Catasys (CATS) is an up-and-coming company that has created a comprehensive program that is designed to help health insurers reduce claims costs, explains Nate Pile, editor of Nate's Notes.
In a nutshell, Catasys has developed a proprietary data analysis platform called On-Trak that it combines with predictive modeling techniques to identify individuals in a healthcare plan who suffer from chronic conditions, but — because they may not be successfully managing these conditions — end up costing the plan more money on other “secondary” items like ambulance transports and visits to the ER that can be prevented or minimized.
Once the individuals in a plan have been identified, the OnTrak program kicks in and a 52-week intensive outpatient program begins in which the patients are engaged and provided with nurses or qualified “coaches,” sometimes in person and/or via video conferencing.
This coach proactively works with the patient to gain better control of their underlying condition (which, in turn, leads to fewer “secondary” events in the patient’s life).
Initially, the company was focused primarily on patients who suffered from behavioral or mental health related illnesses such as substance abuse, anxiety, and depression. But as its data analysis platform has grown, it has also begun to tackle patients with other conditions such as diabetes, hypertension, coronary artery disease, COPD, and congestive heart failure.
With the massive amounts of data that are becoming available for analysis thanks to the digitizing of health records over the past several years, it is becoming possible to sift through this data with ever increasing accuracy to identify patients that are strong candidates to find success with a program like OnTrak.
Though the numbers will obviously vary from patient to patient, Catasys claims that it is reducing claims cost by roughly 50% for the health plans it is currently working with across the country, and though other companies will undoubtedly be joining the fray, Catasys appears to be establishing itself as an early leader in being able to provide this service to insurers.
Founder and CEO is Terren Peizer has had a long and successful career that started in finance. Though his stake is technically held by Acuitas Holding Group, LLC (his personal holding company), Mr. Peizer is the largest shareholder in Catasys — of the 15.9 million shares outstanding, he still own 10.4 million of them!
He has been involved in starting, buying, and/or selling of a number of companies along the way, and, given his still quite large stake in Catasys, it would not surprise me if the goal here won’t be to eventually sell the company as well.
I want to make sure you understand that because he owns so much of the stock, there are very few other shares available for trading, and this extreme lack of liquidity is one of the biggest risks I see in recommending the stock at this point in the company’s history.
Even the slightest amount of buying — or selling — pressure has the potential to cause large swings in the price. As such, you are encouraged to be especially disciplined about not “chasing” the stock.
There will almost certainly be at least one secondary offering along the way so that Mr. Peizer can liquidate a portion of his holdings and the company can raise additional capital, and I just want to make sure you know ahead of time that “dilution” will almost certainly be taking place at some point along the way. CATS is considered a strong buy under $10 and a buy under $15.
