Cardiac monitoring firm on brink of national roll-out.

Of all the places in Los Angeles where the lives of cardiac patients could hang in the balance, an office tucked between affluent homes on Mulholland Drive and a shopping center seems among the most unlikely.

Yet at the headquarters of Beverly Glen Medical System Inc., the electrocardiograms of 250 patients at any time are being gathered from remote sites by computer, 24 hours a day. Employees are charged with pinpointing and analyzing heartbeat irregularities, then reporting them to the patient's cardiologist.

Most patients are monitored at home, but data swiftly delivered to doctors can separate serious heart problems from minor ones, and "prevent multiple visits to the emergency room," according to William E. Shell, who co-founded Beverly Glen Medical in his home seven years ago. That in turn saves health plans and hospitals a lot of money.

Despite the obvious cost savings, Beverly Glen Medical is no meteoric success; for most of the decade it has struggled with both the limitations of capital and technology. However, the rise of managed care and technical improvements in remote monitoring have put it on the brink of a national rollout.

Flush with a recent infusion of venture capital, its work force has more than tripled in recent months. Sales this year are projected to more than triple, to $2.6 million.

"We've put technology together with good, old-fashioned care," says Elizabeth H. Charuvastra, clinical director of Beverly Glen Medical and co-founder of the company with Shell.

Charuvastra, a nurse by training who emigrated to the United States from Australia during the late 1960s, said she first witnessed the rise in at-home monitoring of cardiac patients back in the 1980s. Budding technologies had made it feasible, but the hardware costs - up to $60,000 for a single remote monitoring system and computer software - made it economically unattractive for most physicians.

Then in 1989, a change in Medicare regulations that shifted most of the reimbursement for cardiac monitoring to the equipment operator rather than the cardiologist made it even less appealing for doctors to shell out such capital. But in that shift, Charuvastra spotted a business opportunity.

"I saw it as an outsourcing service rather than as equipment to be sold to doctors," Charuvastra recalls.

Enter Shell, a friend of Charuvastra through functions at their children's schools. He had just received several pieces of cardiac monitoring equipment in exchange for writing a software program for a medical device company. He was pondering whether to use it in his own practice or sell it for a tidy sum. Charuvastra convinced him to go into business instead.

Beverly Glen Medical slowly grew, but the going was tough. Medicare cut payments for cardiac monitoring by 60 percent over the last decade - from $216 to $88 per patient. Beverly Glen Medical adjusted by keeping a tight lid on costs, but its sales had only reached $700,000 in 1996.

It turned out that the same thing that kept cardiologists out of the business - huge infrastructure costs - were also proving daunting to Beverly Glen Medical. Charuvastra and Shell could only purchase equipment in bits and pieces, not nearly enough to rapidly expand. Even a $50,000 loan they had taken out in 1995 was only enough to buy a few large pieces of computer hardware, leaving no money for marketing.

Like other segments of the home health care industry, remote cardiac monitoring is a largely framented niche, the province of mom-and-pop operators. Some remote cardiac monitoring has been handled by community hospitals - UCLA Medical Center and Cedars-Sinai Medical Center are local examples - but it is mostly a secondary source of income.

"There are 30 or 40 companies like ours in the U.S., but they're all very small," says Michael Minson, a local investment banker recently appointed Beverly Glen Medical's chairman and director of marketing.

Two things have recently happened to boost Beverly Glen Medical's potential fortunes: the monitors it could employ became much smaller, and Minson helped the company secure additional capital.

For the most part, cardiologists had just two choices for monitoring patients they suspected of having irregular heartbeats: hospitalization or the use of a Holter monitor. The latter option allows the patient to stay at home, but requires him to be fitted with electrodes to his chest attached to the Holter.

The Holter records heartbeats on a standard-size audio cassette that may later be analyzed on a computer. However, the Holter is uncomfortably bulky and can only record data for a 24-hour period.

In the past few years, companies such as Hillsboro, Ore.-based Instromedix have introduced monitors the size of credit cards that weigh less than four ounces.

Instead of storing electrocardiograms on tapes, such as the Holter does, patients can activate the Instromedix monitor by pressing a button on the device when they experience an incident of arrhythmia and holding the device to their chests. The concept was enough to impress Beverly Glen Medical Chairman Minson, who had been a cardiac patient of Shell's. After he examined Beverly Glen Medical's operations, he persuaded New York-based venture capital firm Founders Equity to inject $1.5 million into the company last June, with the proviso he be named as a high-ranking executive of the company.

Beverly Glen Medical Systems Inc.

Core business: Performing remote monitoring of cardiac patients. Year founded: 1990 Employees in 1990: 2 Employees in 1997: 23 Revenues in 1996: $700,000 Revenues in 1997 (projected): $2.3 million