IPO Preview: WhiteGlove House Call Health

| About: WhiteGlove House (WGH)

[Editor's Note: This article, first published on July 26, 2011, references a planned IPO date of July 28, 2011. WhiteGlove's IPO will actually take place tomorrow, August 4.]

Based in Austin, Texas, WhiteGlove House Call Health (WGH) scheduled a $28 million IPO with a market capitalization of $144 million at a price range mid-point of $11 for Thursday, July 28, 2011. The full IPO calendar for the week of July 25th includes 12 IPOs scheduled to raise $2 billion.

CONCLUSION -- WGH is a money losing speculative, health care delivery proposition.

WGH’s business model is not yet proven. It’s a combination of a low-cost phone referral service and a more higher priced health care concierge service for a fixed dollar amount per year.

In the current economic climate and because WGH’s breakeven is not yet in sight, it seems product to wait until WGH develops a more health income statement before investing in WGH.

However, the upside could be considerable if WGH can ever get a to breakeven cash flow, which is not going to be in the near term.

WGH believes it provides 70% of the medical services handled in a typical primary care setting. The most notable differences between the medical services WGH provides and those typically found in primary care settings are: x-rays; ultrasound; suturing; retinal, pelvic, genital and rectal exams; advanced cardiology evaluations; and treatment of chronic depression, chronic pain, addiction or pregnancy.

VALUATION -- WGHG is range mid-point priced at 21 times sales, 4.3 times book value and – 23 times earnings (because WGH is losing money).

WGH valuation metrics

BUSINESS -- WGH says it is a leading service-driven healthcare organization.

By designing and developing a new service-oriented health care delivery system from the ground up that uses the Internet, social media, advanced technology, a membership-based (subscription) business model, and nurse practitioners (NPs).

WGH believes it is able to substantially reduce many of the traditional expenses and complexities of other health care delivery systems and to give the consumer a very high quality health care experience at a fixed price.

RECENT DEVELOPMENTS -- On May 1, 2011, WGH entered into an agreement with Americare Services, Inc. to provide WGH members the opportunity for a phone consultation with a doctor, under certain circumstances, instead of an in-person visit from one of WGH’s nurse practitioners. This service will be seamlessly integrated into the WhiteGlove experience. When members contact WGH for medical care, WGH will determine if a phone consultation is possible and something the member desires or not. If they do, WGH will schedule the visit with Americare and give them access to the member’s medical history and medical record.

Americare will schedule a phone consultation between WGH’s member, an Americare nurse and a board certified doctor in the member’s state within three hours of WGH’s member’s initial call. After the phone consultation, Americare’s nurse will complete the member’s chart and end the visit.

COMPETITION -- WGH has a number of competitors in the large , broadly defined health care marketplace. Sometimes you can get a good idea of what a company's overall vision is by looking at "competition" as defined in their S-1 filing.

Primary Care Physicians

Competitors in this category include the numerous primary care physicians available in almost every market. Primary care physicians provide primary and chronic care to consumers on an appointment basis in clinics. Primary care physicians have been the consumer’s traditional choice for primary and chronic care and enjoy greater recognition in the marketplace. In contrast, WhiteGlove is a new company whose service model has not been widely accepted.

Retail Clinics

Competitors in this category include retail clinics such as MinuteClinic, Take Care Health Systems, and RediClinic. Many large discount retail stores, drug stores or supermarkets such as Wal-Mart, Target, and CVS operate retail clinics within their stores, providing a level of convenience for consumers. Like WhiteGlove, these clinics are primarily staffed with NPs and offer consumers an affordable alternative to primary care physicians for medical care.

Concierge Services

Some markets offer concierge services where members pay monthly or annual fees to make primary care physicians available for longer appointments and after-hours care. Some concierge services offer consumers the option of seeing a physician in the consumers’ chosen setting. Physicians participating in concierge services typically charge monthly or annual fees equal to or more than the monthly fees that WhiteGlove charges for a comparable service.

Urgent Care Clinics

Urgent care clinics are alternatives to primary care physicians and hospital emergency rooms. Urgent care clinics usually treat consumers on an unscheduled, walk-in basis and are primarily used for injuries or illnesses that require immediate care, but are not serious enough to warrant an emergency room visit. Visits to urgent care clinics are usually more affordable than an emergency room visit, but more expensive than other health care options such as visiting a physician’s clinic.

Emergency Rooms

Emergency rooms provide 24/7 emergency care on an unscheduled basis. Emergency room visits can be very expensive, have long wait times and do not offer treatment for chronic conditions. Nevertheless, emergency rooms are increasingly used as replacements for primary care physicians and other health providers by a significant number of consumers.

COMPETITIVE DIFFERENTIATION -- As of June 30, 2011, WGH had 484,000 individual, employer, and insurance plan members in seven major metropolitan markets (Austin, TX; Boston, MA; Dallas, TX; Fort Worth, TX; Houston, TX; Phoenix, AZ; and San Antonio, TX), with plans to expand across the U.S. The company’s ultimate objective is to provide a national service to its members giving them the same, consistent, affordable, high quality health care experience across all the markets it serves.

WGH intends to continue to capitalize on its first mover advantage by expanding rapidly to other major metropolitan markets with the support of advanced technology that enables very cost effective and rapid expansion into these markets.

Service-Driven Approach

WhiteGlove appreciates that there are many primary care and chronic care choices for the consumer. Specifically, the options are primary care physicians or physician groups, concierge doctors/services, retail clinics, urgent care centers, minor emergency clinics, hospitals, wellness centers, and telemedicine services. We believe WhiteGlove’s Service-Driven approach to health care sets us apart from other health care providers.

WhiteGlove is not a health insurance plan. Health insurance plans: (i) deliver healthcare services to individuals enrolled in the plan through agreements with providers; (ii) have financial incentives for persons enrolled in the plan to use the participating providers and procedures provided for by the plan (e.g. in-network vs. out-of-network); (iii) have deductibles, co-pays, minimum and maximum out-of-pocket expenses; and (iv) assume risk. WhiteGlove has none of these attributes.

Convenient Access

WhiteGlove brings medical care, generic prescription medications, diagnostic tests, and more to its members. While some concierge services will bring medical care to their patients, others simply make themselves available via the phone within a certain period of time. In either case, their service is generally limited to just providing medical care and doesn’t include prescription medications or other incidentals. For all other choices, the consumer has to drive to the health care provider when it works for the provider’s schedule, and then travel around for diagnostic tests, prescription medications, incidentals, etc.

Affordable Fixed Cost

WhiteGlove’s business model is based on affordable fixed cost membership fees and a fixed cost all-inclusive visit fee of $35 (includes most generic prescription medications and other incidentals).

WGH files no claims against an employer’s or an individual member’s health plan. The combination of fixed fees and no claims lowers and caps the overall cost of health care for employers for the services we provide.

For consumers, visit fees are capped at $35 a visit. Most other health care choices are reimbursed based on a fee-for-service model where they charge the consumer and the health plan for every service performed, making health care costs variable and unpredictable. In addition, the consumer spends money on some combination of gas, parking, tolls, multiple co-pays, child care, and incidentals, only adding to the variable cost.

In the case of most concierge services, their annual fee is generally between $1,500-$3,000 per year, which is not affordable for the average consumer. WhiteGlove has a broad scope of care, and believes it provides 70% of the medical services handled in a typical primary care setting. The most notable differences between the medical services WGH provides and those typically found in primary care settings are: x-rays; ultrasound; suturing; retinal, pelvic, genital and rectal exams; advanced cardiology evaluations; and treatment of chronic depression, chronic pain, addiction or pregnancy.

USE OF PROCEEDS -- WGH expects to net $24.5 million, assuming an initial public offering price of $11.00 per share . WGH intends to use the net proceeds of this offering for the repayment of $2.5 million in debt, expansion of business to new metropolitan markets, and general corporate purposes.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.