 24, respectively--ditched lucrative consulting jobs for their own business and 300 square feet of cramped office space at the San Francisco Bay Area World Trade Center. Louie, a Harvard grad, had been working as a health-care consultant for American Practice Management (now part of CSC Consulting) in San Francisco. More than 2,000 miles away, in Cleveland, Milano was a quant jock for McKinsey & Co. They were introduced by Jung Shin, a mutual acquaintance, with whom Louie hatched the idea of producing analyses--in any industry--for time-strapped consulting firms. Shin lured Milano to San Francisco, where, backed by $15,000 in combined personal savings and armed with their 386 personal computers, the three opened Market Insights (now officially named Information Insights Inc.).
By the end of their first month, they had landed a $25,000 contract with a Big Six accounting firm to analyze local hospitals. A short time later the company began to sharpen its business focus and pursue clients in the data-starved health-care industry. (Shin left at the end of 1994 to go to work for a competitor.)
In an industry with scalpel-thin margins, hospitals and providers of managed health care are hungry for details that will boost their bottom lines. Not only do they crave a diagnosis of their own operational health, but they also want the lowdown on competitors.
Armed with the latest number-crunching capabilities, a generation of data providers has sprung up to help them. Some resell the details they glean from clipboard surveys of hospitals and other caregivers. Others, like Market Insights, buy up the troves of public databases that are for sale and submit them to rigorous analyses. Take the Department of Health and Human Services' (HHS) collection of data from Medicare providers. HHS requires any provider requesting reimbursement for even one Medicare patient to submit an exhaustive cost report. Pay HHS something like $75,000, and the collection of reports can be yours. State governments are another bounty. Many mandate that health-care providers pony up inpatient and outpatient data as well as everything from the number of hospital beds to food costs. Anyone with a checkbook can buy the data from the government agency that collects it. But it's a seller's market: the state of New York charges a bargain-basement $600 for its data, Pennsylvania a cool $30,000.
From the start, Market Insights put a consulting spin on its information. Most of its competitors crank out standard reports several hundred pages in length, delivered in three-inch-thick three-ring binders. But Market Insights' forte is to churn the numbers into custom analyses that are short, sweet, and powerful--35 pages of graph-supplemented text. "We're the Cliffs Notes of our industry," says Louie. "You can buy War and Peace, or you can buy the Cliffs Notes."
For example, a hospital eyeing new federal guidelines for outpatient-procedure reimbursements might want to see how the changes will affect its bottom line. A Market Insights analysis can not only project the possible bad news awaiting the hospital--that its reimbursements might be lowered, say--but also propose a way to remedy the problem by identifying the specific medical procedures on which it will lose money.
Louie and Milano have always run Market Insights with the meticulousness of two numbers guys. "We're driven by making money every month, building real product and making profits," says Milano. Their approach was successful. Since its founding Market Insights has turned a profit every year and grown 25% to 40% annually. And in June 1998 Health Forum Inc., a subsidiary of the $100-million American Hospital Association, agreed to comarket its products. "We liked their culture and their expertise," says Patty Riskind, Health Forum's executive director of business development. "They're R&D oriented and extremely customer focused. Very entrepreneurial. They're smart guys, and they like to have fun."
Fun isn't a word you often hear associated with health-care benchmarks. However, technoliterate is. All along, Market Insights has relied on its founders' technical muscle to manage the vast quantities of health-care data that are its lifeblood. The company's first big-ticket technology purchase was a $2,000 digital-audiotape (DAT) drive. As boxes of data arrived on tapes, the information was dumped into the drive. From there it would move through a cable to the hard drives on the company's PCs where it was analyzed, and then the raw data were sent back to the tape drive for storage. Later, for even greater capacity, the company compressed the data it bought on tape and stored the information on CD-ROMs in a jukebox that held 250 disks. Via the local area network, Market Insights' four full-time analysts pulled up data as they needed it onto their hard drives.
The system worked, but it wasn't enough. By 1996 the new offices to which Market Insights had moved just the year before (on Brannan Street, in the heart of San Francisco's Multimedia Gulch) were crammed with cardboard boxes full of tapes. Milano believed the answer to their data-management problems lay in technology--specifically, a massive and sophisticated relational database. Simple relational databases, like the ones used in billing and accounting systems, pull up one record at a time and perform some operation on it. That style of handling data is perfect for recording a customer payment, for example, or processing an employee paycheck. But since Market Insights uses its data in a much more complex fashion, making numerous comparisons and projections based on all sorts of criteria, it needed something more advanced. It needed to be able to pull up many records simultaneously and to manipulate the information in a variety of ways.
