Netsmart Technologies is an American company that develops and sells health information technology, including for electronic health records and health information exchanges, for organizations and entities in the behavioral health, human services, and post-acute care (which consists of home care and hospice and senior living) markets.
Netsmart was founded in 1992 although its technology origins go back to 1968 with the founding of Creative Socio-Medics, which it acquired in 1994. Netsmart has since grown via many other acquisitions. It is headquartered in Overland Park, Kansas.
Origins
Netsmart Technologies was originally known as Medical Services Corporation. Created in September 1992, this was a holding company which did business under a subsidiary called Carte Medical Corporation. In October 1993, Medical Services Corp. merged its subsidiary into itself and became directly known as Carte Medical. In June 1994, Carte Medical acquired Creative Socio-Medics (CSM).
Creative Socio-Medics had been founded by Gerald O. Koop and John F. Phillips in 1968. It had then been acquired in 1973 by Advanced Computer Techniques (ACT), a New York City-based software company that specialized in language compilers but also engaged in information technology consulting and hosted service bureaus. CSM specialized in delivering software products and hardware and software services in the human services field, specifically for behavioral health providers such as psychiatric hospitals and mental health clinics. In 1989, CSM had stopped sharing physical facilities with the rest of ACT and relocated to Islip, New York on Long Island. CSM had tended to be profitable some years but not other years and was rarely in solid financial shape. By the early 1990s, ACT's other businesses had been closed down and it was motivated to sell CSM as well.
In June 1995, Carte Medical Corporation's name was changed to CSMC Corporation, and in February 1996, the name was finally changed to Netsmart Technologies, Inc. Creative Socio-Medics became the company's operations arm that it did business through.
Public company
James L. Conway, who had previously been an executive for a credit subsidiary of ITT Corporation, became president of Netsmart Technologies in January 1996 and its CEO in April 1998. Several former ACT and CSM executives still held executive or board positions with Netsmart, including Koop and Phillips as well as Chief Financial Officer Anthony F. Grisanti and Chairman of the Board Edward D. Bright. Another former executive, Oscar H. Schachter, did legal work for them.
In August 1996, Netsmart Technologies staged an initial public offering and became a public company. The company was traded on NASDAQ under the symbol NTST.
Around 1999, the company began a period of rapid growth, with revenues increasing almost fivefold over the next six years, with both acquisitions and organic growth being responsible. It was especially strong in contracts with the different states. By the end of 2002, the company had 145 employees. Leading up to 2003, the business of Creative Socio-Medics benefited from the phase-in that year of Title II of the Health Insurance Portability and Accountability Act (HIPAA), which required the establishment of national standards for transactions involving electronic health records. The Avatar software suite from Creative Socio-Medics generally cost from $250,000 to $1 million at that time and covered patient tracking, medical records management, and scheduling and billing for both inpatient and outpatient services.
In 2003, the company moved from Islip to Great River, New York. By 2004, it had been profitable for five straight years and 23 quarters in a row.
By 2005, Netsmart was the largest information technology provider within the behavioral health care sector, with revenues of around $50 million. That year it acquired its biggest competitor, CMHC Systems of Ohio, which was especially strong in community mental health centers, for $18 million. Conway remained CEO of the merged entity. At this point the Creative Socio-Medics and CMHC names were retired and the company operated solely as Netsmart. By the end of 2005 its profitability streak had reached 30 quarters in a row.
Private equity buyout
The purchase of CMHC in turn attracted the interest of private equity firms. In 2006, Netsmart agreed to be bought out by two such firms, Bessemer Venture Partners and Insight Venture Partners, for $115 million.