ExactCost Recapitalizes & Raises $8.5M Led by Flagship Ventures
As featured on Dow Jones VentureWire

June 10, 2011—ExactCost, Inc. is being reorganized, recapitalized and renamed. It's also raising an $8.5 million round of equity from Flagship Ventures and other investors.

Valuation is not disclosed, nor is the financial history of the software company. Chairman and Chief Executive Roland Harris said ExactCost has raised "a substantial sum of money" over the years and has more than 100 shareholders, including individuals and a couple of VC firms, many of whom have stuck with the product in good times and bad.

ExactCost was launched more than 10 years ago in Israel as a way to help Israeli hospitals and other health-care organizations get a detailed understanding of their costs in expensive departments like radiology and labs.

ExactCost uses an accounting method called activity-based costing and management, in which the resources, or overhead, that an activity consumes is included when calculating what that activity costs.

Over time, the company opened offices in the U.S., but activity-based costing was controversial, and U.S. health-care customers weren't convinced that they needed such a detailed view of their costs, according to Harris.

Harris retired from International Business Machines Corp. and joined ExactCost last August. He and others are betting that the Obama administration's health-care reforms are going to require more, not less detail on costs.

"The optimum point in health care is how to reduce cost with no compromise in quality--every CFO is struggling with a small profit margin, and every dollar counts," Harris said. "Sometimes things just grab you, and this grabbed me as being necessary."

Harris said he began working with ExactCost when he was still at IBM and ExactCost was trying to sell IBM its software. He got a good view of the company's strengths and weaknesses, and explained them to Flagship Managing Partner Ed Kania at a meeting with ExactCost's management at Kania's home. Flagship has been working with ExactCost for a little over a year.

Since he joined the company, Harris has brought in new management, including former IBM colleague Jerilyn Asher as the executive vice president of business development. Founder and former CEO Ilan Mintz is now chief operating officer, and a new CFO is being hired.

Harris also renegotiated with ExactCost's shareholders and creditors, jettisoned parts of the company that were no longer needed, and incorporated ExactCost in Delaware.

Meanwhile, ExactCost's software is being expanded so that it can run across an entire organization, rather than just in departments. ExactCost draws data from various health-care IT systems. It will enable hospitals to examine a dip in profits, for instance, "by looking at what procedure is causing the problem and if a particular doctor is causing it and why," Harris said.

The company's business model has also been tweaked so that its primary source of revenue going forward is software subscriptions and not reports on the data that the software generates.

“ExactCost is hiring and raising more money,” Harris said. “The company's new name is still being determined.”

It's betting that its detailed health-care accounting method will benefit from
cost-cutting trends.

Media Contact
ExactCost, Inc.
Ivy Yuni
954.455.5665 ext. 100
ivy.yuni@exactcost.com