George Salem, ProxsysRx

Fixing a $4.3 trillion catastrophe. One problem at a time.

Imagine creating a business that generates so much positive buzz you’re forced to sell it. That, for all practical purposes, was George Salem’s dilemma in 2009. He’d founded Respond Medical Staffing — which provided nurses for hospitals — in 2004, and in the company’s fifth year, he was approached by no less than eight interested buyers.

“All but one of those companies were public, with far more capital and resources than we had. Which meant that, at some point, we’d either have to sell, or compete against the company — or companies — they were going to create if we didn’t sell.” So how’d RMS do after the sale? “Not so well. They brought-in a lot of people who thought they were smarter than everyone else because, you know, they came from a bigger company.”

And thus ended the fourth chapter in George Salem’s entrepreneurial success story, which began in 1984 with the founding of Southeast Health Plan — Alabama’s first Health Maintenance Organization (HMO). The fundamental thinking behind the company was essentially the same as the four other successful startups he’s founded: Finding inefficiencies in the $4.3 trillion healthcare system, and solving the problems they cause.

Applying common sense where there is none
With Southeast Health Plan, the inefficiency was in the traditional health insurance model. “At the time, HMOs were catching-on in other parts of the country, but we were the first in Alabama. The problem we attacked was in the basic philosophy behind health insurance — which provides coverage for sick patients, but literally discourages people from maintaining good health.

“What’s really sad is, that problem is now significantly worse than it was forty years ago. Annual deductibles of $10,000 are common these days. For most policies, deductibles are so high that people don’t get medical care until they’re very sick, when the cost to treat them is so much higher.

“Well, that’s just stupid. In our plan, there were no deductibles. Which encouraged people to stay healthy.

“At our peak, Southeast Health Plan had over 600 employees, and we made a deal with them: Whenever they did something to improve their health, we’d split the resulting savings. We gave people daily time to exercise, and we didn’t charge them for wellness care. By the end of the first year, our own healthcare costs were down significantly — and our number of sick days had plummeted.

“What’s more, our people genuinely believed we cared about them, and they were happier and more productive. It was an investment that paid off in so many ways.”

Southeast Health Plan did so well that in 1995 George started a second company, Guidestar Health Systems, in Baton Rouge — which started as a hybrid HMO, then evolved into a TPA (Third Party Administrator). Why Louisiana? “At the time, prescription drug use was five times the national average. And remember, this is years before the opioid epidemic.” You could certainly call that a glaring inefficiency in the state’s healthcare system.

Thanks, I take my coffee with coffee.
Running two successful healthcare companies at the same time created an equally-glaring inefficiency in George’s home life. “We sold Southeast Health Plan in late 1995. But for the entire summer before that, I worked in Birmingham Mondays through Wednesdays, flew to Baton Rouge every Thursday morning, then flew back to Birmingham every Friday night.”

George’s workdays were so crowded that he held board meetings at 6:00 AM. And that was after his committee meetings, which started at 4:30 AM. It’s safe to say that none of the Birmingham Venture Club’s voters (who selected Guidestar as the 1998 winner of the prestigious Jemison Award) were members of those committees.

Another success. Another award.
With his third company, Proxsys, LLC — which he founded in 2004 and sold to athenahealth in 2012 — George became the Venture Club’s first (and still only) two-time Jemison Award winner. In case you didn’t notice its founding date, Proxsys, LLC was the first company George launched in 2004 — the second being Guidestar.

Proxsys, LLC was a hospital revenue cycle company designed to eliminate duplicate inefficiencies in healthcare visits, while improving care coordination between physicians, hospitals and other health care providers. Proxsys’s team developed a software platform that addressed those inefficiencies. After the buyout, athenahealth deployed the platform across their network (nearly 100 facilities in 15 states), and increased point-of-service collections by more than 200% — while significantly reducing bad debt.

Better living through pharmacy
For the next two years, George lived a life of comparative leisure as a Managing Director of Athena Healthcare Systems. But old habits die hard, and in 2014, he identified yet another significant inefficiency in healthcare (several, actually) that he could address — this time in the complex relationships among the providers, distributors, insurers, manufacturers and end-users of prescription drugs. Regarding potential names, he says, “My son and I were batting-around options, and we hit-on the idea of bringing-back Proxsys.” Hence, ProxsysRx.

ProxsysRx’s initial focus was on building-and-owning on-campus hospital pharmacies. The company’s primary income stream today comes from its management of the 340B drug program, which enables eligible non-profit hospitals to pay a fraction of the cost for prescription refills — then bill the manufacturers for the drugs’ full price. The program was created by Congress to fill-in the massive gaps inherent to the hospitals’ business model.

Doing good. And doing it well.
“The average non-profit health system loses tens of millions of dollars a year serving indigent, uninsured and/or non-paying patients,” George explains, “and the cost of the program to drug manufacturers is minimal.” In fact, the total value of the 340B program amounts to just 5% of the U.S. drug market — and yet, the industry’s S&P 500 companies still generate, on average, nearly double the profit margins of non-pharmaceutical companies on the exchange.

ProxsysRx launched its 340B Support division in 2019, and in its first two years, generated $135 million in revenue for the health systems it serves. By the end of 2023, that total had surpassed $500 million. ProxsysRx is now making significant inroads into a new market — Specialty Pharmacies for 340B hospitals — the prospects for which, George says, he’s equally optimistic. It’s well-founded optimism, given that — in 2020 — specialty drugs were used by less than 2% of the population, but accounted for more than 50% of all prescription spending.

One more for the road? Here’s hoping.
No surprise, George has heard from more than a few interested buyers. As the owner of ProxsysRx’s ad agency of record since 2021, I’m pleased to report that the company’s business model isn’t nearly as easy to reproduce as RMS’s — and I’d love to think George has no plans to sell anytime soon. I’m also hoping he has at least one more company up his sleeve (one, naturally, in need of branding and marketing support) before he leaves the healthcare system to fix itself.

POST SCRIPT:

I couldn’t find a way to fit this anecdote inside my profile of George, but it was simply too good NOT to include. My sub-head, below, is the title of a song by an early-80s novelty band called The MBAs.

Born To Run Things
Long before he started his first company, there were clear signs pointing to George’s future as a leader — as evidenced by the following: In high school, he entered a contest to sell Krispy Kreme donuts for charity. While the other kids were selling a few dozen at a time, George hit a one-day sales record of over FIVE HUNDRED dozen.

“Everybody else was selling boxes door-to-door. I figured I could make a lot more sales if I went to office buildings, where there were a lot of people in one place — and I learned real quick how to talk my way past security guards. After a couple of days, I started calling the store in advance, to tell them I was headed their way — so they could start making more donuts. I’d fill-up my mother’s Pontiac station wagon with boxes, and be back the next day for another load.” The store manager was so grateful, George recalls, he had an in-store plaque made with George’s name on it.

 

And Finally, A Shameless Sales Pitch:

Serving George and ProxsysRx as their agency has been, very possibly, the single great pleasure and privilege of my career.

Click Here if you’d like to see the work we’ve done for them.

 

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