Driving change Featured

7:00pm EDT December 26, 2005
When John Shermyen founded LogistiCare Inc., it had three employees who created and sold software to health care providers.

But along the way, his vision of how the company could succeed evolved.

Shermyen saw the health care industry was changing. And instead of waiting to react, he jumped in, forging a new direction and helping create those changes he predicted would occur.

LogistiCare transformed itself from a company that created software for the health care industry into a company that works with governments and health organizations to handle all operations of health care transportation. Its 700 employees oversee the entire process, from taking the initial calls for service to arranging pickups and ambulance runs to billing.

It’s a far cry from where he started, but Shermyen, president and CEO of LogistiCare took chances that have paid off.

Smart Business spoke with Shermyen about how he transitioned the focus of his business using future possibilities to guide his decisions instead of past reports, numbers and activities.


How do you predict changes in your industry so you can change before the industry does? Two things sort of drove our thinking on a strategic level. One is a theme we call the graying of America — this whole issue of what kinds of services and how they are going to be delivered to the graying and baby boom population in light of the fact that the health care delivery system is very fractured.

The other part of what was driving our business was growth in both the Medicaid and Medicare population. With double-digit increases in health care spending every year, we thought there was no way the government could continue to do business as usual, and one way that the government can get control of cost is to move to our model.

We thought that was a trend incoming and changed all our business practices to allow us to compete in a more financially difficult environment. We took a bet and I rolled the dice that that was how governments would increasingly look to become more efficient to handle their health care costs. We’ve been right so far.


Because predictions guide your decisions, how do you make choices without worrying about the industry’s actual future?
One is to make a decision every day. The worst thing an entrepreneur can do is sit back and wait for other things to make up one’s mind or to push you in one direction or another.

It’s always easy to change course and correct your mistake tomorrow, but this goes back to my philosophy that you have to act like you have a burn rate. I think it’s a lot easier to make minor adjustments to your path than to sit and wait and have to make major disruptions.

I think making decisions every day and correcting them tomorrow if you’re wrong today is a great way to go about it.

Then assume everything will change and there’s not a single element of what you do that will not be subject to change. If you’re afraid of change, I think you begin to lose as soon as you change your focus from growing the business, improving it and looking for new opportunities, to a fortress mentality — things were going great, and you just want to manage what you have, and you want to be careful. I think you end up losing the spark that keeps everything growing, and that’s when a company begins to die.

I think it would be very, very difficult for an entrepreneur or any CEO to run a company that was happy with the status quo.


How did you transition your business from software to transportation?
That transition happened over an 18-month period. The model really grew into its own in late 1997, and since then, we’ve grown. One business went from being 100 percent of our focus down to 15 (percent) to 20 percent of our focus, in terms of our total revenue in the company.

We maintained our software development efforts and the sale of our software. We’ve continued to manage and maintain our Business Process Outsource (BPO) model with our small transportation companies, but we chose to not expand that business as we transitioned into our new managed-transportation model.

Because we have continued to supply and support those small companies in our BPO model, we’ve stayed in touch with the demands and challenges of providing the transportation service, which then helps us in managing our network in other parts of the country. So it’s been a very symbiotic relationship.


How do you develop software to fit your current and future needs?
This software was designed with place holders for each of those modules or elements because we predicted that, in the future, many of our clients may want to access our service over a Web-based appliance or from a hand-held device.

Even though we laid this original infrastructure in 1995, we basically reserved spaces for those new technologies as they developed and we’ve been lucky. We bet right on some of those elements.


How do you implement drastic changes?
We had to change the behavior of the of the existing transportation provider community. We essentially stepped between a cab driver, a taxi company or a wheelchair operation and his client. At the end of the day, it’s a positive change, but obviously it’s very scary to a small business to have a new business come in and take your business away, so that was huge.

Much of that is done through our software, through the support we provide to our credential network. The things we do for them, like driver training, vehicle inspection, checking their insurance and, in some cases, providing their insurance, all those things help them be successful in terms of risk management and routing efficiency.

Next [was] going to the managed care organizations, going to the states and telling them, ‘It’s much better for you to get out of purchasing services from a whole bunch of little companies and instead give me that responsibility and give me a fixed budget and leave me to focus on getting people to the doctor.’ So our second big challenge was to get our payers to focus on what their core mission was and to let us take on that logistics challenge.

Pitching to our third-party payers is a job that I do with a business development team, and sometimes it’s a five-year sales cycle. It may require a budget crisis in a particular state, or a state to refocus on how or why they spend money in a particular fashion.

It may require a change in a managed care organization that picks up a new book of business and doesn’t understand how to deal with this, for them to come to us and give us an opportunity to make a change in the way they deliver services.

The third was internally getting people to ignore the dollars and cents in all but one or two positions in our whole company and focus just on service delivery, picking people up and getting them to the doctor in a high-quality fashion. It’s very easy to say, ‘Hey, the vehicle broke down. The snow was flying. It’s a holiday. It’s after hours. I’m real sorry. We don’t need to take you.’

When we take on a contract, we take responsibility 7 by 24 to provide whatever kind of service to a client, to go the extra mile. It’s always easy to come up with an excuse to not provide service, so that’s our challenge within the company is to get everyone focused on that client.

For my employees, it’s a constant reminder to get them to be empathetic employees, to put themselves in the client’s shoes. We spend a lot of time trying to keep that in the forefront of our customer service representatives’ minds. It’s important to maintain that focus on the fundamentals of why we do business.

There are two things we always tell them: Totally focus on the client, but also when people feel overwhelmed, I remind them if this was easy, we wouldn’t have jobs.


How do you manage all the elements of a company when it’s expanding so rapidly?
Every call center I walk into has the same software. Everybody’s been trained the same way.

We’ve gone to a very comprehensive, Web-based training to make sure everyone gets the same training. We can actually prove that they scored a particular score on each of the elements of their training.

We have one, and only one, version of our software. Every single call, every single transaction is touch-tracked, so we know anybody and everybody that touched any element of a transaction, from the time the phone rang through it being dispatched, routed and run by a van.

We’ve standardized on a single set of telephony equipment. If any of our network operations centers have any problems — if a hurricane goes off or anything happens — any and all of that work can be automatically rolled to another call center. And if you have every single one of your employees using the same tool set across all books of business, it makes your management a heck of a lot easier.


HOW TO REACH: LogistiCare, (800) 486-7647, www.logisticare.com