Medical dramas focus on blood, guts and bungled procedures, but away from the glare of the operating lights, crucial mistakes by hospital administrators can go unnoticed, creating a potential financial nightmare for healthcare providers.
Scottish Equity Partners portfolio company Craneware is an innovative software company set up by entrepreneurs Keith Neilson and Gordon Craig to tackle this issue. It has taken the US healthcare market by storm with a product which picks up errors in healthcare billing systems, identifying millions of dollars a year in lost revenue.

The efficiency of the company’s core product, Active Chargemaster Professional Toolkit, has resulted in testimonials from financial managers at major hospitals including Phoebe Putney Hospital in Georgia where, in its first week, the system identified over 30 items priced below the correct rate. Spotting these errors resulted in a significant increase in the hospital’s gross revenue.

Prior to the introduction of electronic systems, the only way to make sure a hospital was charging correctly was to run manual checks, often by external consultants.

A chance meeting with US healthcare consultant Nora McNeil in New Jersey, spawned Neilson and Craig’s idea for Craneware’s focus. While working on a software system for McNeil, they discovered a gap in the market for a software product which could replace laborious manual audits.

Craneware chief executive Neilson explains that, as a typical hospital chargemaster billing system can have 20,000 lines of data with 53 different fields, a few typing mistakes each day can easily result in a costly error compounded over time.
Craneware’s software significantly cuts down on slip-ups like these which stop hospitals getting paid and it also helps them meet compliance requirements. “If they get it wrong they risk a fraud and abuse investigation by the Office of Inspector General and the FBI,” Neilson says.

It also has built-in checks to make sure a hospital is charging the right rate for a procedure.

McNeil’s knowledge of the US healthcare system was invaluable to Craneware as it launched into a complex regulatory environment and she joined the company as its research and development director.

The company’s ability to save money for clients and to ensure they comply with US government Medicare regulations has fuelled Craneware’s strong growth since it was founded in 1999.

Craneware carries out software development in Livingston, Scotland but its sales operation is based in Orlando, Florida and the company has offices across the States.

Craneware has captured 80% of the market for electronic chargemaster auditing systems in the United States, despite the arrival of aggressive competition. But this is only 10-20% of the total market and Neilson’s team is now focussed on winning custom from hospitals still performing manual checks.

Five years after launch, the company, in which SEP has been an investor since 2000, has 60 staff and its software is installed in more than 500 hospitals across 47 US states, including Alaska.

The company is diversifying its product range and has launched Decision Dashboard, a decision support tool for healthcare chief financial officers, offering a quick desktop overview of financial operations.

Throughout the rapid growth of the business, Neilson says he has appreciated SEP’s support: “We have a very positive and
constructive relationship with the investment team at SEP - one where we feel comfortable about having open and robust discussions about different ideas - and they’ve given us consistent support as we’ve grown the business,” he said.

“They have been active and energetic investors who have made my job a lot easier in terms of being able to make decisions, pull information together quickly and to bounce ideas.”