Gary Cohen is executive chairman and CEO of iSOFT of Sydney, Australia.
iSOFT is a significant global player in healthcare software, but not maybe as well known in the US. I’m interested if you have plans to increase the visibility and presence now that you’ve started with iSOFT Integration Systems.
I think that the US is the process of going through an enormous transformation both in healthcare reform, as we speak, and obviously in relation to some of the effects of the ARRA legislation in relation to how healthcare IT can change the way healthcare is delivered across the US. There is quite a lot of disruption, I suppose, in terms of the US health economy, which is bringing change.
I think that is probably the point I wanted to emphasize. I think that provides significant opening for us, I believe, particularly where we have specialized around socialized healthcare or healthcare that is more distributed rather than just obviously utilized in the hospital, or utilized in a private care facility, or whatever. But the movement of information around that network, whether it’s between the various facilities inside a hospital or the various facilities that can make it to a hospital or may interact with that hospital, such as community and so on.
The architecture and the way in which we have built our latest generation solution, Lorenzo, has obviously been around that socialized healthcare model. I think when you look at one of the requirements for Meaningful Use and a lot the climates for performance-type process; you’re going to need — particularly, as chronic illness processes involve a lot more interaction with many multidisciplinary people in a healthcare environment — solutions that enable that sort of coverage. I think that’s where we do see a significant value.
With that in mind, we think we have a technology that is probably quite suitable for the US environment. Therefore, we do look to the US in terms of increasing our exposure there in a variety of ways.
Can you tell me what areas that you’ll specifically target? Will Lorenzo ever be sold in the US, or will it be strictly integration tools?
The answer would be in the longer term, yes, we will be looking at a way of bringing Lorenzo into the US. It’s no secret that we’ve worked very closely with our partner CSC in the UK program delivering Lorenzo. CSC has made a very significant investment in getting to understand, from an integration and delivery point of view, the benefits of Lorenzo into the market. I think one of the things that we would see is that working with organizations like CSC, we believe have significant benefits to the US market. That is a longer-term plan.
I think that what we need to do is look at what is going to be available over the next 6-18 months that is going to be suitable for the market as against what might be available well beyond that time. I think there are various products and components from Lorenzo because it’s just, if you think of Lorenzo not as a simple solution, but an architecture and as a platform with many solutions, then we are able to reconfigure Lorenzo in a form that is more suitable to some parts of the US health economy. So, ignoring the integration solutions that we have — which we supply already in the US — which aren’t unimportant, but are one facet.
We are looking to build a suite of solutions with that integration engine and Lorenzo applications that might, for example, target health information exchanges, target aggregation solutions, target solutions that are able to provide an umbrella framework around which other disparate systems can be integrated. But at the same time, adopt workflow processes into that rather than simply just adopting an integration solution or adopting a viewing platform, in terms of how you might aggregate solutions up through a portal or whatever. Look at some similar ways that Microsoft is targeting to aggregate solutions, we would see similar ways of moving down that path.
I think aggregation and dashboard-type solutions, business intelligence, solutions that compliment that process; so if we were able to bring some added value into that equation, such as, we’ve got a multi-resource scheduling solution which we have recently added to our suite that would help enable some of these organizations to do things that they’re not doing today. If we can start to surround some of the aggregation and solution into a complex healthcare delivery, I think that we’ll fill a niche that will keep us busy for quite a few months.
Obviously, when you have the add-on or wraparound solutions, then you have to get in front of customers or find partners. What do you think it will take to be positioned to get the word out to compete while the money’s beginning to flow, but there’s a narrow window before it will be gone?
I’m probably a bit more sanguine in the sense that I don’t think it’s just going to be a short-term window. Inevitably, I believe it’s going to be a much longer-term window than people imagined. But there is a window, so let’s accept that. It is going to require probably a few things from us.
One, it’s going to require us to build a reasonable-sized platform in the US in one form or another. That could take a number of forms. That could take a form of — and these aren’t necessarily, mutually exclusive — investing more resources ourselves into the market, which is what we’re doing. We’re building not only what we’ve got around, what would be required in Boston, but we are bringing more and more resources out of our UK facility, our European facility.
With some of the people, rather than basing themselves in Europe; we’re relocating them and basing them in Boston. That’s starting to add some more high-level, intellectual-type fire power to that. We’ve recently recruited a senior operations director from Carestream who was formerly a CTO of Kodak in healthcare. He’s a global position, but based in the US as well. We’re starting to populate that.
Secondly, we are looking at a significant number of partnerships that we can engage within a more meaningful way, both from a distribution point of view as well as a technology point of view. Those discussions are becoming more critical and intense, and we hope to get some significant progress in those in the immediate future.
Three, we’re also looking at acquiring a platform. Obviously, that would in turn mean that we’ve made a more significant position in the US through that platform than we could leverage a lot of our own products and technology in that platform. That’s another discussion. I’m certainly not going into much more detail in that, but they are all on the table for consideration.
I don’t want to press you on the point, but when you said “consider acquisition of a platform,” did you mean a hospital information system or an integration platform?
I think for us, there are two parts to our business model. We have a lot of product outside the US, and many of those products, over a period of time, will be very valuable inside the US market. I’m not saying that they may not need to ultimately get referenceability in the US. You did ask me what else we require, and obviously referenceability inside the US is going to be important for us.
But then secondly, you need to have significant capability from sales and marketing and distribution, and so on, inside the US, in terms of scale. Obviously, that’s something that we’re giving serious consideration to how we achieve that scale from a sales and marketing point of view, and distribution.
The second element is in relation to technology. Most countries have technology that is very country specific because of functionality. If you look at most health information systems on a global stage, whether it’s the patient management system or it’s the financial solutions or whatever, there are certain things that are not ubiquitous and they require very point solutions. There’s no doubt that the US is equally prevalent with its own specific solutions for certain areas.
It may be useful for us to look at ways in which we could either partner or work — whether through acquisition or partnership — with companies that have certain solutions, but don’t have other solutions. That’s one of the things we’re closely focusing on, and those solutions would have to be complementary to our product suite. For example, if there is a hospital information system company in America, that, per se, doesn’t really add a lot of value because we have a lot of value elsewhere in the world, right? Just going and acquiring a HIS solution or partner with someone with HIS solutions wouldn’t necessarily be as complementary as something that might be more synergistic. They’re the sort of things we’re looking at.
How would you grade the progress that’s been made and the value that’s been delivered by the NPfIT project?
That’s a very pertinent question. If we strip all the emotion out it, and the political dramas and the theatrics that go around it, I think you’d have to say there are some parts of the UK program that have been enormously successful — have done very well. Other parts which are in progress, but for which the progress probably has not been as fast and as good as it should have been, from a holistic point of view. If you look at the overall arch, is the program — in terms of its over-arching ambitions and what it’s trying to do — a good program, and is it going to get there? I think the answer will be, absolutely, yes.
I think really, if you take all politics aside, I don’t think anybody would suggest that the program’s going to stop and it’s all going to go backwards; because really, there’ll be a no man’s land and they’ll not have any viable alternatives. By the way, that doesn’t necessarily mean that the end is worth it, but if you look at where they are trying to get toward, what they’re trying to achieve, I think it’s fair to say that the goals and what we set up is, and are, very good.
I think the problems exists that some of the ambitions in the way in which some of the things have been done have been too ambitious and probably haven’t had the necessary capabilities around their systems to do it as fast and at the pace in which the goals that were set by the NHS and by the government at the time and therefore, set forth expectations, in terms of time scales, that meant that it was much more difficult to deliver. Therefore, people could then always refer to the fact, “Well, you promised X on a particular date,” or, “You promised X within a year or two years.” Once you pass that date, you can always refer back, “Well, the program’s late.” The more you say it doesn’t make the program any later, necessarily. It just is late, right?
There’s no doubt that the development of the spines that connect the top and bottom of England together to enable records to be transmitted through the health network has been a very successful development. There’s no doubt that the connections of the primary care facilities onto that spine, and most of the hospital institutions onto that spine, have delivered enormous, potential capabilities in the way healthcare records can be transmitted, as well as the admission and flow of information into hospitals and so on, by doctors.
Thirdly, there is the digitization of radiology and some of the diagnostic solutions, has been very successful. The more difficult part of the program, if you like — and it’s difficult because it is complex, and probably the ambitions to do it — were to put in place the electronic health record solution in each hospital trust. To basically replace all the legacy systems that existed right throughout all those trusts. I think it’s that part of the program where the difficulties occurred. I think it’s that part of the program that probably should have been done in slightly different stages, but it is that part of the program which ultimately will lead to the biggest benefits, and ultimately will lead to a successful outcome. It is on track. It is late. They need to accelerate deployment and they need to accelerate some of the expectations around delivery.
I think the NHS have probably appreciated the complexity a lot more themselves, and have probably reshaped the program and are currently reshaping the program to ensure that it is going to be able to reach some of those goals more quickly. But that’s probably a small snapshot. I’m happy to elaborate if you want me to, but that’s basically a small snapshot.
It seems that in the UK, you can’t separate the politics from the technology. Do you think that there will be similar challenges in the US as the federal government gets more involved in healthcare IT and gets equally ambitious to roll out these huge national projects that are certainly going to involve some uncertainty and some huge expense?
In my opinion, healthcare is a social thing. At the end of the day, part of the problem is that you just can’t leave it to private industry to sort out the problem because it’s so interconnected to the political fabric of a country in one way or other. Whether directly or indirectly, we all contribute to the healthcare budget. You probably don’t really think about contributing to a budget of a large corporation, if you will. Healthcare always has a very large public sector element into it, in some form or other, whether subsidized or for social reasons.
Government does need to get involved, and I think part of the problem is government is never sure how evolve itself. Part of the experiment in the UK, which was probably good and equally bad, is that they got involved, but probably the way they got involved could have been better framed. The UK’s a very specialized thing because use of national healthcare system, principally, and controlled centrally even though it might be distributed through various bodies like NHS trusts and strategic health services and authorities and so on. It’s effectively a centralized controlled system; whereas the US is a far more fragmented, non-centralized controlled system where the central government tries to either help with policy designs and so on, but allows industry to make its way.
I think if the federal government or the national government in the US were to be far more active, in terms of programs and structures, then probably one of the things it would learn from the UK is, perhaps, to ensure that there is far more participation at an earlier stage. There’s far more buy-in, and there’s far more flexibility into the system. You need to have a system that doesn’t just pick winners, but allows the market to pick the winners while at the same time, ensuring that you encourage the market to go out and spend to pick those winners. You might put incentives and rules and programs in place, which is a bit like what ARRA’s trying to do, and then allow the market to do it.
It probably needs to be a bit further along than just where it is at the moment, but I think the more that a government tries to identify itself with one or two parties — even if they are the right parties — then everybody else is disenfranchised and they become enemies. Then they spend their life just chipping from the sidelines, which is fairly what happens in the UK today. It’s much better at the end of the day, I think, to allow the market forces to select that in a way that isn’t necessarily centrally driven, but the programs are centrally driven.
Richard Granger was really hard on NHS vendors, making them compete and telling them they would be replaced. But looking back, there almost weren’t any contractors left and now the government is trying to loosen up the payments because they were too tough. Was there a lesson learned about how hard you can push a vendor?
In my opinion, whether it’s at the smallest end of the scale or the largest end of the scale, you need a partnership for delivery of healthcare solutions of a complex level. You’re not going to a shop and buying a piece of commodity and walking out and you don’t have see the shop keeper again. If that works, or doesn’t, you don’t really have a relationship with the vendor of that software. You just put it in your system. It either works or doesn’t work. You might be pissed off with the vendor, but that’s a reputational issue. You don’t really have a relationship.
Complex healthcare delivery solutions at the level we’re talking about require a very significant interaction and partnership between the providers and the integrators and the government, or the providers of the services — the users. If you don’t have that partnership, and because you dictate terms that become more and more unreasonable, if that partnership starts to get one sided by either side, then basically that relationship starts breaking down as the complexities of the solution, which often requires a lot of flexibility, and as time goes on, changes of understanding of the market and things.
If you look at the UK, this was designed back in 2003, right? I think it got underway in 2004, six to seven years ago. So what’s happened in six to seven years? Requirements have changed. The economic circumstances have changed in governments and so on. If you don’t build in that flexibility in the relationship, then the whole thing becomes… You know, you can’t document it in a contract, so ultimately, the more you put contractual and the more you go one-sided, the more difficulty you ultimately create in that relationship.
There are a lot of observers that are putting a lot of importance on the Morecambe Bay go-live because of the payments that trigger and the deadline that supposedly is out there from NHS. Do you think that’s overestimating the importance of what’s going on there?
Morecambe Bay is going to go live. No one is suggesting that Morecambe Bay is not going live. The go-live in Morecambe Bay — and I really get a bit sensitive about this, particularly because the contractual arrangements — but you’re talking a very technical integration program where a lot of historical data on all systems has to be integrated into the new systems and training has to occur with a lot of people and so on. The last thing you want to do is go live and not have a successful integration.
In any program, or any delivery, if it was slipped today, a week, or even a month, everyone would say, “Well, OK, that’s not the end of the world.” But what happened is that Christine put a date there that was a bit of a mark in the ground for the go-live of Morecambe Bay for Lorenzo, with 1.9, in terms of importance for CSC.
I think leaving aside whatever contractual arrangements CSC has agreed with the NHS or not, the real issue is if Morecambe Bay are happy with the solution, which we know they are, and they have been testing it in their environment now for a number of months, and they’ve also been using the older version of Lorenzo. If the trust has made a commitment to go-live, which we know that it has, the fact it might be delayed by some weeks is leaving aside what contractual arrangements exist between CSC and the NHS because of the payments, that is not in any way a train wreck.
OK, yes, I would have preferred it to happen earlier, but the fact is that we are talking very groundbreaking and new technology at the same time, in a complex integrated trust environment. The one thing I can assure you is that, technically, the solution is working and delivered. So technically, the go-live has occurred in every other environment in the primary care trusts. So, it’s going to happen. I’m sure there’s going to be a fair degree of political emotion around it and rhetoric, for the reasons we’ve discussed earlier.
Of course, your company suffers from that because shareholders look at the uncertainty there and know that you’re a major player and significant part of the revenue and would have some concerns. Is there anything you can do to reassure them, or are they mislead into thinking that it’s that important?
We have to understand, number one, the NHS program represents today, for us, less than 20% of our total revenue. It’s not our total business. It’s a significant part of that business, but we’ve 80% of our business, and actually more than half of the UK revenue has got nothing to do with the national program. We’re quite a major player in quite a number of things, so I want to at least put it in context. But notwithstanding, you’re 100% right. There’s a lot of focus, there’s a lot of attention, and it gets a lot of air play even if it is only 20% of our total revenue because it’s seen to be a major growth engine and potentially, if it doesn’t work very well, a potential risk factor.
The reality is that in some ways, fortunately for me, my year end isn’t up until 30 June, and a lot of the major things and milestones and deliveries are all scheduled to take place between now and 30 June. I am not in any way looking to stress out or think that our investors should be stressing out. But unfortunately, there’s a lot of people who make lots of noise, and sometimes you just have to allow that noise to occur because what can you say other than to let the facts speak for themselves. Sometimes that just has to be the time period.
When you look ahead for five years or so, what are your plans for the company?
I think that we sit on an enormous potential for delivering health solutions, if I could call it, across the health continuum, in that we think that with the pool of intellectual capabilities that sits in our organization, together with the product know-how and technology that we’ve invested in, with what we can potentially create through building upon that. I think that we can be a world leader in healthcare IT and span the globe. Not just in the 40 countries we do today, but in a broader number. But also, be far more significant in some of those countries where we would obviously like to have significant influence, which hopefully must mean — we would like to think — that by that stage we would be a substantial player in the US market.
I think that the opportunity to achieve that means that we will need to grow and hopefully that growth will be commensurate with a very substantial profit returns to our shareholders and those who surround it. That’s certainly our aim, that’s certainly our intention, that’s certainly our desire. I think we’ve got a good team of people around us to help us achieve that. Even though we have challenges at the moment, and we’re not in the US, and also we’ve got the uncertainty around the national program, I think over the next 6-12 months a lot of that, I believe, will be behind us. I think that will really enable the company to propel its success further.