No.1: Senior Whole Health

Three-year growth 31,525.4%

Senior Whole Health was conceived not in some humble garage but in the Massachusetts statehouse. Its birth legend is no more dramatic than six managed care veterans responding to a government request for proposal. And the founders led the business for just a year before relinquishing control to outsiders.

Yet in the best entrepreneurial tradition, Senior Whole Health is a grand and risky experiment. And although it was built to spec, the company innovates every day as it seeks new ways to serve the vulnerable among us.

In 1995, Massachusetts began picking at a stubborn knot in the vast tangle of health care reform: coverage of the elderly poor. About 7.5 million people in the United States qualify for both Medicare, the federal program for seniors; and Medicaid, the state and federal program for those with limited means. Medicare doesn't pay for long-term care, so when this population -- "dual eligibles" in bureaucratic-speak -- lands in nursing homes, states foot much of the bill.

States hate paying for nursing homes. Seniors hate living in them. "I've never met anyone who wants to be in a nursing home," says State Senator Richard Moore. "They see it as the end of the road." In 2002, 10 years after Massachusetts started researching the problem, Moore championed legislation to create Senior Care Organizations, or SCOs, with the goal of keeping people in their homes or in the least restrictive setting possible. SCOs are "a wraparound service providing all the support needed to do that," Moore says.

Like traditional managed care, SCOs work with networks of primary care physicians. But they differ from other providers in three ways, according to Diane Flanders, director of coordinated care systems for the MassHealth Office of Long Term Care. First, SCOs are funded jointly by Medicaid and Medicare and include every benefit offered by both agencies, including treatment for substance abuse, exercise programs, and transportation. Second, they make nurses available by phone around the clock and arm them with a constantly updated database of enrollees' medical records. Third, they contract with community organizations to provide clients with services, including housekeeping and family support.

In 2003, Flanders's office issued an RFP for health care networks willing to road test the SCO model. Up stepped Camille Bressler, Michael Levoshko, Mel Benson, Denise Gallagher, Matt Vinikas, and Marcia Stein, who had met in the 1980s at a Medicaid HMO in Boston. (Managed Medicaid is not new, but it has historically targeted mothers and children, not the elderly.) The six envisioned a nonprofit, their area of expertise. But when they sought seed capital, "the money just wasn't there on the nonprofit side," says Bressler. "So we went where we could find it."

The founders secured $7.5 million from four venture groups. What they failed to secure was the top spots for themselves. "That was taken off the table pretty early on," says Bressler. "One of the requirements of our financing was that the CEO and CFO positions would be the selection of our investors." Bressler and Levoshko accepted less exalted roles, currently vice president of human resources and chief technology officer, respectively. The other founders have left the company. All six founders have ownership stakes.

For a year, Senior Whole Health chugged along under James Outland, a managing partner at New Capital Partners, one of the groups funding the business. In 2005, a headhunter recruited John Baackes as CEO. A veteran of Kaiser Permanente and Group Health Incorporated of New York, Baackes has increased enrollment to 5,900-plus members. Revenue was $147 million in 2007, based on payments from Medicare and Medicaid of $1,500 to $10,000 per month per enrollee. (Higher fees are for members already in nursing homes. The average monthly payment is $3,000.) From 84 percent to 86 percent of each dollar collected is passed on in medical and social benefits. Administrative costs consume another 10 percent.

So margins are thin. Senior Whole Health's delicate job is to cut costs without cutting care -- by substituting generics for brand-name drugs where practical, winnowing out drugs that are incompatible with other drugs, using intensive posthospital care to reduce return trips, and, most important, assigning both a nurse and a caseworker to every client. "We don't have a cost avoidance strategy," says Outland, who is now chairman of the board. "It's about care management improvement, which translates into quality-of-life improvement, which trickles down into cost savings.

"The stupidest thing you can do is to try to avoid care," says Outland. "That just exacerbates issues."

True to its industry, Senior Whole Health pays enrollees' medical bills. True to its roots, the company sees itself as not just an insurer but also an advocate for members -- an intermediary between the rigid complexity of government processes and the chaos of fraying human lives.

On the day before July Fourth weekend, Jane Sullivan, a Senior Whole Health nurse, sits in the living room of a tiny Boston apartment while Dung Lam describes her ailments with the help of a translator. Sunlight spills through the window, illuminating two tables, half a dozen chairs, a cot, a hammock. Atop a metal shelving unit, slender electric tapers flicker before the candy-colored portrait of a Buddhist deity. Religious music -- tinny, keening -- issues from an unseen source.

Lam, 74, is dressed to go out, in a gray-green pantsuit and tennis shoes that look fresh from the box. She had planned to attend tai chi class this morning at the community health center down the block. But in the end, she wasn't up to it. "I feel a cold chill," says Lam in Vietnamese. "I am weak and fatigued. I can hardly eat." With her left hand, she grasps her right arm at the elbow, then at the shoulder. "Why is my arm so bad from here to here?" she asks the translator. "I can hardly lift my arm."

Sullivan extracts Lam's medications from a large plastic bag and examines them. When Lam complains about her vision, the nurse promises to make an appointment with an optometrist and arrange transportation there and back. She asks about her patient's diet and gently chides her for substituting fortified milk drinks -- hugely popular in the Vietnamese community here -- for regular meals. Sullivan inquires about the adult day care center Lam attends, and her patient produces a coloring-book picture of fish in a coral reef, which she has filled in with blue and orange crayons. She tells the nurse that she enjoys doing art projects at the center when the pain permits, and that she has many friends there. Sullivan makes a note to sign her up for additional days in the program.

Before she leaves, Sullivan presents Lam with a magnifying glass and a card of prethreaded needles for sewing. "You bring up a lot of good deeds," Lam tells her through the translator. "What you are doing does more good than if you go to the temple."

Sullivan is one of 44 nurse care managers at Senior Whole Health. Another 22 employees are community resource coordinators, or CRCs, who help members over the bumps of daily life. Only nine of the company's 181 employees process claims.

When a new member joins Senior Whole Health, a nurse visits his or her home, often with a translator in tow. After an assessment of health and living conditions, the nurse works with the member's physician, a CRC, and community-based elder organizations to create a care plan and arrange the necessary treatment and support. About 1,250 members in Massachusetts who are not in nursing homes have health problems that affect their ability to live independently; nurses will visit them every few months to make sure they are seeing the right doctors, taking the right prescriptions, eating, sleeping, not succumbing to depression. Between visits, follow-up and monitoring are performed by the community care organizations. Senior Whole Health tracks its healthier members chiefly through their physicians and devotes more attention to those whose conditions deteriorate. The CRC, meanwhile, answers questions, makes appointments, and translates the member's correspondence or simply reads it to him or her out loud. (Forty-three percent of enrollees don't speak English, and 20 percent are illiterate. Collectively, the CRCs are fluent in 11 languages.) The CRC also arranges for housing, electric scooters, Meals on Wheels -- whatever good sense and the member's physician recommend.

The company pays for Dung Lam's time in adult day care and sponsors her seniors' tai chi class, which promotes balance. It has bought enrollees air conditioners, tacked down their carpets so they don't trip, and hired nurse's aides to spell family members exhausted by a long deathbed vigil. When a member was recently forced onto a liquid diet by a stroke that rendered her unable to chew, the company ordered two weeks of treatment from a speech therapist who taught her new techniques for swallowing solid food.

"Remember, these aren't people who spent down their assets to qualify for Medicaid. These are poor people who got old," says Baackes. "Their needs aren't just physical but also social and psychological. Our innovation is looking at the whole context in which they live."

Senior Whole Health is headquartered in a converted twine factory a few miles from the Massachusetts Institute of Technology. During a meeting in Baackes's office there, the executive team tries to demystify for a visitor the bewildering regulatory environment in which the company operates. Repeatedly the conversation devolves into abbreviations: ASAP, CRC, PCP, HCC, DME -- it's as though the team hopes to increase efficiency by reducing the amount of time people spend saying entire words.

Despite their expertise at navigating government bureaucracy, the leaders often find the system frustrating. Medicare and Medicaid won't release information on people with dual eligibility, so the company cannot reach them through direct mail or other mass marketing techniques. "If they would share the names and addresses under some kind of control, we could get to people faster," says Baackes, who has spent many hours at the state capitol lobbying to get the rules changed. "The amount of money we are spending on this is ridiculous."

Senior Whole Health can approach only individuals who raise their hands, so it relies on doctors' referrals and the occasional presentation at senior centers. Most sales take place around the senior's kitchen table. Sales staff -- outreach representatives in company parlance -- are drawn from members' communities and speak their native languages. "I speak Creole-French and English, and I do quite well in Spanish also," says representative Ingrid Pamphile. "Most of my clients are Creole-Haitian. Even when I go to a home where the caregiver or adult children speak English, they want me to do it in Creole, so the mother or father can understand what I am saying."

Pamphile says her neighborhood roots build trust, which is critical when dealing with people who cling for dear life to their Medicare and Medicaid cards. "I know what it's like to come from a country where you don't have health care," she says. "When you finally get it, you don't want to part with it. I have to make them understand we are not taking their Medicare away. We are going to add to it, give them more benefits."

Identifying prospective members may be hard, but converting them is relatively easy. About 75 percent of pitches result in sales. Enrollee retention is 99 percent. Senior Whole Health's internal research shows it has reduced the number of avoidable hospital admissions -- that is, admissions treatable in an outpatient setting -- by 25 percent even as the number of high-risk enrollees has grown. Jen Associates, a health care policy consultancy, found that SCO enrollees are more than 25 percent less likely to turn up in nursing homes than the general Medicare-Medicaid population in Massachusetts. (Senior Whole Health represents nearly 50 percent of the Massachusetts SCO market.) Jen Associates also found that SCO members are generally older when they do enter nursing homes and remain there for shorter periods.

Senior Whole Health is now looking outside Massachusetts. The company raised an additional $16 million in December 2006 and used it to expand into parts of New York and Connecticut. And there's room to grow in Massachusetts, where SCOs represent just 10,000 of roughly 100,000 dual eligibles. In Connecticut and New York, Senior Whole Health also plans to roll out coverage for those who are on Medicare because they are disabled rather than old.

But though this model's advantages for seniors are demonstrable, the advantages for taxpayers remain unclear. No one has yet quantified the cost reduction from delaying or avoiding nursing-home care. Richard Moore, the Massachusetts senator, believes savings exist but are not as great as was once expected. "Providing these professional services is not inexpensive if you do it right," says Moore. "So there's a savings, but it's more that the quality of care is better and people are able to maintain their independence.

"I've talked to my constituents about Senior Whole Health and gotten a lot of positive feedback," says Moore. "They understand that every time a person goes into a nursing home prematurely, they've lost a battle. And they don't want to lose."

Leigh Buchanan is an editor-at-large for Inc.