Well before the federal government created incentives for health care providers to update their information technology systems, Akhtar Chaudhri anticipated rapid growth in the IT health care space—as early as 2003, in fact. Having survived the bursting of the dot-com bubble, Chaudhri recognized the need to focus the IT consulting and technology services company he founded in 1998, Virtelligence, on the next growth area—health care, primarily in the area of electronic health records.

“We became an early adopter of investing our time, money, and resources in a sector that was not glamorous,” Chaudhri says. “An IT department of a hospital is typically somewhere in the basement. Hospital revenues are typically invested in doctors and medical equipment, not IT.”

That’s changing. The American Recovery and Reinvestment Act, known more familiarly as the stimulus bill, provides a total of $19 billion in incentives to health care providers that demonstrate a meaningful use of technology, which basically means adoption of electronic health record technologies. The Affordable Care Act (also known as “Obamacare”) will begin providing incentives to health care organizations that can demonstrate positive patient outcomes sometime in the next few years, which will require sophisticated IT systems.

A vast majority of health care systems in the country don’t have electronic patient records. X-rays and other images are still stored in large manila envelopes, and doctors and nurses are still using paper charts. While that might work (more or less) for the health care provider, it’s not very functional for patients who move among systems as their insurance providers change. Sometimes even within the same system records are not transferred from one specialist to another, leading to wasted time, duplicate tests, and inefficiency, Chaudhri says.

Though an early adopter, Virtelligence now has plenty of competition, notably Minnetonka-based United Healthcare. But the market is expanding. According to the federal government’s Office of the National Coordinator for Health Information, more than 600 firms offer 1,700 certified electronic health record systems. A recent health IT report produced by Texas-based Mercom Capital notes the U.S. market for electronic health record software deployment in 2010 was $15.8 billion. By 2014, Mercom Capital’s report estimates, the market will grow to $28.9 billion.

“Our sweet spot is hospitals with preferably over 200 beds,” Chaudhri notes. So far, Virtelligence has worked with more than 100 health care systems, many of them with more than one hospital. In Minnesota, Virtelligence’s clients include Allina Health System, Fairview Health Services, Hennepin County Medical Center, and North Memorial Medical Center.

Virtelligence’s 100 full-time salaried and 20 to 30 contract employees advise their clients on building and implementing health IT solutions. According to Chaudhri, Virtelligence consultants are certified in health care IT and have an average of 10 to 15 years of experience in health care and IT. Approximately one-third comes from clinical health backgrounds. Consultants provide a variety of services including project management and strategic guidance, system implementation and upgrades, building and configuration of systems, process redesign and optimization, system integration and reporting, and health IT training and support.

“Virtelligence saw the trends coming and read the tea leaves better than most,” says David Miller, vice chancellor and chief information officer for medical sciences at the University of Arkansas. Miller, who has used Virtelligence on two projects, says that Virtelligence has some of the best talent for niche projects. “They are in the top tier of these types of companies,” Miller adds.

Named one of the fastest-growing 5,000 private companies in America in 2009 and 2012 by Inc. magazine and one of the top 100 health care IT companies by Healthcare Informatics magazine in 2008 and 2009, Virtelligence has shown a compound annual growth rate of more than 50 percent since 2009. The firm’s revenues in 2011 topped $21 million, and Chaudhri anticipates annual revenues will soar to $55 million to $59 million by 2014.

Location: Eden Prairie
Founded: 1998
Employees: 100 full time, 20 to 30 contract
2012 projected revenue: $27 million