From Holly: “Re: HIPAA. On the heels of Piedmont Hospital, Cedars-Sinai in Los Angeles is number two to be undergoing a HIPAA Audit by the government.” Unconfirmed, but that’s interesting. I didn’t hear what came out of the Piedmont visit. Gartner could do an interesting hype cycle on HIPAA. Phase I was everybody panicking and hiring consultants and attending endless HIPAA preparation seminars, along with promoting some obscure HIM or compliance person to a higher paying HIPAA Czar position. Then, it kicked in with NPPs, employee training, and transaction set software upgrades. Next, it dropped out of the picture entirely when it became clear that the administration wasn’t keen on actively hunting down violators. Most recently, the formerly timid providers and agencies are piping up to say that it really has impeded information flow and needs to be revisited. Somewhere in all that is the Insurance Portability part that got the whole mess going.

From Amber Waves: “Re: AMIA. I vastly prefer it to HIMSS. It is much more practical, in my mind, with way less focus on vendors and way more on what is really working – whether vendor-driven or homegrown. They have lots of opportunities for interaction with people who are really working hard on the tough informatics issues. Some of the solutions are not yet in the vendor products, but they will be soon and it is great to see in advance what types of real implementation issues are going to be coming along.” I also noticed that AMIA will take its 10×10 informatics education program global, now shooting for training 20,000 informaticists by 2020.

From Jack Horner: “Re: AMIA. Another great panel was ‘Integrating Informatics Into the Enterprise’, with John Glaser, Bill Stead, Marc Overhage, and Charlie Safran. The first two basically proved why Vanderbilt and Partners have the biggest informatics departments. Partners is also impressive in that it has avoided vendors for its EMR system and also that its IT department actually funds small, internal research grants. Bill Stead gave one of the best descriptions of the field informatics I’ve seen. Also notable: the empty Misys booth in the exhibition hall. Maybe you could get the NLM to give out ‘I Am Mr Histalk’ buttons at the 2008 conference?” OK, you’ve just about convinced me. I probably won’t attend the meetings (although you never know) but maybe I’ll join. It does sound more practical than I remember and I just might be an informaticist, depending on who’s defining. Its CEO salary: $256K.

From Keyser Size: “Re: layoffs. In Atlanta, the air is cool and brisk, leaves are turning red and gold, the holiday spirit is all around. It is also fall at McKesson, where around 250 employees were given their pink slips this week.” Unconfirmed.

From Nasty Parts: “Re: Allscripts. The culture of Allscripts is very micromanagement. I understand that Glenn Tullman himself regularly dials members of the sales force to quiz them on competitors, elevator speech etc. He also has his product manager making similar calls. All of this on top of the daily pipeline reports that the sales guys have to deliver.” That’s probably annoying to a sales guy used to being a lone wolf, but I give him credit for getting involved in the details. If he wasn’t, someone would claim that he was distant and disconnected.

From Justen Deal: “Re: Universal Rules for Big EMR Rollouts™. Went ahead and trademarked it for you.” Justen comments on the big Epic projects at Kaiser and Sutter, calculating that HealthConnect will end up costing $9 billion over ten years, just a bit higher than its original $1.8 billion estimate. Hey, maybe I could work that Universal Rules thing like Letterman’s Top 10. Actually, that list just kind of spewed out because I was tired, so two minutes later, I was trying to figure out how it got on the screen. I must have been channeling some dead HIT cynic.

A reader asks about medical informatics programs, specifically those of Northwestern, UIC, SUNY Downstate, and UMNDNJ. Good question. Which programs are good nationally, maybe both those intended for full-time study and programs better for working adults? Are they worth the cost and effort required? I’m curious myself. Let me know.

Allscripts must have allowed its web domain to lapse, at least temporarily, or maybe somebody hijacked their DNS. I went there yesterday and got one of those fake search engine sites littered with Adsense ads. Same result when I Googled and clicked on the several links listed. It’s working now.

Amcom Software will merge with telecommunications provider XTEND Communications.

MedAvant’s Q3 numbers: revenue down 25%, EPS -$0.38 vs. -$0.12.

Microsoft gets an Azyxxi sale to St. Joseph Health System (CA).

Odd hospital lawsuit: a man arrested for drunk driving after a car crash refuses to submit to a blood alcohol level. After his release, his wife took him to a local hospital to get the test “to satisfy his own curiosity.” He failed, so the hospital notified the police because they thought they were supposed to. He changed his plea to guilty, spent a couple of days in jail, and lost his license for a year. He’s now suing the hospital for emotional distress and economic damage, claiming it violated HIPAA by disclosing information when it didn’t have to (he claims he wasn’t being treated at the time). What are the odds that he even paid for the test?

Visionary Medical System announces it has met the interoperability requirements of the Novo Grid by Novo Innovations, allowing its EMR product to view hospital information along with the practice’s health records.

CPSI announces the migration of its hospital system (the applications and database tiers) to Red Hat Linux, offering customers royalty-free licensing, portability, and broad industry support. The GUI will remain ClientWare on Windows.

E-mail me.

Inga’s Update

I have to admit I am sad that everyone thinks Mr. H is right with his universal EMR rollout rules. Does this mean everyone who talks about their success stories aren’t telling the whole truth?

From Tracy: “Is the President and COO’s name really Rob Kill? Man, his parents must have been in a bad mood during the baby naming process. I’m glad I’m not in charge of PR or brand management at that company!” Yep, it really is. I heard his brothers are Chase and Hunter.

Northern Louisiana is establishing a new e-health initiative with the help of IBM, Carefx, Initiate Systems, and the Louisiana Rural Hospital Coalition, Inc. Louisiana taxpayers are providing the initial funding.

Former Accuro Healthcare Solutions and QuadraMed execs announce the formation of a new company, Panacea Health Solutions. They’ll focus on helping hospitals improve their financial performance.

Unless Mr. H, who doesn’t like to give his projects too many shameless plugs, I am happy to shamelessly ask people to contact me for the HIStech Report scoop. We are already working on reports for four or five companies. If you want to be included in the pre-HIMSS editions, let us know soon.

E-mail Inga.

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From HIT Insider: “Re: Sutter. Haven’t seen this article on Sutter Health wasting millions on its Epic installation yet.” Link. Sutter’s original estimate to install Epic in six hospitals: $150 million. Current estimate: $500 million and going up. Nearly $100 million for one hospital? Says they learned from Kaiser’s mistakes.

Mr. HIStalk’s universal rules for big EMR rollouts:

1. Your hospital will pledge to make major processes changes, vowing to “do it right” unlike all those rube hospitals that preceded you, but the executive-driven urgency to recoup the massive costs means the noble goals will change to just bringing the damn thing up fast, hopefully without killing patients in the process.

2. The project and/or system must be anointed with an incredibly dopey and user-embarrassing name, preferably chosen from user submissions and with the offer of crappy vendor paraphernalia or lame IT junk as a prize, and also preferably made up of a far-fetched phrase whose contrived acronym spells out a medically related word or female name. Instead of inspiring the expected collegial chumminess among users, it will serve as a bitter reminder of the innocent, naive days between RFP and go-live before it got ugly.

3. Doctors won’t use it like you think, if at all, because hospitals are one of few organizations left that doctors can say ‘no’ to.

4. You’ll spend a fortune on mobile devices and carts that will sit parked in a corral due to the short life of their $100 battery and a dysfunctional but not yet fully depreciated wireless network, the keystone arches to the entire project.

5. All the executives who promised undying support to firmly hold the tiller through the inevitable choppy waters and who overrode all the clinician preferences in a frenzy of inflated self esteem will vanish without a trace at the first sign of trouble, like when scarce nurses or pharmacists threaten to leave or when the extent of the vendor’s exaggeration first sees the harsh light of day in some analyst’s cubicle.

6. It will take three times as long and twice the cost of your worst-case estimate.

7. You’ll pay a vendor millions for a software package consisting of standardized business rules, then argue bitterly that all of them need to be rewritten because your hospital is extra-special and has figured out the secrets that have eluded the vendor’s 100 similar customers. The end result, if the vendor capitulates, will be a system that looks exactly like the one you kicked out to buy theirs.

8. You’ll loudly demand that the vendor ship regular software upgrades to fix all the bug issues you submit, but then you’ll refused to apply them because you’re scared of screwing something up with the skeleton maintenance staff you can afford, given that millions were spent on systems with nothing left for additional IT support staff or training.

9. All those metrics you planned to collect to show how quickly the EMR would pay for itself instead show the situation unchanged or getting worse, so factors beyond your control will be blamed (like a ridiculously long implementation time that changed all the assumptions and external conditions) and ROI will not be brought up again in polite company.

10. No matter how unimpressive the final result toward patient care or cost, the EMR will be lauded far and wide as wonderful since the vitality of the HIT industry (vendors, CIOs, consultants, magazines, HIMSS, bloggers) requires an unwavering belief that IT spending alone will directly influence quality, even when nothing else changes.

From Dastwood Biouf: “Re: AMIA. AMIA’s annual meeting wrapped up this week in Chicago. It had over 2,000 attendees. AMIA still has a reputation for being full of pointy-headed navel-gazers more concerned with abstract topics than solving real-life issues in health care. If that was ever true, it’s certainly not now. The academic rigor is definitely there, but the focus is on everything from dealing with vendors to doing clinical decision support in distributed health information networks. Other highlights were a demonstration of context-sensitive “infobuttons” linking from EHRs to knowledge resources like UpToDate using the new HL7 Infobutton standard and a discussion of privacy policies around RHIOs. Oh, and also an announcement and panel discussion about AMIA’s latest initiative: establishing Applied Clinical Informatics as a formal medical specialty. Good stuff all around. AMIA is a great organization that deserves to have a higher profile than it does.” I’ve started to join a few times, but I always balk at the $250 a year. That darned HIMSS has set the bar high by selling out to Diamond Members, thus keeping dues for the little people low in the process. AMIA’s still worth it, I think, so I may pony up.

From Tom C. “Re: Eclipsys. Cardinal Health may buy Eclipsys. Cardinal likes the way McKesson is leveraging the old HBOC division.” Bet they liked it even better back in 1999, when their arch-competitor took it in the shorts as the HBOC house of cards finally collapsed, wiping out $9 billion of market equity in one exciting day and forcing the writedown of hundreds of millions of dollars worth of fictional accounting.

From PoBoy: “Re: Healthvision sales price. Quovadx determined fair market value is $7.42M. After payment of @ $4.87M of Healthvision’s indebtedness (primarily to VHA and a bank) and @ $1.23M of transaction expenses in connection with the merger, the remaining net equity value of Healthvision is @ $1.32M. Healthvision’s Series E Preferred Stockholder was entitled to receive the entire net equity. None of the other stockholders were entitled to receive any proceeds.” I assume General Atlantic was the stockholder, but I was too lazy to look it up. And to think that, according to Scott Decker, it had a value of between $1 and $2 billion back in the dot-com days. Like he said in my interview, too bad they didn’t go public quickly then.

Pictures of Kiowa County Hospital in Greensburg, KS from May 4, 2007, from a presentation by administrator Mary Sweet. 68 employees lost their homes. That bottom picture is of HIM, yet 95% of the paper records were saved because a cement wall fell on them and protected them. Her tips: have a plan to bring in storage pods if needed, make sure the building code footprint is current, use employee picture IDs with an extra copy kept at home, develop plans to save vital items, have contracts in place for temporary buildings and bathroom facilities, make sure patient beds fit in the elevator, and don’t keep your backup tape across town – the tornado’s 200+ mph winds destroyed 95% of the town and the tapes, too. Pictures of the town are here. Ten people were killed. Sad.

Was I the only one who didn’t notice that consulting outfit Kurt Salmon Associates sold out to a UK consulting company last month for $125 million?

I got wrapped up watching Eric Fishman’s videos showing Dragon NaturallySpeaking working with several EMR products in several specialties. Though the speech recognition part is cool and it’s clear that it works really well (you actually see the narrator’s voice dictating and running the app), I liked being able to see someone actually going through eClinicalWorks, e-MDs, etc. so I could see what their screens looked like. Putting those out there was pure genius – seeing speech recognition driving the screens is fun.

I’m hearing that Dairyland laid off around 30 people this past Monday, with developers, architects, and PMs the hardest hit. This could be like a sports trivia question: what CEO laid off dozens of people at two different companies in the same year? (answer: James Burgess, 2007: Mediware and Dairyland).

The Healthcare IT Transition Group guys amuse me yet again (no, they’re not a sponsor – I just think they’re funny). Marty covers the CCS conference from Beverly Hills. In a wickedly funny summary, he postulates that Canadians live longer because all meat keeps better in the freezer, describes Eclipsys CEO Andy Eckert as “… like the guy in high school who was both valedictorian and captain of the football team. The kind of guy who you just couldn’t help liking, even as he drove off with your girlfriend in his red Camaro.”, and Jonathan Bush as Alex P. Keaton with ADHD and a software company (“he chewed up the scenery like William Shatner on steroids.”)

McKesson Provider Technologies is criticized by the health department for moving quickly out of its Queensbury, NY building after an employee claimed to have Legionnaire’s Disease. The health department says no one has reported the disease as the law requires, the landlord has been told nothing, and the health department said McKesson had been “less than forthcoming.”

Former Duke University associate CIO Iain Sanderson is named CMIO at Health Sciences South Carolina.

EHRVA releases a free quick start guide for the Continuity of Care Document standard.

Misys tries to drum up some enthusiasm for the iMedica EMR it licensed. What it says: some resellers said they’d sell it and some MGMA attendees saw it demonstrated. Not well written: the headline is a dead giveaway for the commercial that follows and it lapses into the first person in the eighth paragraph as though some unseen press release god suddenly began speaking to you directly from your monitor. Bet they didn’t feature as many compliments about the same system when iMedica was selling it against the old Misys warhorses (like this one, in which a practice paid over $150,000 to get five doctors on Misys).

Medsphere hires Edmund Billings, MD as CMO, who appears to have bailed out of medicine early in his career to start IT companies (like Oceania). I don’t know that I’d have made him CMO, but maybe a marketing or development guy. He’ll be a good asset to them nonetheless, I suspect.

Cardinal Health announces a 340B software package.

Ambulance chasers file a class action suit against FCG for taking $365 million in cash for the company. It’s not enough, they say, despite the 30% premium to market price at the announcement. It was not mentioned whether they kept a straight face.

HIStech Report has caught the eye of a few companies and PR firms. I’m not making a pitch, but simply mentioning that companies who are interested in the pre-HIMSS period of January and February contact Inga stat because we’re going to book it up fast, I think. We’ll have a “Mr. HIStalk Goes to HIMSS” writeup that accompanies it.

MediNotes says its small-practice EMR system interfaces with 76 practice management systems. My interview with CEO Don Schoen is here.

EnovateIT announces an agreement that gives Language Access Network the right to provide its two-way video system to EnovateIT’s 1,100 hospital customers.

Pioneers Memorial Hospital (CA) chooses Optio’s document-based EHR.

IBM will acquire Cognos for $4.9 billion in cash. Pretty much all of the BI companies have been swooped up except privately held SAS. They’re probably next (Oracle?)

It’s a holiday coming up, and one of few that somebody doesn’t protest about. I’ve got planning to do (HISsies, the HIMSS get-together we’re hoping to put on, and the announcement of a new service in the next handful of days). I’ll still be writing here, of course, since that’s what I do. If you’re heading out of town, be safe and enjoy the time with your family and loved ones.

E-mail me.

Inga’s Update

Larry: Regarding your comments on Allscripts third quarter projections and the question: Do you think the ambulatory market is slowing? I think that it has to do with Stark relaxation. My guess is that 1) physicians/groups are not buying as much because they are waiting to see if the hospitals will foot the bill and 2) hospitals/health systems take longer to make decisions and are still planning their strategies and budgets.

I think those are pretty good guesses. Hospitals establish strategies years in advance and many were not anticipating needing to have a strategy for offering EMR to community physicians. Those strategies and budgets are not created overnight.

A UMass Memorial Center doctor is arrested for soliciting sex, but claims he was just gathering information on STDs. No word if his wife bought that story.

La atención oradores españoles: Averigüe UnBuenDoctor.com, un nuevo sitio web del español Idioma que permite a usuarios a buscar para la información de asistencia sanitaria y recursos.

Chuck Noland and his buddy Wilson might have liked this. Telemedicine comes to Tristan da Cunha, a remote island 1,665 miles off Cape Town, South Africa. It is only accessible by boat and it takes a week to get there. But, thanks to IBM, UPMC, and Beacon Equity Partners, the island’s only physician can get advanced medical assistance when caring for the 270 residents. I am adding this one to my list of places Mr. H can send me for interviews (once he gets his $2 billion for going public.)

Speaking of UPMC, the Vatican blesses its merger with Mercy Hospital.

McKesson will provide PACS for 22 Shriners Hospitals for Children. I love the Shriners. Not only do they wear cool hats and get to ride funny bikes in parades, they provide free specialty pediatric care. Love it.

Virtual Radiologic Corporation, a provider of remote diagnostic image interpretation services raises $68 million for its IPO. Rob Kill, former Misys Physician Systems president, is Virtual’s president and COO. Bet he is happy how things turned out for him.

E-mail Inga.

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Every CIO’s dream is to start fresh with a new hospital in a new market with all-new employees, choosing technologies from scratch and building the necessary infrastructure right into the structure. Tanya Townsend had that opportunity. The level of automation in most small hospitals is modest, but Saint Clare’s Hospital in the Village of Weston, Wisconsin, is a 107-bed digital hospital, thanks to some cooperation with Marshfield Clinic and parent organization Ministry Health Care.

The all-digital characterization generates a lot of industry interest, so thanks to Tanya for sharing the story with HIStalk’s readers.

Tell me about yourself and your job.

I am IT director for Saint Clare’s Hospital in Weston, Wisconsin. I’ve been here three years now, so I was involved with project about a year before it opened. We are the first and only all-digital hospital in state of Wisconsin, a very remarkable and unique experience and I’ve been part of that since the beginning.

If I walked the halls of Saint Clare’s, what would I see that’s different form the average hospital?

First and foremost, it would be lack of paper chart and a lot of paper-pushing of the paper chart. So, for example, on our nursing units, based on our design for an all-digital hospital and knowing we didn’t have to worry about having a central communications station where that paper chart is generally stored. We started to rethink how we were going to provide care and do business with this new model in mind.

We actually decentralized nursing unit and put all of our nursing staff closer to patient. Now we have alcoves outside all of the patient rooms where documentation can occur, otherwise our document is completely mobile and wireless. Documentation can occur at the bedside as well.

We also implemented voice over IP wireless phones so all our communication can happen either via the computer or phones, tied into our nurse call system. Everything is very mobile and everything is real-time action. It’s a different model for communication and lot more of a decentralized approach, closer to the patient and then hopefully more family-friendly as well.

How do you define an all-digital hospital?

That’s a great question because I’m finding out, as we start sharing stories with other so-called digital organizations, we all have a little different definition of what exactly all-digital means. Going into our guiding principles, we certainly had a lot of different ideas of what we wanted the all-digital approach to be. One was that we didn’t want a paper chart and to worry about storing or maintaining a paper chart in a long-term format. That was the first piece – understanding how you’re going to get rid of any paper coming into your facility in the first place.

It’s also about optimizing information flows across the continuum and building in decision support and patient safety into all of the different systems as much as possible. That means implementing systems such as CPOE and clinical documentation with decision support at the bedside. Not neccessarily just about scanning paper on the back end.

One of the biggest problems CIOs have is change management. What opportunities did you have starting from scratch?

That was actually a unique opportunity. We were a brand new facility – we weren’t even a replacement facility, in a new market and a new area. Everybody coming into the facility was brand new. We all came in with open eyes, the sky was the limit, with a sense of camaraderie and collaboration from the very beginning, both business as well as IT, starting with the senior leadership level. The senior leaders built this vision, and upon hiring everybody into the hospital, everybody was part of that same vision. Very open minded, a lot less of “we’ve always done it that way.” We set expectations right at the beginning, even with the recruitment process.

Other pieces are building the culture of what we wanted to accomplish, so this idea of decision support, best practices, patient safety – it was at the core of every one of our processes that we built. It was also part of the initial process before the hospital opened – building our culture and process flows. We formed multidisciplinary teams for year before hospital opened, forming process flows. It could be as simple as registering a patient or as complex as medication reconciliation. We have 8,400 pages of process maps, all available digitally and used for both training purposes and process improvement purposes..

It really is an evolution. They’re not just one-time static documents. Any time we want to improve a process, we go back to the process maps and they get continuously updated.

How did you create the process maps?

We have a project manager. We use a project management methodology and we had a project manager to help facilitate those sessions. We had simulations and walkthroughs, and since then have a process improvement manager who will update the process flows and facilitate the sessions sessions. Our quality department is absolutely integral as well. They usually identify the areas we want to look at for process improvement activities. They’re available on our Intranet and we built them with Visio.

What systems do you use and why did you choose them?

Where we had the opportunity to really start fresh, we also knew from a cost savings opportunity as well as efficiency, and what we needed on this campus was a lot of collaboration, with both Ministry Healthcare and Marshfield Clinic present on this campus. Rather than reinventing the wheel, we took a look at what was available to us within both organizations that we thought we could fit in here. We looked at the tools that then did a gap analysis of where the holes were that we needed to identify solutions for.

We came up with two core systems. One of the was GE LastWord, now called Centricity Enterprise, and we’re in the process of converting to that. The other is the Marshfield Clinic application, which is now called Cattails MD. They officially got their CCHIT certification. 90% of all our documentation for our medical record is found in those two core tools.

The OR and ED are two very niche areas that typically require their own set of documentation. In the OR, we are partnered with Picis. They do our OR and anesthesia documentation for pre-op and intra-op. In the ED, we recently went live with MedHost for ED documentation. We also have the GE perinatal product, formerly known as QS, in family birth center. The other gaps was progress notes. How were we going to handle hospital progress notes? We had hunch that we were probably not going to get physicians to type their progress notes. It was one thing to ask them to do CPOE, but we weren’t sure we were going to get them to type progress notes.

Also, the different types of paper forms that are typically found in a medical record  chart that we don’t have solutions for – anatomical drawings, for example. There’s some forms that get approved through the medical records committee every month. And, documents coming in from outside facilities. We knew that patients would be coming here and transferring their care who might have some paper coming with them. We needed to find a way to acquire that into the record. We partnered into Marshfield Clinic. Since they do their own development, we could partner with them and decide on solutions for that.

With Marshfield Clinic, they developed a system called Digital Ink over Forms. That’s a tool that allows you to use a tablet style PC, pull up a form, and complete it with a stylus on the tablet. It digitizes your handwriting or whatever you did on the tablet. That’s our solution for progress notes as well as those different types of forms like the anatomical drawings. We have a scanning solution also developed by Marshfield Clinic for scanning those paper documents that will make their way into the facility.

How does the Marshfield Clinic’s homegrown EMR application work?

It’s actually been in development for the last 20 years or so. It was a system developed by physicians, for physicians. Marshfield Clinic is physician-run group. A lot of it was just a unique opportunity for us to say, “These are the gaps are on the hospital side, can we partner together to help with that collaboration across the continuum”, which is where you often have handoff issues, between ambulatory and hospital and back. That’s where a lot of handoff errors can occur. How can we partner together so that our systems are integrated across the platforms? So they’ve done a lot of very remarkable things, a very powerful tool.

We use it differently in the hospital than they do on the ambulatory side, but we share a problem list, medication list, and allergies. That was a key requirement for patient safety, that we have a medication list that would cross the continuum between ambulatory and hospital and back. The developed a very powerful medication reconciliation processes called Medication Manager. That’s also for patient prescription-writing as well.

Like I mentioned, the scanning solution is embedded right within their system. We have all our radiology and PACS images integrated with their system that allows dictation. And, one of the most unique functions is the Digital Ink over Forms that allows you, with your tablet and stylus, complete forms digitally or electronically. I’m probably missing a bunch of things it does. One of the reasons that Cattails is certified is that because it certainly meets all the standard criteria that commercial vendors already have as well.

What kind of user devices are in place?

Our core tool is the Fujitsu tablet, primarily because of that Digital Ink over Form documentation opportunity where we can use it with the stylus pen and complete the forms digitally. It’s mobile and wireless, of course. That’s our core clinical device. Each provider gets a tablet, whether a nurse or physician. The physician typically gets their own assigned to them and can take that from the clinic to the hospital and can roam freely throughout the campus using their personal tablet. On the nursing units, we have a pool of devices that they check out for the day and that’s their clinical tool they use throughout their shift.

How’s the battery life?

We have docking stations outside all those patient alcoves that I mentioned, so there’s lots of opportunity to sit and charge up. We also have the COWs that they can charge up on. If you’re operating wirelessly, continuously, it’s probably about four hours.

What kind of IT infrastructure was created for the hospital?

We’re completely Cisco, using the voice over IP technology as well of all of our wireless mobility. We’re using the tablets on wireleess, phones on wireless, wireless IV pump … lots of devices sitting on our wireless infrastructure. One of the concerns that I often get asked is about downtime and how to avoid any systems from going down, it both wireless as well as wired. We have multiple categories of redundancy, both on the wireless side as well as wired. Redundancy with different paths going to our data center so that if one of those ties is severed, the other would be up, entirely seamlessly. That’s another goal of the all-digital strategy, to make sure you have 99.9% uptime.

Is your data center on campus?

Actually, no. We have several data centers to house all of these different systems. They’re in Marshfield, Wisconsin, which is about 45 minutes away from Weston. We have a local data center as well, but our core main servers for both the Marshfield Clinic application and GE are in Marshfield.

So you’re running their systems and don’t have to run a separate instance?

Correct, which goes back to that we looked at the tool already available to us that made sense to us to adopt.

What about your wireless infrastructure?

We run 802.11g. We are running into the issues of the A-B-G compatibility with different devices that were available at the time. For example, our wireless phones operate only at the B level, so we have a little bit of issues with the access points being drained with too many devices on the access point, all at the same frequency at the same time. We’re upgrading our wireless infrastructure to separate out that traffic, which is again where it came in handy to have several areas of redundancy for an access point.

Do the B-devices slow everyone down to B-speed when they connect?

It drops the whole thing and we’re living that. Because the phones are almost always connecting to an access point, they limit the number of connections to each access point to try to streamline some of that traffic. The hospital opened and we learned that lesson.

What lessons learned would you have for IT departments moving into a new facility?

A lot of it was on the wireless side, to do the appropriate site assessments. That’s the trickiest thing, to put as much traffic on the network as you think you’re going to have to try to get those correct assessments. That was the tricky piece, especially trying to do that before the furniture was placed. Once you occupy the building, there’s all sort of findings with the wireless piece. So that’s a lesson learned – once everything is occupied, you probably want to do a few more assessments.

We had all kinds of interesting things happen. TVs, for example. We almost didn’t have TVs on our opening day because it was the same time as Hurricane Katrina and they were stuck out in the ocean somewhere. You never know what you’ll have to plan for.

In terms of disaster recovery, as much as you plan for avoiding an outage in the first place, you still have to be prepared because the inevitable will happen and did. Three months after opening, we had one of those unexpected WAN outages and we were essentially an island over here. The good news is that we had a good backup downtime electronic medical record system that we could access in that event, but not everybody was as familiar yet. It was one of those things that you have a procedure for, but you don’t necessarily walk through as often as you need to. That was another lesson learned.

How does the downtime EMR work?

We have a lot of our information stored in there. Even our niche systems like Picis in the OR and perinatal QS in the family birthing center and MedHost in the ED, all of those systems feed a summary document or quite a lot of patient information to the Marshfield Clinic Cattails system. That’s essentially our core repository. That information is then replicated, both in their data center as well as another offsite data center located in Madison, Wisconsin. That’s replicated near real time. So, we have the ability to access that through the Web in the event of an outage. Even if Cattails is down, we can still get to it.

Or, if the WAN is down, we have a satellite on the roof directly connected to this location in Madison so that we can pull up all of our patient information over the Web. It is just view-only at that point, so our downtime procedure is that you’re viewing information, but any new information that’s being captured, you go to a downtime process of paper. Imagine that. We do have paper. [laughs] That’s part of the downtime procedure process – identifying what are those core paper forms that you need to keep on standby.

IT in 107-bed hospitals is usually unsophisticated because of financial constraints. Can comparably sized hospitals accomplish what Saint Clare’s did?

That actually was part of the analysis. We did say, “Let’s try to leverage what we have available to us”, but we did a feasibility study and other vendors were looked at. For some of these systems, the vendor wasn’t too interested in us and we couldn’t touch the ballpark figures. That’s where it really made sense to leverage what was available to us. From a cost savings perspective, that was phenomenal.

What’s your IT staffing?

I have 21 FTEs on my payroll, but there’s a lot of sharing and collaboration with the parent organization. Saint Clare’s is the hospital proper, but it shares this campus with three other entities: MMG Weston, which is the family practice group also owned and operated by Ministry Healthcare, and I’m the IT director of that as well. Then we have the Marshfield Clinic Weston Center, which is over here, and then Ministry and Marshfield Clinic formed the joint venture on the campus called the Diagnostic and Treatment Center. That provides ancillary services for the entire campus – lab, radiology, cath lab, rehab, etc.

I’m over just MMG Weston and Saint Clare’s Hospital. At Marshfield Clinic, there isn’t a local director. They’re supported by the Clinic. Diagnostic and Treatment Center does have a local project coordinator, but we provide services to them. While I have 21 FTEs, resources are shared throughout those parent organizations because we are sharing systems, so I get services from them as well.

Can you prove the value of the technology in terms of cost or patient outcomes?

That was a little bit tricky for us. We didn’t personally have the before and after picture. In terms of looking at our guiding principles, which was to avoid a medical record filing room and storing charts, there was quite a bit of cost savings upfront. Same with PACS. We don’t have a radiology film room, everything is digital as well. A lot of avoidanace in the first place, but then we start to look at our outcomes and successes, that’s where we can try to do some benchmarking in comparison to our peers. We’ve been doing a lot of that. For the true use of CPOE, we’ve pretty much met compliance with all the mandates for best practice and quality outcomes.

For turnaround times on order sets, we’ve done some benchmarking. For delivering antibiotics stat, we’ve been able to turn that around in about five minutes. In a paper world at some of our peer facilities, it’s probably one and half to three hours.

The CPOE side was most controversial area. Lot of organizations are skeptical and taking a wait-and-see attitude. All of our order communications is as fast as the stat antibiotics. We’ve seen cost containment. We’ve been able to drive the doctors to use the formulary. They are 99.6% compliant.

The biggest result of all goes back to our guiding principles – optimizing the flow of information across the continuum. Having somewhat of an integrated system record, even if it is a best-of-breed vendor approach. Making sure none of our patients would be harmed due to lack of access to available information. By collaborating with Marshfield and sharing tools, have been able to avoid that.

Those are the types of things that we’re capitalizing on now and that process will continue. That certainly was a part of why Ministry and Marshfield looked at this campus as a unique opportunity and put quite a bit of effort into it, because it was an opportunity to look at how can we do this from the ground up and apply some of those lessons learned, good and bad, to rest of the organization as we continue to develop an electronic health record strategy.

My advice to others is to develop your strategy and stick to it. Get buy-in and understanding from senior leadership. The vision must be accepted at the senior leadership level. CPOE is not easy to implement. Make sure everybody is committed to vision, but adaptable. It’s a continuous evolution.

Where do you see yourself in ten years?

Hmm. Geez, I just don’t know. [laughs] Continued growth and development. Probably still in healthcare IT – this is definitely my passion. So, I can’t say for sure where exactly, but I’ll be doing something similar.

Your formal medical informatics training sets you apart from most IT leaders.

It’s absolutely been a plus. It’s been a weird development, I guess. I actually started out in health information management, more on the medical records documentation side. As I was finishing up and about to start in that career is really when the whole electronic medical record future started to pick up. I though I’d keep on going, continue to not only work, but also develop my career on the IT side because that’s where I could see myself was development of the electronic medical record and continued process improvement of our healthcare industry through the power of technology.

It wasn’t necessarily what I planned on in the very beginning, but absolutely where I want to be now. It has been extremely beneficial for me not only to have the technical training, but also have that healthcare background so I can communicate effectively and collaborate with my peers on the clinical side of the business, but also can effectively manage the IT technical component.

What do you do when you’re not working?

Who’s got time for that? [laughs] That’s an interesting question, probably another lesson learned. While it’s very fun to tell this story now, it’s been quite a journey to open an all-digital hospital, even if was from the ground up. It’s an incredible amount of effort and work. While it’s been extremely beneficial and a wonderful opportunity, it also was extremely busy. We found the eighth day of the week many times. It’s been such a great team-building experience. This will probably be one of those things that I’ll always look back as such a great experience and great friends for the rest of my life. Not a whole lot of time for everything else in life. But now that hospital is open and we’ve gotten into a little bit more of an operational mode, we’re going to get out and do some more fun things.

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From TGIG (Thank God I’m Gone): “Re: Misys Connect. Just one of many great decisions. How about taking a pass on NextGen; how about putting a Windows overlay on Medic PM but keeping the underlying COBOL code; how about stopping the bidding for MedicaLogic (now Centricity) at $25M; how about firing the guy from GE running Physicians Systems who was exceeding his numbers; how about putting  his “Peter Principle” buddy in charge of BD? Misys is where it is due to lack of leadership and a failure to make courageous decisions. The new leadership can do no worse.” Jon Phillips thinks they’re doing better, but with some unknowns in front of them.

From Sonomaca: “Re: Jon Phillips. I’m interested in the payer tech side of HCIT. Would like to know Jon’s views of present and future here. Companies in the space are Medecision, Click4Care (private), Kryptiq, Trizetto, and bigger companies such as DST and McKesson. Also, will UnitedHealth spin off Ingenix at some point. What’s that business worth? Also, what about the CDHC platforms such as CareGain (Fiserv), ConnectYourCare (Express Scripts), HealthEquity, ASI (DST). Also, banks such as BofA are getting into this, in part because of huge opportunities in financing consumer HC debt.”

From Money Money: “Re: Healthvision. Anyone know or can guess how much it sold for?” I have no idea, but I’ll guess with everyone else. Reported revenue was in the $20 million range but trending down from all appearances, so I’d say it was worth maybe $25-30 million tops given the employee losses and cash flow struggles. I’m sure there was some debt involved.

From The PACS Designer: “Re: Google Android. Google is muscling its way into the mobile phone marketplace by releasing Android, its free and open sourced software stack for the mobile marketplace. Healthcare institutions will most likely show some interest once there is a stable platform for mobile viewing and some new options developed that will benefit daily work routines. Developers will be going after Android’s Software Development Kit (SDK) since Sergey Brin, Google’s president, is offering $10 million for the best new design applications using Android as the platform for new mobile features. Google hopes to challenge Microsoft’s Windows Mobile 5 (WM5) by enticing independent developers to work to improve the  application’s functionality with new features. Since 3D is the newest software that has penetrated the healthcare workspace, it would be nice to have 3D images viewable on your mobile phone. The YouTube video shows a 3D application running on their new platform.”

From Inside Outsider: “Re: Andreessen’s Stanford gift. This is not like the old Bill Gates (prior to Melissa coming into the picture), where he’d donate 100,000 copies of MS Word to poor schools, then write off the donation at full cost. This is a real monetary gift and he should be commended. Think of how much less giving there would be if someone decided who we had to donate to. We should not look a gift horse in the mouth, even if it is giving to a better-off hospital.”

Speaking of alternative practice models, Bruce Friedman has an interesting piece (and I’m not just saying that because he quotes me) on a company that provides medical services by telephone. You get a telephone consultation and prescriptions for $35. Sounds like small potatoes until you notice the headline on their site – they just signed up their millionth customer. Imagine the cost savings if prescriptions didn’t require prescriptions (is it reasonable to require a prescription for drugs that might hurt you but not for alcohol, fast cars, dangerous power tools, and handguns?)

Listening: new from The Hives.

QuadraMed’s Q3: revenue flat, EPS -$0.01 vs. $0.08, some of the loss from the expense of buying Misys CPR.

Several new profiles are in flight for HIStech Report. The interview with Novo’s Robert Connely is fun, of course. Great HIMSS product previews are coming.

Initiate Systems announces plans for a $75 million IPO, with heavy hitter Goldman Sachs bringing them out. The company also announces Initiate Master Data Service version 8.0.

My newsletter editorial for tomorrow: “Two Economic Theories That Explain Why Epic’s Competitors Had Better Improve Fast.”

Sage Software Healthcare announces John Lopiano as division president. He’s new to healthcare, it appears, with previous stints at Spinet Associates, Xerox, and IBM. A West Pointer, which we like here.

Post-acute care services provider CareCentric announces that CEO John Festa and CFO Lyle Newkirk are gone. Says it’s part of a plan “to refocus the company on operations, software development, and infrastructure.” Wonder what were they focused on before?

Symantec announces some kind of healthcare provider package with software and stuff.

The Kansas City paper covers Mediware’s retooling, including a new CEO, restructuring, product retirement, and layoffs.

Industry longtimer Kerry de Vallette joins HealthPort as SVP of Solution Sales.

Thomson announces PDRhealth, an online version of the Physicians’ Desk Reference with some health tools added on (can yet another PHR be far behind?)

Government Health IT, probably my favorite online HIT publication, runs a well-written profile on Brent James of IHC.

Odd: a Florida cardiologist’s office is raided by the DEA, he’s named in several civil lawsuits, and his office manager is shot dead by a coworker who later kills herself. Now, his physician partner gets a court order and takes all the equipment from their angiography practice. The partner had started an EMR company at one time (I’m guessing it was AutoMedicWorks).

The Healthcare IT Transition Group, fresh off their report urging RHIOs to find local funding instead of relying on federal grants, announces a new resource directory to make that easier. It’s $395 per region, which seems like a pretty good deal. Those guys must be busy all the time.

Allina is urging staff to take PTO and will probably have layoffs by Christmas. Its 2004 tax form shows a $198 million profit, an $835 million warchest, and a CEO compensation of $1.4 million. For all that (plus the $249 million Epic project) I would have expected something more creative. But, hospitals have zero willpower when it comes to position control (at least of the preventive persuasion).

An Oregon community college and Asante Health System join forces to offer informatics training, with plans to expand it to a certificate and then associate’s degree program. It’s not exactly what I’d call informatics since it has no clinical component mentioned and the maximum pay at Asante will be $19 an hour, so it’s more like field support and training for applications. Sounds like a good program, though.

Steve Starkey of Healthcare Management Systems is promoted to COO.

State funded UT Southwestern takes heat after the local newspaper obtains a list of 6,400 wealthy, influential, and connected people who would be given concierge-like VIP treatment if admitted. Other hospitals contacted rationalized their own VIP lists, saying that UTS went too far by including people with whom it had no relationship, according to an overheard conversation between the pot and the kettle. I like the frankness of a county commissioner who found out that he was on the list when the paper called: “I get there at 7 a.m. and there’s not much of a wait. Ain’t nobody hardly at work. I’m glad I’m on somebody’s VIP list, because I’m damn sure I don’t have any money.” The hospital’s president does: he gets a $1.1 million salary, according to tax records.

Oracle will offer freely downloadable server virtualization software starting on November 14, knocking down VMware’s share price.

E-mail me.

Inga’s Update

Turbulence at Medquist continues. Three independent directors announce their resignation amid concerns over the potential sale of the company. Costa Brava Partnership III, a five percent stakeholder, wants to inspect the books. And, the company lost $8.9 million in the third quarter.

Meditech Chairman Neil Pappalardo donates $2.5 million to Korea Advanced Institute of Science and Technology. The university plans to build a medical center with the funds. No word as to whether they plan to use Meditech products at the new facility, but perhaps Michael Dell can advise him on this strategy.

The Georgia Department of Community Health announces winners of $853K in grants to promote EHR and electronic prescribing initiatives. One of the four facilities was Sumter Regional, which received $250K.

Sentillion announces a new Channel Partner Program and already has at least three initial members. The company also reveals that it signed six new customers in the third quarter and now has 335,000 live users.

Oschner Health System in New Orleans goes live with master patient indexing for 2.7 million records across 10 hospitals and 32 health centers. IBM and Initiate Systems helped create the EMPI.

An ambulatory vendor employee commented that his company missed their third quarter projections, though not as badly as Allscripts. His question: “Do you think the ambulatory market is slowing?” I personally don’t have the answer to that question, but I am curious what readers think. Despite missing projections, Allscripts earnings were up 26% from the same period in 2006 and QSI’s were up 16%. I doubt Misys and Sage will announce similar growth, however.

The FCC announces a proposal to fund a $400 million Rural Health Care Pilot Project to deploy broadband telehealth networks. The project would target rural and underserved communities and is designed to facilitate telemedicine programs.

Perhaps the FCC read this report before making their announcement. The Center for Information Technology Leadership conducted a study that found a national implementation of telehealth technologies could save $4.28 billion in annually, including $912 million in patient travel costs. AT&T helped pay for the study.

SCI Solutions will provide its Order Facilitator solution to HCA’s TriStar Health System, which includes 18 facilities.

E-mail Inga.

Art Vandelay on IT Project Work

I wanted to comment on a great topic and pending analysis to be completed by Will Weider.

Will would like to determine how much effectiveness he is receiving from his IT staff time spent on project work. Competing demands lead to sub-optimized use of his staff’s time. No project assembly line exists to ensure that work is contiguously and effectively sequenced for his staff.

What factors drive the lack of effectiveness of work in health care IT organizations? From my experience, it is a combination of the following:

1. Effective IT governance. Who, how, and how quickly can decisions be made that are binding in order to prioritize projects?
2. Tactical prioritization of resources. Day-to-day prioritization of resources doing the project and operational tasks.
3. Effectively estimating, measuring and communicating resource capacity within or outside of IT. Who is truly available to do what?
4. Vendor providing qualified resources. Experienced and trained people who are capable of mapping the capabilities of a product to the client’s goals while addressing the unique characteristics of a client’s environment.
5. Evolving project scope and requirements. May impact project approval and re-approval, which leads to idle time for resources while decisions are made.
6. The lack of early determination of product fit ( i.e., usability,technical, response time) with the resources, processes and technology capabilities of the organization. Results in potential idle time as issues regarding product fit are resolved.

To speak in statistical terms, these are the factors (in my opinion) driving a good R-squared if we were to model this relationship. Your organizations may have other factors that may be “statistically significant” driving ineffectiveness. The other factors likely involve your organization’s competitive environment, financial situation, leadership styles, cultural norms, and a lack of standardization in resource roles, technology capabilities and processes.

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I like to do a high-level business update about the healthcare IT industry once or twice a year. My go-to guy is always Jon Phillips of Healthcare Growth Partners, LLC. Jon is careful with what he can and can’t say (unlike me, he won’t just gleefully blurt out sensitive information to the whole world) and if you check his track record from previous interviews here, he’s done very well in his analysis and prognostications. I always enjoy chatting with Jon and appreciate his taking time to share his thoughts with HIStalk.

Characterize the M&A market so far this year.

This year, we’re looking at well ahead of recent years in number of transactions even than the markets of recent years, which have been pretty active. What we’re seeing is activity in the sub-200 million dollar range. You haven’t seen much in huge deals going on, but seeing a lot in the middle market and sub-middle market. That bodes well for continued strong M&A activity in the space over months and years to come.

The big difference this year, and there are probably three that I would consider somewhat bellwether transactions or maybe four, is where you have financial sponsors making significant plays into the healthcare IT space. One of those, obviously, is Francisco Partners acquiring Dairyland. Two is Battery Ventures acquiring Quovadx. Three is Vista acquiring Sunquest, Four is potentially Insight and the Bessemer guys acquiring Netsmart, and five could be Primus acquiring HMS.

You’ve had a lot of financial sponsor activity in the healthcare IT space this year. That means a couple of things going forward. I think that these companies under new ownership are going to see some shifts in strategy. Not all of them, but some of them are certainly going to see shifts in strategy.

Take Sunquest, for example. Now that the CPR piece has been decoupled and Sunquest has been pulled out of Misys, all of a sudden you have a business that looks very different than it did six months ago. The growth opportunities are different. You have an organization that most likely will look to acquire new assets to augment their existing position and to grow in new ways.

For each of these financial sponsor deals, you’re going to see aspects of that. They may seem like small changes at first, but over time, you’ll see more and more. Quovadx bought Healthvision. My bet is that they’ll look to buy other things as they go forward. I think you’ll see acquisition activity and interest from these new kids on the block.

The pressure that will put on the other strategic players in the market, the traditional acquirers of choice like McKesson and Cerner and GE, they’ll start seeing more competition in situations where they’re looking to buy things. If you’re a small company, it’s great for you, because instead of having one or two people to talk to, now you have a lot of people to talk to. A small company can be more bullish about exit opportunities than you’ve been able to for quite a long time.

What’s hot and not in healthcare IT?

If we went back three months before the dislocation of the credit markets, I would have said that the hot opportunities are companies that are meaningful size with strong EBIDTA performance and a conservative investment platform for investment sponsors. Dairyland, Sunquest, HMS – organizations like that four months ago were on fire. You’ve seen a little bit of a slowdown because sponsors can’t put as much debt on them as they’ve been able to earlier in the year. There still will be a market for them because when a company gets to the 30 to 50 million dollar size with strong EBIDTA performance, but you’ll see some compression in the value that people can put forward on them.

In terms of what I see as hot, if you look at where the venture investment is going into, I’d drop it in three categories and there’s not a lot of change. There’s still a lot of interest in revenue cycle. Part of the challenge is defining what revenue cycle is. There’s a lot of interest in solutions that address revenue cycle challenges. More financings will be announced of companies in technology business and services businesses that are focused on fixing bits and pieces of the revenue cycle. The large majority of them fix bits and pieces. You don’t have anybody who’s going soup to nuts. Still, those point solutions can still deliver a lot of value to customers and that’s what’s driving investment VCs.

The other areas with a little more froth in the market come back to some things that are geared toward consumer-facing solutions, things that help manage information or care in consumer-directed or higher deductible type health plan environments. There’s some strong interest there.

Others get back to clinical content and clinician collaboration tools. Figuring out different ways for clinicians to work together and to exchange thoughts and ideas and being able to capture and then present back out the resident knowledge. That’s another area that’s pretty hot.

One that I’ve heard more about, and it will be interesting in how it plays out, is the whole remote care, telemedicine, home monitoring, and different ways of to deliver care into non-institutional environments. I’d stay that’s still a little bit earlier on in terms of the froth, but you’re starting to see people get more excited about that.

What do you think about Health 2.0?

I always tend to be a little bit skeptical of buzzwords. Some of the solutions that are out there, like the clinical content solutions that I was talking about, there are some really cool things that people are working on, When you think about the applicability of these technologies, or not even technologies but business models and care models, to the existing healthcare environment – you start getting pretty excited about that. Just different ways to give people a platform to work together and access knowledge that they wouldn’t otherwise be able to access.

We’re all in this to try to improve healthcare overall. You gotta think that by bringing more of that knowledge to bear, you’re going to be able to improve healthcare overall. I still think there’s a lot of noise around it and I’m not sure how all the business models will play out, but it’s definitely exciting.

We are seeing a lot activity on the interoperability and portal side. I’ve been a big fan for a long time. I’ve never run a hospital IT department, but solutions that let me manage my application migration myself on my schedule, not being forced to make changes because of interoperability requirements, those types of solutions strike me as being able to bring a lot of value. I characterize those as different aspects of Health 2.0 solutions that are clearly provider-facing, not consumer-facing, but you recognize that there’s a lot of data and information that’s already out there and tools that help you access that. They’re going to drive improved outcomes. It’s not necessarily a direct causation relationship, but the more information you have … think about clinicians. They are very smart people. Give them more information and tools to work with and they’ll use that and you’ll see that in healthier patients and better outcomes.

Private equity has gone crazy since we talked last in January. Explain how it works and how it has affected the industry.

Different private equity funds are going to have different approaches to how they like to build businesses. Some like to buy things cheap and fix them. Some buy pretty good companies and make them a little bit better. Some buy really good companies and help them be really good on a larger scale. So, you have these different approaches to the private equity marketplace.

Funds have acquired businesses in the healthcare IT space. Their focus is to generate a return in a reasonable timeframe. They may be willing to have a longer-term hold, longer than two or three years. Francisco Partners turned around their Lynx investment very quickly on a relative basis, but the investment was performing so well that it was the right time to do it and they got an incredible outcome from Picis on that exit.

These guys have made investments and the way they will make money is by really two ways. One is organic growth, the other is inorganic growth. They can augment those returns because they put debt on the company to start off and get leverage on their investment. But, the reality is that these guys need to figure out how to grow these businesses to get the kinds of returns they want to get. Companies that may have been a little more passive historically will probably get more aggressive in management and personality.

The direction for these companies is to be more aggressive toward growth. You also will see ongoing acquisition activity, especially in companies that are under $50 million in revenue, as these businesses look to add on pieces and capability so that they can take their organic growth rate, say 10 or 12%, and augment that with acquisitions and move that up to 20 or 25%. That really helps them get the returns they want to get.

At the end of the day, to get the returns they need, have to have some kind of exit. It can be an IPO, like athena. They can sell to strategic, like Francisco Partners selling Lynx to Picis for a strategic exit. Or, they can sell to another private equity firm. They have different approaches and sizes, so a smaller fund can always grow a business up and then sell it to a bigger fund. What you’ll see is a good amount of activity as these businesses position themselves for growth. Then will see those folks making the call to find a bigger home and see them making those decisions as well.

What’s the track record of private equity owners with respect to making R&D investments, keeping customers happy, and not flipping the company at the first opportunity?

I think some of the private equity folks will actually be better owners than the historical ownership, not to knock the historical ownership. The private equity owners are going to be very focused on how to grow the business. You can go buy stuff, but you also have to be able to sell more to new and existing customers. These guys are smart enough to realize that you can’t sell stuff to customers who don’t aren’t happy with what you’re giving them.

I’ve had conversations with a number of folks involved in both investors and management of these companies, and what you’re hearing about is a renewed level of focus on customers. Customers can actually be better off. When you think about it, when a strategic acquirer buys a business that’s in the same line of business of something they already have, one of those customer sets will have a migration path. They won’t want to support both customers on different platforms indefinitely. A strategic acquirer will have to manage a customer transition.

The financial acquirer wants that customer to be happy and to buy more things from me so that I can both grow in terms of selling new stuff, and on the maintenance side, I don’t have people who say they don’t want to fool with me any more and I’ll find another vendor because your product is behind and you’re not giving me decent service and a reason to stick. My argument would actually that these private equity owners can result in good things for customers.

The folks that will have the toughest time are organizations that have gotten used to operating in a certain way. You have folks coming from outside of healthcare IT, and some ways that’s good and in some ways that’s bad. Healthcare IT as a market has a lot of very unique characteristics. If you don’t understand those characteristics, you can really fall flat on your face.

There are some evolutions have occurred in other IT markets that haven’t hit healthcare yet. Some will never hit healthcare, some of them will hit healthcare and some of these folks bringing some outside perspective can bring value by saying, “This is how it played out in Market X.”  If you think about your business in different ways as a vendor, you might find ways to make customers happier and grow your business.

So I think that for customers overall in the near- and mid-term, it’s a good thing. The downside is the next round of exits, because you know they’re going to sell at some point. You hope they become strong enough when they do get sold, they’re not getting sold into a situation where somebody’s just buying them for the footprint and moving you off that system and onto something else.

Give me a grade for each of these publicly traded companies in terms of market share, image, management, and return on shareholder equity:

McKesson

In terms of market share, they’re absolutely getting an A because of their footprint. In terms of customer retention, I’m not sure what grade I’d assign, but what I’m hearing more of is that they’re having some customer losses. Historically, McKesson has been unbelievable in being able to hang on to customers. Traditional wisdom is that they didn’t try to find that many new customers. They weren’t trying to fight the ground war in getting new business hospital by hospital. I hear they’re starting to do more of that with some of their new capabilities that they have on board.

The Awarix deal that the did this summer … that they’re getting pretty aggressive in using that as an entry point. Awarix is a workflow tool for patient management hospital-wide, so it pulls information from disparate systems and presents it on flat screens that you have around the house. At a glance, you can understand things about census, room availability, where the bottlenecks are. It’s a patient throughput tool, very cool. McKesson is using that to push into new hospitals. They haven’t done a lot of that, so I’d give them an A in terms of what I’ve heard on that front. I’d probably give them a B in terms of customer retention because they’re losing more than they have in the past.

Eclipsys

At this point, I’d give them a B overall. They would agree that it’s taken them a little longer than they expected to right the ship. But, I also think that they still occupy a pretty interesting position in the market. They have strong capabilities. Organizationally, they’ve made the changes they needed to make to push things forward. I’d almost give them an incomplete. The judgment is still out.

Cerner

I still rate Cerner as being an A overall. Everybody you talk to, you ask them who frightens them in the marketplace, and everybody’s going to say Cerner. People can throw stones at different parts of their products and capabilities, but the reality is that Cerner, for better or worse, has defined the hospital information system landscape in a way that’s favorable to them.

Cerner’s question going forward comes back to where do you find growth going forward? When you’ve built up to be as big as they are, where do you go? I would expect that they wrestle with that internally. I’d give Cerner an A. Everybody knows about them, even outside of healthcare IT. They’re still the company to beat.

GE Healthcare

I’m going to stick with GE at a B-. I think they’re getting their arms around the assets they have, but every time they get their arms around the assets they have, they go out and buy something else, like Dynamic. When you look at where they fit, I’ve certainly heard good things about product development, but broadly I don’t feel like they’ve taken advantage of the footprint as well as they could have.

They have this incredibly strong brand, they’ve bought a lot of companies, but I would argue that, of the companies they bought, I don’t know how many you’d say were better off for having been bought by them. You can’t go through the list and say, wow, they bought that company and they really turned it into a massive business. You saw that on occasion, but they haven’t done a great job at taking advantage of the pieces they’ve put together.

Perot

I know less about them, but I would say that I’ve been surprised at some of the things they’ve done. I’d probably put them, honestly, closer to a B- or C. They’ve bought some things, but then lost one of the big contracts recently. I understand why people are in the outsourcing business because there’s huge opportunity there, but I haven’t heard that many, if any real success stories, in outsourcing. It’s an interesting thought, but then in practice, it just doesn’t seem to work that wall. It comes down to how different than other industries healthcare is, with a more complex mix of stakeholders. Aside of a few case studies, I don’t that they have a lot of folks saying, “Wow, I’m ecstatic about my outsourcing vendor.”

Quality Systems

They continue to stick to their knitting and I think they’re doing really well. I’d give them an A for focus. Anecdotally, I would give them somewhere between a B and C for delivery. I don’t know that that’s their fault, but they have so much opportunity out there that it’s tough to deliver.

The biggest risk Quality Systems and Allscripts and eClincalWorks and folks like that, that the more successful you are on the sales side, the more risk you’re taking on because you’re signing people up and it will take time to implement them. The longer that delays, you start digging a hole for yourself. It’s hard to argue that they’re doing the wrong thing based on the business they’re doing. From customer perspective, I get a little nervous about how long I’ll have to wait to get my system.

Sage Healthcare

I follow them a little bit. I think they’re probably a C to a D. Not through all the fault of their own. They stepped into a tough situation. They’re an example of an organization that stepped into healthcare most likely thinking it had some real similarities to other small and medium business, and they’re finding that the physician business is a challenging market.

Medical Manager had a great footprint, but those customers didn’t get a lot of care and feeding. When customers aren’t expressly unhappy but at least not happy and there’s a technological inflection point like the EMR hitting your sector, you’re in trouble. Your customers are going to go and you’ll lose more than you keep. That’s what they’re running into.

Misys

I think their new focus is good. I’d give them a B with little bit of an upward trend. They have this great asset in terms of the physician installed base. They just need to make sure they don’t run into the same issue that Sage is running into. If they can keep their customers happy enough so they don’t see them walking away. As customers go through technology replacement cycle, I want to make sure I’m on the winning end of a disproportionate share of my customers as they make those choices. They’ve got a fair amount of risk in front of them, but the focusing will help them out.

Mediware

I thought it was good to seem them start to focus more. The real question is, can they really figure out how to get some growth back? They have some interesting assets, but have to put them on a C on growth side until the most recent quarter. It’s good to see that most recent deal they did was focusing back on blood bank. It’s a good thing to reinforce what you’re good at and they’re good at that. They have an upward trend in front of them, but the jury is out.

Allscripts

Boy, up until the most recent quarter, I probably would have tagged them with an A based on what I was hearing in the marketplace. They were going a great job in getting big wins and were a really tough competitor. That doesn’t change with one quarter’s results, but you get a little concerned when a company operating in this great sector of healthcare stumbles. You wonder, is it due to growing pains, and if so, then look at them getting whacked 20% on stock price, then buying that’s a great buying opportunity. Otherwise, if it’s something fundamental, you get a little nervous. I’d probably give them a B, but I’d keep an eye on them because it could be opportunity to get in at the right price, but you have to see if the quarter was an aberration and not a trend.

Siemens

I’d give them a C. You get the sense that they’re buzzing around a lot, but you don’t get the sense that much is happening. They’ll have to continue to wrestle with whether this is a market they’re committed to long term. The answer has consistently been yes, but you keep asking the question because you’re not seeing them just rip it in the marketplace.

What do you think about big acquirers like InfoLogix, Nuance, and MedAssets?

I don’t know much about InfoLogix.

Nuance is really focused on strategically to be willing to be aggressive to build out a strong position. As a banker, you love to see that, but being a strategist as well, you wonder how all the pieces fit together at the end of the day.

MedAssets is especially interesting to me because they’re really a non-traditional player. Given the fact that they’re going public and they’re going to have lots of money and lots of margin and footprint, they could be a really big competitor for folks. I think it’s just a question of what they want to do. Do they want to focus on revenue cycle, or get into broader information systems in hospitals?

Given that they can touch so many hospitals, if I’m sitting in the competitive intelligence department of McKesson or Cerner or one of those places, I’d keep a very close eye on MedAssets. I’d want to know what those guys are doing. They’ve been pretty creative and can they certainly could continue to be creative.

In terms of other players, you’re going to see more and more offshore organizations looking to buy entry into the US market. Indian companies and other Asian organizations looking to take advantage of the labor force that they have and looking at the US market and trying to find targets that have a labor component that they could offshore.

When you think about situations with labor requirements, where you have systems that you can deploy that have labor associated with them. Revenue cycle is a good example of this. You can put the technology in place, but if you don’t have people to run after the claims or other aspects of it, you’re leaving money on the table. I think what you will see is a continued push by offshore organizations to find US targets where they can get some of that offshore arbitrage.

Are Microsoft and Google serious about healthcare or posers?

They’re serious about it, but I also think that they consistently underestimate the complexity of the market. A lot of people do. Microsoft has certainly done some interesting things with the businesses they’ve bought in the space, but they have to figure out where they’re going to fit and who they want to be. Are they going to be an enabler or in the application space? You look at them and they’ve got brand and reach, so they should be able to do things in healthcare.

I tend not to get too excited about some of the big healthcare initiatives these guys put out there. On the PHR side, I spend a lot of time around PHR businesses. It would be great if everybody had a personal health record and they all do it with Microsoft HealthVault, but you think through the challenges of how you get information in there. You don’t want to type it in, but because of privacy issues, you don’t want to have someone do it for you because who knows where the information will end up. You have challenges on the personal side of healthcare that won’t be resolved for awhile. For Microsoft and Google, I think they absolutely have huge opportunities and they recognize there’s a lot of money to be made in the space, but they will have to go through a bunch of iterations to get there.

There were rumors going around that Google was going to buy WebMD. Let’s say they did. What does that really do? How many people do you know who are using WebMD for more than a basic reference tool? The consumer market is tough. You haven’t had people have a lot of success there for a reason. As fragmented and challenging as the provider market is, it’s far simpler than consumer side.

If someone wanted to invest in early-stage companies but doesn’t have the $1 million it takes to be an accredited investor, what are their options?

It tends to be pretty tough. To get into a private equity fund, you must be accredited, and even then it can be pretty tough to get into private equity funds. The other part, in terms of direct investing, you still have the issue of being accredited.

I spend a lot of time thinking about that. One of the great opportunities in this space is that there’s such grassroots knowledge out there that it would be great to capture that and to let people invest and to be able to get return for the fact that they know what’s going on. Mechanically, it’s tough.

One of the challenges is that, in the early stage of healthcare IT investing, it’s a pretty small universe of funds that will do that. You and I know some of the characteristics that will make these small companies successful, but from an investor perspective, you have a whole raft of risks. If you’re not living and breathing healthcare technology, you’re not comfortable with a lot of those risks. You don’t see a lot of funds that have made plays in early stage healthcare technology because a lot of them made bad investments and lost money. It’s hard to find funds that are interested in doing that, much less putting your own money to work.

If I can figure that out, I’ll let you know, because I think there’s a great opportunity there in working with early stage companies. It’s not formulaic, but there’s a lot of common problems companies have. We see it in our client base. The challenges aren’t that different between companies. So there’s some benefit you can add just having that knowledge, saying let’s figure out how to apply it and help those companies grow and the best way to do that is as an investor.

How about the practice management market? Any projected winners?

I still think on the practice management side that you’ll continue to see a divergence, guys who will be software-focused and those will be services-focused. So not just services in terms of the subscription model for software, but bringing a broader set of services to the physician practice.

Take athena vs. Quality Systems. Athena uses a lot of technology and maybe they’re a technology company, but they’re really providing services, whereas Quality Systems is a technology company. In terms of who will win, I come back to that scale is incredibly important in the physician market. There are a lot of companies that have 200 or 500 docs, but you have over 200,000 practices. It can be a high cost of sales to go after those practices and try to convert them. Scale will be a big differentiator. Product will continue to differentiate, but a bigger company with a weaker product will still probably have a leg up over a smaller company with the best product out there.

Do you still like Teletracking, DR Systems, and the handheld vendors?

I do. When I come across a company that is bringing a fresh perspective and making money while they’re doing it, I love to see early stage companies that don’t have a lot of revenue that have cool technology because some of those guys are going to make it. The difference between making and not making it is picking the right strategy.

When I look around, I’m still a fan of the privately held businesses that keep plugging along and doing their thing, focusing on being the absolute best at what they do and not necessarily saying they have to do everything for everybody. Lots of companies that fall into that category. Those are businesses that you like to be around. You go through the KLAS rankings and see how many companies are out there and how many of decent size with really happy customers. That’s pretty cool. If you look at the top-ranked vendors, you get pretty excited when you see them serving customers well and growing their business and making money.

Instead of saying I like specific kinds of companies, I like companies that have strong technology and really happy customers who are really using the product. There are a lot of technologies out there where they get a couple of customers who aren’t really using the product. All the stuff we’re trying to change broadly – if people won’t use the technology, it’s still worthless.

What is athenahealth’s IPO telling the market?

To people who are either owners or employees of healthcare businesses, the capital markets are pretty interested in stories that help them. Jim Cramer said he’s a fan of any company that addresses the cost problem of healthcare. That’s a pretty blanket statement and a lot of people believe that. The stock came out at 18 and is over 40 today. Athena is trading with the expectation that it’s an option on improving efficiency in healthcare.

It’s nearly impossible to justify that price based on the fundamental performance of the business today. But, if you look forward, athena is a leader in a market that has a massive amount of opportunity, and as such, people are saying they’d rather in invest in Quality Systems in 2001 than in 2007. If you can communicate your business model and deliver numbers, there’s money to be had to fund it.

What’s the best M&A deal of the year so far from the buyer’s perspective?

I would probably say that the best one for the buyer is the McKesson Awarix deal. Awarix certainly wasn’t a $100 million business when they bought it, revenue-wise. McKesson was willing to make a strategic change in terms of what they were looking to do. They’re effectively rapidly going to market with that. It could be the most transformative and impactful of the deals.

What other industry segments are going downhill and likely to take some companies with them?

I think you’ll see a shakeout on the physician software side. I don’t think the segment is going downhill, but will see a shakeout there with all those CCHIT-certified vendors. You haven’t seen much consolidation there in a long time.

You’ll see that in the RIS-PACS marketplace. The aggregate enterprise value of Merge, AMICAS, and Emageon is less than $200 million. Each of them were valued at multiples of that not that long ago. Some of it’s the impact of the DRA, others because of company-specific things. A lot of people are still buying in that sector, but those guys have had a rough road. AMICAS is turning the corner, Emageon had a rough quarter. Merge is caught in challenges. The sector has been challenging, but it can’t be that challenging since GE bought Dynamic.

What changes would you predict for the upcoming year?

I think you will see sharper competition for new customers and for holding on to existing customers. It’s always been competitive and a highly fragmented market with a lot of small and large companies that run around. You can have a hospital systems vendor that can really make a go of it with three or four hospitals that they sign up from the start and bootstrap from there.

I think you’ll see a paradigm battle between best of breed and enterprise continue and probably heat up. Since so many hospitals have made large scale systems decisions and picked their big player, you will see a lot of fighting to capture the IT dollars around that big investment. The private equity investment … some companies that might have been a little more laid back will have pressure ramped up to deliver growth and profit. From a customer perspective, you might find that this next couple of years is a good time to be a customer, not that you didn’t have people fighting for your business before, but they’ll fight even harder.

I think you will see more of a focus on getting value from IT investments already in place. You hear a lot about healthcare technology investments, “We bought the system, but it’s not delivering even the soft ROI that we justified the investment with.”

This is part of why you’re seeing consolidation on the consulting side. People are realizing that consulting organizations are they’re bringing value in getting systems in place and some specialty firms actually help out with the adoption. That will be a bigger and bigger thing. If I’ve spent seen or eight figures on IT investment and it’s not being used, I have to figure out how to get people to use it. I can’t just throw it away and start over.

Given the issue with bond insurance companies, I think you will see capital constraints because of capital markets and operating pressure because of reimbursement trends from third-party payers and self-pay. You must be more efficient with the resources that you have.

The Huffington Post is a blog that raised $10 million in VC money. Is this a sign that exuberance is irrational enough for me to take HIStalk public?

I think if you took HIStalk public, you could expect a valuation that would be at a significant premium to the athena valuation. I would argue that you could go ahead and start interviewing bankers for this. I would say you’re worth somewhere around two billion dollars. [laughs] I’ll get a call from Jon Bush after this, asking, “Hey, are you saying I’m overvalued?”

People focus on return. In terms of what you’re building, you’re not just grabbing eyeballs and clicks. If people are looking at the information and the content that you’re bringing together … and this is in all seriousness … and you’re capturing decision-makers as they’re looking it and shaping their decisions, there’s a lot of value in that. Seriously.

You’re jumping off the $2 billion thing, but there’s a lot of value in the fact that you’ve got an audience who are really influential in the healthcare space. The challenge that you have … you’ve done a great job of monetizing it, because you’ve done a great job balancing it between making money without compromising the integrity of the commentary. The challenge in putting venture money in … I’m not saying that you’d ever compromise the integrity … is that the pressure goes up to find more revenue and be able to continue to grow that revenue line.

I think you’re doing the right thing the way you’re doing it, but I tell you what, if somebody comes along and offers you $10 million for it, you probably should think pretty hard about it. [laughs]

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