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Interview

In 1978, while working for a Valley medical testing lab, Stephen M. Besbeck met some people with an idea for a company that would make computer software to automate the collection and management of data for the health care industry. The problem was, like many entrepreneurs, they had no money to bring the idea to life. With a few years of experience on the business end of the medical industry, Besbeck was convinced of the project’s potential. So he launched Creative Computer Applications Inc. that year with his own money, and by attracting some investment bankers whose goal was to take the company public. Creative Computers did go public, in 1983. Today, Besbeck’s entrepreneurial enterprise in which he owns about a 10 percent share is one of the most profitable companies in the San Fernando Valley, with an average return on investment of 14.51 percent over the past five years. For the 1997 fiscal year, the company had a 24.23 percent return on equity with revenues of $7 million. Creative Computer made headlines when its most recent quarterly statement was released. For the three-month period ending Feb. 28, the company reported a net loss of $534,158. No worries, Besbeck said, as Creative Computer Applications is still profitable. The loss reflects an accounting procedure the company adopted because of a new national standard. Question: What do your software systems do, and who buys them? Answer: We provide clinical information systems, which basically gather data on each individual patient’s health care conditions such as pharmacy, nursing notes, physician notes, vital signs, etc. CCA also provides applications that automate laboratories, pharmacies and radiology departments in hospitals and other health care settings. The products also have informational tools that assist doctors and nurses in diagnosing and treatment, as well as managing patients with respect to benefits and reimbursements. Q: Are doctors still writing a lot of information on paper that is filed away and not readily available? A: Absolutely. And there’s a lot of older technology that’s still employed in the industry, especially with respect to financial systems. A lot of older products are no longer being supported, and Year 2000 issues are very big in the industry. There’s a lot of interest in the field from analysts and consultants and so forth because health care is probably seven years behind the general marketplace with respect to information technology. The industry is approximately $9 billion in the United States. Q: Do your software systems work with those of your competitors, or must a medical provider use one company’s software exclusively? A: To be able to survive in the industry, disparate systems must talk to each other and there are several ways that is done. There are several industry standards which we adhere to and there are companies out there that sell interface engines that work like a traffic cop managing communications between different systems. Q: Is this an industry undergoing consolidation? A: It is, and there are some very large companies that have emerged, the largest of which does over $1 billion a year in revenue. We, like a lot of companies, have made acquisitions and we’re looking at a half a dozen acquisitions right now software companies, companies involved in health care products that can be sold and supported by the same organization that we have in place. Q: Have there been offers from other companies that wanted to acquire your company? A: There’s been interest, but nobody has presented anything at this point that is in the best interests of shareholders. Q: What do you do to set your company’s products apart? A: Most of the main vendors in the health care information systems business focus their attention on developing applications specifically for the acute-care hospital. However, the managed care model has dictated a lot of changes in how information is used. We have distinguished ourselves in having a breadth of products that can compete in a variety of settings. We may have an acute-care hospital that is affiliated with a multi-specialty doctor group and a long-term care facility and want to use the systems applications throughout this enterprise. The beauty of our products is they can be used in this hybrid environment and track a patient through a continuum of care. Q: How did you get into this business? A: I was the CEO for a number of years of a Valley-based clinical testing laboratory. One of the company’s entities was called Cancer Screening Services, that was at one time the largest in the world specializing in gynecological pap smears and related testing. I was there from 1974 to 1983, and before that I had a brief stint in the real estate business as the chief financial officer. From the lab company I met some of the principals that founded this company and they had this very interesting idea. They put together a business plan, I put the first risk capital in and here we are. Q: Were you at all interested in the health or software industries when you were embarking on a career? A: Early on, my interests were more entrepreneurial than anything else. I liked the idea of starting businesses and building them. It’s something that I studied. I had a number of ventures even when I was a kid that paid my way through school and so forth. Q: What sorts of ventures did you have? A: My first one I was about 16 years old and I lived in an area of Los Alamos that had a lot of grape-stake redwood fences and after a year or two they would bleach from the sun and look gray and tattered. I got the idea of going around and painting those fences. It sort of went back to what Mark Twain’s “Tom Sawyer” where he got all those kids to help him whitewash the fence. A couple of summers I made a fair amount of money enough to buy a new sports car by employing kids to go around the neighborhood and sell the service. One summer I had over 20 kids working for me. Q: Your domain is mainly in the realm of computers, but do you feel a connection with the health industry? For example, do you ever come in contact with patients? A: We don’t contact with patients but we deal with doctors and nurses and specialists and pharmacists. On staff we have people with those kinds of backgrounds, and our clients assist us on a routine basis. For example, we wanted to develop a new system to assist in the science of anatomical pathology, where tissues are taken and pathologists microscopically analyze the slides. We invited a number of pathologists who are also our clients as part of a focus development group. We’ve worked with this body for over a year and in a couple of weeks we’ll present the product for final critique and analysis. Q: Even though you’ve never studied medicine, do people ever ask you medical questions? A: All the time. It’s hysterical. Especially when I was running the women’s laboratory business. At cocktail parties, women who had been to their (doctor) for a pap smear would tell me that they had come up with a “Class II,” and the doctor suggested one course of treatment. And they would ask “what do I think of this?” The last thing I wanted to hear was about their pap smear problems. Even though you gather a certain amount of knowledge about a subject, you’re certainly not an expert on it. Steven M. Besbeck Position: President and Chief Executive Company: Creative Computer Applications Inc. Born: Long Beach, Jan. 5, 1948 Education: Cal State University, B.S. in Finance, 1970, some post-graduate studies in business and finance Career turning point: In 1979, went from being a CFO to being chief executive of American Cytogenetics Inc. of North Hollywood Personal: Divorced, no children

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