Firm Seeks to Be Patients’ Ally on Health-Care Costs

As anyone who doesn’t have health insurance knows, charges for doctor or hospital visits can add up quickly.

Patients who foot the bill for health care themselves--whether because they’re using up deductibles, going out of network or because they’re unisured--pay hundreds, even thousands of dollars more for specific treatments than large health maintenance organizations, which have the power to negotiate low rates.

Andy Slavitt, a Pasadena-based entrepreneur whose old job was to negotiate those discounts for insurance companies, learned this the hard way, by helping the widow of a close friend argue with hospitals and doctors about the cost of her deceased husband’s treatment for brain cancer.

Slavitt was so moved by the experience that he quit his job and founded HealthAllies.com, an Internet-based company aimed at helping individual consumers negotiate discounts on their health-care bills.

Slavitt recently won venture capital backing from Idealab Capital Partners, whose managing director, Bill Elkus, also had the unpleasant personal experience of dickering with medical providers over bills for a family member with a chronic illness.

The first-round financing, which was in excess of $4 million, also included backing from several leading Southern California executives, including Timothy Ling, chief financial officer of Unocal; Charles Conn, chief executive officer of Ticketmaster Online-Citysearch; and Ted Meisel, president of GoTo.com, Slavitt said.

“After my friend passed away, I did research to find out if this was just a terrible story for one individual or whether it was something I could learn from,” said Slavitt, 32. “I learned this is a hugely pervasive problem.”

Slavitt’s venture isn’t the first such effort to try and negotiate discounts for consumers who are not covered by large insurers, but Slavitt’s has a twist that might help achieve a level of volume that previous efforts have lacked: It uses the power of the Internet.

Consumers who navigate to his site, https://www.healthallies.com, will be able to click on “bill calculators” to let them know what their hospital charges would be if they had the discounts normally afforded managed-care companies and other insurers.

For a portion of the savings, Slavitt or his staff will call the hospital and attempt to negotiate a lower rate. By promising quick payment if the hospitals and doctors accept only a portion of the billed amount, Slavitt believes, he will be successful. And he thinks that if enough patients sign up, he will begin to have some real negotiating power.

Already, the new company has won the support of the American Heart Assn., which advertises on and links to Slavitt’s site and allows him to do the same on its own site.

Still, the start-up will face some major challenges.

“It’s not a slam-dunk,” acknowledged Elkus of Idealab Capital Partners. “There are a number of problems that need to be solved.”

For example, Elkus said, it might be difficult or expensive to gather enough data on charges and costs across the health-care spectrum. And, he said, it might be difficult to get consumers--who are presumably already aggressive and hostile when they approach the company--to pay the portion owed to HealthAllies once the negotiation is done. (HealthAllies works on contingency: Consumers agree upfront to pay it a portion of any savings, but the firm doesn’t get paid if it fails in its negotiations.)

Peter Boland, a health-care consultant based in Berkeley, said bill-negotiation services are not new in health care. Such enterprises, he said, are very difficult to sustain because it can take quite a bit of work to process the bills. Slavitt needs employees to phone hospitals and doctors, pay the bills and collect the fee from consumers, plus field consumer inquiries and decide which cases to take.

“You can run into an enormous personnel problem that would erode your profit margins,” Boland said.

Nevertheless, he said, the idea has great appeal. Because HealthAllies is Internet-based, Slavitt might amass enough clients to allow him to put several claims together and confront hospitals and doctors from a stronger position.

In addition, he said, the Net might help the company develop enough brand recognition that it could negotiate in advance for prices on popular elective procedures, such as laser eye surgery.

Diana Bianco, chief counsel for health care for Consumers Union in San Francisco, said Slavitt’s service is similar to what health advocacy law firms provide for poor patients.

But she cautioned that consumers might wind up in trouble if HealthAllies begins to negotiate a bill and then stops, or the process drags on. “If the ball gets dropped in the negotiations, the consumer’s credit rating could suffer,” Bianco said.

And she said consumers might be able to do the negotiating themselves--and thereby avoid paying part of any savings to HealthAllies.

Another potential pitfall is that relations with health-care providers, particularly doctors, can be very personal. If a doctor believes a patient is trying to skip out on a bill, he or she might not be willing to continue to provide services.

“It’s not as straightforward as it seems, and it creates a lot of ill will,” Boland said. “If you bring a claim like this [against a doctor], you don’t think his office is going to remember you?”

Slavitt, nonetheless, is convinced that his company will thrive, simply because he believes there are untold numbers of consumers who need such a service.

“A medical bill is the equivalent of the sticker price on a car,” he said. “Everybody in the [health] insurance business knows you never have to pay the sticker price. But consumers don’t always know that. It’s like walking into a car dealership and saying, ‘Geez, I have to pay $34,000 for a Camry?’ There’s a lot of room to maneuver.”

Among other California companies receiving venture capital financing recently:

* Newport Beach-based PrintNation.com got $5.8 million in first-round funding from US Venture Partners and Venrock Associates. PrintNation.com operates an e-commerce site for commercial printers that plans to offer supplies, equipment and services.

* Fremont-based Lexar Media, a supplier of high-performance digital film, received a $30-million investment. Investors include GE Equity, Sun America Equity and St. Paul Venture Capital.

* Santa Monica-based UroGenesys raised $11.3 million in financing. Investors include Lombard Odier & Cie. UroGenesys is an early stage biotechnology company seeking to develop therapeutic and diagnostic products for urological cancer.

Bridge News was used in compiling this report.

Times staff writer Sharon Bernstein can be reached at sharon.bernstein@latimes.com.