St. Cloud business Netgain broadens its reach
Aug. 13–A hospital in Ohio soon will rely on a St. Cloud-based company to manage and maintain its on-site information technology infrastructure.
What’s extraordinary about it is Netgain, which has been in operation since 2000, will do the work remotely.
That means people such as Jered Rassier, Netgain’s infrastructure team lead, will sit at his workstation in the Federal Building in downtown St. Cloud and monitor systems in action more than 700 miles away. He’ll keep track of the availability, use and performance of the systems for Fremont Memorial Hospital in Fremont, Ohio, a 105-bed facility in a town of about 18,000 people about 45 minutes from Toledo.
It’s the second such arrangement Netgain has entered into this year with a small hospital. The first was with Mille Lacs Health System, which has a 25-bed hospital in Onamia. In the past five years, Netgain has done 70 percent of its business with medical clinics.
The contract with Fremont Memorial is worth $2.5 million in the next five years. Scott Baynes, one of Netgain’s three managing partners, says deals like this will require continued hiring for a company that already has enjoyed 30 percent year-over-year growth in revenues and salary since focusing on medical clients.
“There’s a challenge for the health care industry in remote areas to find doctors,” said Baynes, 37, Netgain’s vice president of technology. “There are some innovations that help. Maybe these smaller hospitals can outsource their radiology and use other things like telemedicine to stretch their resources. The challenge is the same with information technology. There’s not a lot of IT talent in these local communities in many cases. We’re able to partner with them and supplement their own IT departments.””It’s an evolution of what we’ve been doing, so our customers know we can do it,” Baynes added. “We’re doing it now.”Unique offeringNetgain’s management of the Mille Lacs Health Care System already has begun. The system for Fremont Memorial is expected to deploy next month. Baynes said his company will aggressively court more hospital clients in the months ahead, working trade shows and other contacts to get in front of the decision-makers. Netgain’s goal for the change in strategy is to grow business by 50 percent in the next five years. The company already is in discussions with hospitals from California to New Hampshire.
“The product they have on the table is unique — infrastructure as a service,” said Dustin Hufford, chief information officer for Memorial Health Care System. “I Googled around to try and compare to other companies, and our board did its due diligence when considering this arrangement, and we could find no one who offered anything like it.”Netgain provides a data center that the hospital rents under the contract. That allows the hospitals to designate the service as an operating expense rather than a capital expenditure — something important for strict budgets. The cloud-based technology provides a secure environment in which the hospital can run a wide variety of programs — from scheduling and email to patient records and imaging.
Netgain also replicates the data from the hospital’s on-site hardware to storage in St. Cloud. That provides hospitals with an off-site data backup and an option to recreate or recover information in the event of a disaster like a tornado. It also means patient records would be available to functioning medical facilities or disaster response centers.
“Smaller hospitals in general are sort of IT laggards by nature,” Baynes said. “Working with us is about like hiring one or two additional staff to do these modern technologies … the underlying challenge is cost. We help them stabilize that. They can’t buy the talent and the gear for what it takes to rent them from us.”There’s urgency on the part of hospitals to adopt modern technologies because of provisions in federal health care legislation such as the Patient Protection and Affordable Care Act of 2010. The motivation is to increase statistical tracking of treatment, reduce errors and improve efficiency to manage costs.
Because Netgain monitors the systems and handles hardware replacement and upgrades, hospital IT staffs can concentrate on face-to-face user support.
“Their equipment is on site — you can see it, touch it and feel it,” Hufford said. “But they provide an extra level of expertise that is hard to add in a small community — and even if we could we’d have high turnover and then you don’t have great documentation for what you have in place. They’re pros. They live and breathe this. They allow our ground crew to focus on software implementation. We don’t have to worry about baby-sitting servers and all that fun stuff.”Unlike working with clinics, there are significant upfront equipment costs for Netgain when working with hospitals. Fremont Memorial will need gear that would retail for about $1.5 million, though Netgain can acquire the hardware at a volume discount that hospitals and clinics can’t get.
“We have to buy all that before we see the first penny,” Baynes said.
That’s where Bremer Bank comes in. The institution has been involved with Netgain for a decade, but a move into the small hospital market could bring its lending to a new level. Mike Grogan, senior vice president of business banking for Bremer in St. Cloud, said a key to that is a Small Business Administration loan program, including a so-called 7(a) loan for businesses operating in rural areas. The SBA loan is guaranteed, providing comfort for the bank, and a longer amortization process for the borrower.
“Netgain has had good, steady growth right through the recession, and you can’t say that about a lot of companies,” Grogan said. “It helps that the health care industry has bucked that trend, but they’re on the right track. We have confidence in their management team that this business model will be profitable for them.”Baynes believes this is the continuation of a success story for a company benefiting from Minnesota’s Job Opportunity Building Zones program. Netgain has gone from 17 to more than 50 employees since receiving JOBZ benefits beginning in 2006. The program is expected to continue through 2015.
“We’re a local company bringing in money from out of state and, really, we’ve been constantly hiring,” said Baynes, who has a physics degree from St. John’s University and a master’s from Colorado State. “We’re always looking for people.”
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