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Des Moines outsourcing destination?


As Protocol Driven Healthcare Inc. gears up to move its operations to Des Moines from New Jersey, a Silicon Valley venture capital firm that’s investing in that company is preparing to refer another out-of-state business to the city.

PDHI, which in February received a $750,000 incentive package from the state and the city of Des Moines, is the second software development company to relocate to Des Moines that’s received private funding from Acuity Ventures LLC, the first being GCommerce Inc. The San Jose-based venture capital firm has about $2.5 million invested in each start-up company.

Based on its positive experience with state and local economic development officials, Acuity is now working to help a California-based software firm it’s investing in move to Des Moines, says its managing partner, Eric Hardgrave.

Working with Des Moines and Iowa development officials “has been a uniquely refreshing experience,” said Hardgrave, who said the cost of doing business in California “no longer makes sense.”

“Here are two (entities) that are approaching it with a business perspective and getting it done. … I told (Iowa Department Economic Development Director) Mike Blouin, ‘What we’re really getting accomplished is domestic outsourcing.’ If you want (our companies), we’re coming in to Des Moines because it makes a lot of sense to us.”

Hardgrave said the California company is preparing to submit a funding request to the Grow Iowa Values Fund board which has awarded $1 million to GCommerce and $320,000 to PDHI.

PDHI, which develops software to help caregivers and patients better track their health conditions, says it’s poised to capitalize on the explosive growth of the disease-management industry, whose revenues totaled less than $1 billion two years ago but are expected to hit $20 billion this year.

“We are sitting right in the crosshairs of that explosion, I’m very pleased to say,” said Paul Greenwood, PDHI’s co-founder and executive vice president for business development.

Though the health-care industry has not adopted the disease-management software technology as quickly as PDHI had expected, there now seems to be growing interest, Greenwood said. Iowa’s funding package is buying the company needed time, and the move will provide significant savings in operating costs, he said.

“We are currently still a venture-backed company that has not yet achieved a break-even cash flow,” he said. “We’re hopeful our revenue growth will get to that point in the next 18 months to two years.”

By moving its computer network operations to Des Moines, PDHI estimates it will save upwards of 60 percent on what it would otherwise have paid for more office space in New Jersey.

The company is now negotiating for downtown office space, as well as a local Web hosting partner. It plans to have a downtown address by June 1, and begin operations in Des Moines by Sept. 1. The first step will be a transfer this summer of its computer servers from its offices in Bernardsville, N.J. and Manhattan.

“(The servers’) relocation has been met with very positive response by our clients,” said W. Lee Penn II, PDHI’s chief financial officer. “They feel the lower visibility of Des Moines relative to New York City in terms of security is a big plus. We were very pleased with that response by our clients.”

PDHI recently began “serious discussions” with a local Web host provider for a deal to host its client server.

“We’ll probably be looking for some kind of partnership basis with them as well,” Penn said. For instance, a Web hosting firm might be able to offer PDHI’s software as part of a Web-based suite of products to businesses.

Some of the first application programming and business development positions will be hired locally this fall, Penn said. The average salary for those jobs is about $63,000.

“We would hope to have five people here total in the fall, and grow that by another five over the following 12 months. I’m hesitant to predict beyond 12 months, but the growth would continue from there.” The company’s agreement with the state calls for it to create 50 new jobs within five years.

The basic capability of PDHI’s product line is patient connectivity, Penn said.    “It’s a set of tools that are Web-based that allow individuals, typically members of a health plan or managed-care organization, to record information about their health or disease, and share that information with their health-care providers,” he said. The software includes the necessary privacy protection to comply with federal requirements.

Several health-care organizations in Central Iowa have already established these types of remote systems to assist patients with chronic conditions such as diabetes and congestive heart failure to monitor their health daily.

One possible partnership that PDHI is discussing is with Iowa Farm Bureau Federation and the Iowa Chronic Care Consortium, which is a health-management outreach program for Medicare patients in Iowa.

“It’s a way of maximizing what both of us would bring,” Penn said. “They have the clinical programs; we would provide them with a platform.”   

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