By Mr. HIStalk

KLAS just released its CPOE Digest 2010. It’s a pretty fun read, although not too encouraging. A full 86% of US hospitals fall short of even the paltry 10% CPOE adoption rate that the proposed Meaningful Use rules would require.

That’s probably why hospitals are whining (while looking the gift horse in the mouth) about the modest conditions that are attached to the millions in free taxpayer money they’ll get for merely using the systems they already own.

The KLAS report seems to send this message to hospitals: you’re in trouble if you’ve chosen a crappy CPOE vendor.

Everybody would agree that the whole CPOE issue is vexing. It’s healthcare IT’s Vietnam, having dragged on for years without progress while experts opine, outsiders roll their eyes, and boatloads of cash exchanges hands in a failed attempt to turn the situation around. Technical superiority is getting its butt kicked by a committed and stealthy enemy called paper.

Until Meaningful Use, hospitals had pretty much given up on CPOE. It’s like naively buying a fancy new car without doing your homework, then finding it so annoying and unsuitable that you just put it up on blocks in the back yard and cover it with a tarp so you don’t have to be visually reminded of your bad decision every time you go out.

So news from the CPOE front is not so good. But I might quibble with KLAS’s implication that it’s all because of low-quality CPOE software.

KLAS correctly observes that some CPOE products are majorly screwed up when it comes to usability and integration. The vendor names are hardly shocking: (a) smallish vendors whose customers didn’t really care about CPOE anyway, and (b) mega-corporations who dabble in HIT not because they care about patients, but because they run their business like an unfocused mutual fund and needed sector diversification.

But then you have Epic, which shames everyone by throwing off the grading curve. While the also-rans are locked in a desperate struggle for tiny percentage gains to their scores in the low 70s or worse, Epic surveys the spectacle from rarefied heights and splatters the heads of the combatants below with its droppings pretty much whenever it pleases.

Epic’s software is better than most (although a strong argument could be made that Eclipsys Sunrise has better CPOE). However, it’s naïve to think that Epic’s software is THAT much better. Or, that hospitals can move their CPOE needle by just doing a mating dance with Judy.

Epic’s secret sauce, I think, has a second ingredient: its choice of customers.

Epic knows that most hospitals don’t have the right stuff to handle big projects, especially those involving IT. They are indecisive, change-resistant, and unable to move beyond the tactical to the strategic. Epic sends those prospects away to fail under a competitor’s watch. That vendor cashes their check, but gets dinged in the KLAS report because the good customer predictably turns into a bad user.

(If you believe that software alone drives CPOE adoption, consider this: would you instantly whip out your hospital’s checkbook for a system that boasts nearly 100% CPOE utilization at every one of hundreds of hospital sites? You won’t need the checkbook – just order your free CD copy of the VA’s VistA).

One way Epic ensures that its customers are committed is by charging them exorbitant prices. Hospital C-levelers to get uncharacteristically involved in a so-called IT project when it’s costing them $50 million or more.

But more importantly, those high prices pre-qualify prospects. Badly run hospitals don’t usually have $50 million burning a hole in their pockets. Or, they may back down from their lofty ambitions, recognizing that deep in their DNA, they don’t have the right stuff to make expensive IT work. They fold their cards and slink away to a lesser-heralded and cheaper vendor rather than confidently throwing their big chips into the Epic kitty.

(I once had a sweet, competent employee who was also recruiter for a cult. She tried to get me to attend an introductory class, surprising me when she said it would cost me $100. The reason, she explained, is that free classes attracted mostly people without commitment who weren’t likely to join. Not to mention that prospects with $100 probably had more assets worth swindling once their brains had been programmed).

The KLAS report talks about vendors, but I think the real issue is one that should resonate with us IT people. It should also make hospitals think twice before dumping their current CPOE vendor to chase the Holy Grail of a higher-rated one (even Epic).

It’s PEBMAC — problem exists between monitor and chair. It’s not what you have, but how you use it. Much of the Epic ballyhoo is because they sell only to hospitals already qualified as having a high probability of success – they have enough money and motivation to want to undertake an Epic project in the first place.

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From The PACS Designer: “Re: World Cup apps. Some HIStalkers may want to watch the results of World Cup Soccer as it proceeds through to the final game. The viewing can be done on your mobile device with various apps that have been designed just for the event.” I don’t know anything about soccer except it’s something US kids seem to play until high school and then forget about until the World Cup, but someone sent the picture above from Cape Town, which is pretty cool.

From Buck S. Pearl: “Re: West Virginia. Governor Joe Manchin dedicated his most recent weekly column to the $6 million regional extension center called WVRHITEC (catchy!) The state HIE has been awarded $11.3 million in funding and plans to choose a vendor by the end of the month. In 2006, the state funded an almost $100 million install at WVU Hospitals. Do you think Epic will play well with the HIE vendor?” The state seems to have its act together. Let’s hope they can get Epic connected since the value goes way down without WVU.

From Sorry, You’re Dead, EMR Said: “Re: unintended consequences or befuddled users?” A UK hospital scheduler refuses to make an appointment for a cancer patient, saying their records show that he’s dead. NHS authorities tries to reassure the public that its Choose and Book scheduling system is the fastest way to schedule an appointment, but in the mean time, hasn’t yet found one for this patient.

Readers believe the biggest beneficiary of the Allscripts acquisition of Eclipsys will be Eclipsys customers, according to my previous poll. New poll to your right: did your doctor use an EMR in the exam room during your last visit?

Listening: Killola, quirky LA punk led by actress Lisa Rieffel. They’re DIYers: they book their own shows through e-mail and sell albums on USB flash wristbands.

ONCHIT issues rules for its temporary certification program, intended to set up non-profit Authorized Testing and Certification Bodies (ATCB) to certify EMRs so that HITECH money can be handed out even before a permanent program is developed (ONCHIT says that won’t be until January 1, 2012 at the earliest). It was too dry for me to read, so let me know if it contains anything interesting (the PDF is here). Organizations will spend about $75,000 to apply to become an ATCB, with their authorization lasting two years until the permanent rules are finalized.

Dennis Sato tells me he’s serving as interim CIO for Hawaii Health Systems Corporation, where he used to work.

The Walgreens drug store chain uses technology to increase business, offering a mobile site, an iPhone app, and text messaging for special offers and “your prescription is ready” alerts.

Strange bedfellows: the highest paid University of California employees are athletic coaches and brain surgeons.

HHS posts the agenda for its June 29 hearing on privacy and security tools in Washington, DC, which will features demos and panel discussions.

Jobs on the HIStalk sponsor job board: Eclipsys Activation Consultants, Epic Certified Clinical Documentation Consultant, Cerner Ambulatory Consultant.

InformationWeek says Newt Gingrich’s endorsement of EMRs is cause for optimism, apparently not noticing that his somber pronouncement fortuitously came at a rollout bash for a new EMR offering from GE Healthcare, which is a Platinum Member of Newt’s very much for-profit think tank, Center for Health Transformation. According to CHT’s site, its Platinum sponsors enjoy “limited access to Newt Gingrich on your company’s strategy” (maybe his appearance was their freebie for the year), the chance to pay more money to sponsor other stuff, and the chance to chair project advisory groups and influence white papers. Needless to say, Newt’s in favor of a free market approach to healthcare.

I’ve been busy with HIStalk Mobile lately, putting in a new layout and bringing on a primary editor, Travis Good. He’s finishing a dual MD/MBA program, earned an MS in decision and information sciences, and has experience developing software and designing enterprise architecture. Thanks very much to its Founding Sponsors (AT&T, Vocera, Voalté, and 3M) and Platinum Sponsors (Access and PatientKeeper). If you’re a provider, I’d like to hear your experiences with mobile technologies.

People drawing HIT-related paychecks like the artificial demand created for it by spending taxpayer dollars, they say in a HIMSS briefing during National Health IT Week. More interesting to me was that none of the three members of Congress that HIMSS expected to speak actually showed up, saying their full attention was needed to address the Gulf oil spill. Its 183 partners (mostly vendors) claim this purpose:

National Health IT Week is a collaborative forum, now in its fifth year, of assembling key healthcare constituents—vendors, provider organizations, payers, pharmaceutical/biotech companies, government agencies, industry/professional associations, research foundations, and consumer protection groups—working together to elevate national attention to the necessity of advancing health IT.

Reminders: HIStalk, HIStalk Practice, and HIStalk Mobile each have their own content, readership, and e-mail alerts, so sign up on each site for the latest. The Search function to your right, however, covers them all, clear back to 2003 when HIStalk emerged (at least slightly) from the primordial ooze. Inga and I update Facebook when we post something new, so Friend us or Like us with the widget to your right to connect. Your guest articles and interview suggestions are welcome for all three sites, as are your clicks on the ads of those nice sponsors who keep the lights on and the keyboards clacking. Thanks for reading.

Merge Healthcare signs a distribution deal to bring its eFilm Workstation image viewer to Brazil.

Bon Secours Health System (VA) rolls out Epic MyChart for physician and patient access.

Note to these two vendors: both HIMSS 2009 and 2010 are over, so you might want to stop paying for Google ads pitching your booths.

Cisco, CareFusion, and Medtronic sign on as technology partners with the non-profit West Wireless Health Institute of San Diego, a medical research organization founded a year ago with a $45 million donation to promote wireless health to reduce costs. The billionaire namesake founder is fascinating: he came back from a tour in Vietnam, spent seven years as a hospital administrative assistant, started a telemarketing company, and got really rich. That inspires my own entrepreneurial vision for healthcare: hire a boiler room full of over-caffeinated telemarketers to cold-call patients during dinner to remind them to take their meds, eat less, and get off the couch, then sell the whole business to an insurance company.

Health workers in Malawi use free SMS messaging software to track TB outbreaks, saving money and allowing twice as many patients to be treated. They bought recycled cell phones at prices ranging from $15 to $50 each, a GSM modem for $200, and a donated Compaq laptop. The software is from FrontlineSMS:Medic, a non-profit started by Stanford students that recently received a Google charitable grant.

This interview is a good introduction to insurer UnitedHealth Group’s telemedicine initiative. Patients go to a clinic, where an employee sets up the session with the remote physician using two-way video. The company says they’re paying doctors the same rate as they would for a face-to-face visit.

Sponsor news:

• NextGen Healthcare opens registration for its 2010 user group meeting, to be held November 7-10 in Orlando. It drew 2,700 attendees last year.
• Keane’s Healthcare Solutions Division will announce a partnership with Ormed Information Systems, Ltd. this week at HFMA to offer Keane Optimum clients a full ERP solution.
• Vocera is offering a June 24 Webinar describing its work in reducing communication breakdowns in VA healthcare facilities.
• The Voalté One hospital communication system is now available on the BlackBerry as well as the iPhone.
• A European Journal of Anaesthesiology article concludes that use of decision support in iMDsoft’s MetaVision doubles adherence to guidelines involving prophylaxis of post-operative nausea and vomiting.
• TELUS Health Solutions donates its Assyst Rx Pharmacy Management System to the pharmacy school at the University of Toronto for teaching hands-on skills to pharmacists trained outside of Canada.
• e-MDs will be at NYMGMA later this month.
• Vitalize Consulting Solutions was named as a Top 100 Healthcare IT Company by Healthcare Informatics.
• Hayes Management Consulting will offer a June 22 Webinar on keeping historical data when migrating to EpicCare.
• Sunquest is supporting the SUG 2010 meeting, to be held in Tucson July 12-16.
• Sentry Data Systems will be at HFMA’s ANI conference in Last Vegas this week, exhibiting in Booth 609.
• Dentrix Enterprise offers free Webinars to introduce its electronic dental record.
• The Anson Group adds Patrick Mooney, formerly of Eli Lilly and Company, to its team of life science consultants who work with healthcare IT regulatory requirements, including those of the FDA.
• FormFast is offering a July 13 Webinar called Cloud Computing: Advice from a Top Legal Expert.
• An Ingenix Consulting article called Intervention Valuation: Translating Innovation into Payer Value, is available on its site.
• CynergisTek CEO Mac McMillan is interviewed in an article about security threats from used copy machines.
• Consulting firm Virtelligence will be at Epic’s User Group Meeting in September.
• 1450, Inc. is offering a 25-minute Webinar on using Dragon Medical with or without an EMR on several dates through August.
• Enterprise Software Deployment had activations last week at Children’s Alabama and Yale New Haven.
• O’Toole Law Group offers its legal consultation to hospitals migrating to Meditech 6.0. 

The local paper profiles Smile Reminder, a Utah-based company formed in 2000 to send text message appointment reminders to patients. It’s grown to 60 employees, servers 10,000 doctors and dentists, now does patient-doctor communication, and just signed a deal with GE Healthcare (details not provided). It charges $299 per month per practice and claims to drop no-show rates by up to 80%. It suggests interesting customer retention services: sending birthday greetings, offering last-minute cancellation appointments, embedded refer-a-friend links, and sending surveys.

The Senate votes to rescind the 21% Medicare payment reduction for physicians, but too late to stop CMS from applying the cut to checks for services rendered June 1 and after. The House will take up the issue this week.

Just for fun, I’ll leave you with a great Monty Python OR sketch, including “the machine that goes ping” and a clueless hospital executive. The inside joke: Graham Chapman, who plays the doctor, really was one.

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From I Told You So: “Re: patients accessing their own records. One in a thousand did. ‘Wicked problems’ were prevalent.” Researchers find little benefit with England’s Summary Care Record and the patient portal view of it. Only one in 1,000 patients who were invited to open an account bothered to do so; many of them tossed the informed consent letters into the trash unread; and those who used the portal found it pretty much a waste. What the researchers found evidence of: improved quality in some visits. What they found no evidence of: improved safety, faster visits, number of referrals, more personalized care, increased patient empowerment, better management of chronic conditions, improved health literacy, positive impact on data quality, and reduced cost.

From Samantha: “Re: Inga. I saw this and just had to ask – is this what Inga’s been up to lately?” Could be — those shoes look familiar. It’s a cool pinup calendar an agency designed for a medical imaging vendor. Inga is still cavorting beachside, although apparently with connectivity since she checks in periodically.

From Winston Zeddemore: “Re: software usability. Software used by 911 operators in Pittsburgh is a likely contributor to the death of a three-week-old.” A 911 operator keys an @ sign instead of # to indicate the apartment number address given by the frantic mother of her dying daughter, which is a reserved keystroke that the software uses as a command to change the address. The software moves to the next alpha address, the misrouted paramedics take an extra seven minutes to arrive; and the baby dies an hour later. They don’t know if the delay contributed. Implementation of the $10 million system is scheduled to be finished in August.

From Mr. Science: “Re: Howard Messing of Meditech. He’s now the chairman of the board of the Museum of Science in Boston.” Funny – I had just gotten off the phone with Howard when your Rumor Report came through. I could have asked him about that, although he’s a man of few words. I’ll have the interview I was doing with him up shortly.

From p_anon: “Re: Atul Gawande. He gave the commencement speech at Stanford’s School of Medicine last week.” It’s excellent. Here’s a snip:

Half a century ago, medicine was neither costly nor effective. Since then, however, science has combatted our ignorance. It has enumerated and identified, according to the international disease-classification system, more than 13,600 diagnoses—13,600 different ways our bodies can fail. And for each one we’ve discovered beneficial remedies—remedies that can reduce suffering, extend lives, and sometimes stop a disease altogether. But those remedies now include more than six thousand drugs and four thousand medical and surgical procedures. Our job in medicine is to make sure that all of this capability is deployed, town by town, in the right way at the right time, without harm or waste of resources, for every person alive. And we’re struggling. There is no industry in the world with 13,600 different service lines to deliver.

From Techsan: “Re: Epic. I can confirm that Epic is supplying new customers with their interview tools, which I understand are self-developed, and recommending hiring college grads to staff projects. One of our clients just completed using the tool for internal candidates and will be interviewing college grads soon as they near the beginning of their implementation. I am also working with a new Epic client and Epic made the same suggestion.” The debate rages: are inexperienced youth the best choice for implementing sophisticated clinical systems? You can’t argue with the results – Epic’s implementations almost never fail and those of their competitors often do despite having lots of experienced hands on deck. I’ll make the argument that Epic’s methods make it not just possible, but desirable to use easily managed, job-appreciative noobs who don’t bring any preconceived notions or egos to the table (not to mention “experience” that’s mostly with bad vendors or hospitals). As a non-noob, I’m as threatened and offended by that fact as anyone, but you can’t argue with Epic’s results and it’s never Epic’s implementations that are implicated in the patient-endangering case studies you read about. Plus, it gives them endless scalability because it takes little time to bring in a fresh wave of troops. I think it’s brilliant as long as it continues to work.

Listening: The Young Veins, dead ringers for the cheery Help-era Beatles, but from Topanga, CA and featuring two former members of Panic! at the Disco.

Someone sent me a copy of the just-released CPOE Digest from KLAS. I’ll keep it high-level since they’re charging vendors $14,850 for a copy and I only glanced briefly so I wouldn’t be tempted to spill the beans, but I was looking to see how specific vendors did. Providers get the report for $980, by the way, and for those in the market for a system, I’d say it’s worth every penny since there’s a ton of detail.

• Cerner – CPOE adoption fairly low but growing, but not so good with physician documentation.
• Eclipsys – has a higher percentage of its customer base using CPOE and making progress in pharmacy and the ED.
• McKesson Horizon – shallow CPOE usage even where it’s mandated and prospects are steering clear (and customers are considering defecting) because of worries they can’t get to Meaningful Use with it. Complex to maintain (iForms). Good with bedside barcoding.
• Meditech – OK in CPOE, very strong in bedside barcoding.
• Soarian – the weakest of all vendors for CPOE adoption. Too many marginal implementation people. Great at barcoding, poor in physician documentation.
• Centricity – decent CPOE usage, but it’s still the bottom-rated EMR.
• Epic – nothing you haven’t heard a zillion times before. It’s light years ahead of everybody, with huge CPOE utilization (over 90% in both inpatient and clinics). The score difference between Epic and its competition is shocking.

Ed Marx is always diligent about updating his CIO Unplugged postings to address any reader questions or comments. He’s done so with last week’s staff retreat one.

This CBS Evening News video shows the security exposures inherent in copy machines, which have hard drives that retain digital copies of everything scanned. Machines purchased used contained everything from police records of sex offenders to a New York insurance company’s machine that contained 300 pages of patient records, one shown redacted on the screen bearing the Montefiore logo.

A couple of readers e-mailed me their displeasure about an extended outage of all Intuit Web sites. The online versions of Quicken, QuickBooks, and TurboTax became offline versions when something went wrong (Intuit isn’t saying what). Most importantly to the hospitals, Intuit’s QuickBase project management software was unavailable. It’s not cheap: the lowest monthly price is $299 and goes up from there based on the volume of users, data records, and data storage.

Weird News Andy adds to his body of literature about people who suddenly start speaking with a foreign accent after some medical event (this is his second report of that phenomenon). A Canadian woman thrown from a horse suffers brain damage, temporarily loses her ability to speak, and then regains it but finds she suddenly has an Irish/Scottish combo accent, including the unintentional use of words she had never used such as “brilliant” and “wee.” Maybe I have a wee bit of that since I notice I’ve said “brilliant” a couple of times.

Financial Times says big NPfIT contractors like iSoft and BT got burned for their involvement, but upcoming NHS cutbacks could create a new breed of emerging vendors. Listed: Emis (practice EMR); System C Healthcare (hospital systems, including EMR, patient management, and departmentals); Iris Software (custom development), and INPS (practice PM/EMR).  

Speaking of NPfIT, the head of one trust that opted out of it says it “put back the contribution of IT in the NHS by more than ten years.” His trust, which he calls “one of the bad boys who left NPfIT,” passed on CSC and iSoft’s Lorenzo system, choosing Meditech 6.0 instead in a $60 million project (sounds way high for Meditech).

And speaking of iSoft, its reassurances didn’t help as the stock keeps diving (now at $0.25, but only after a big run-up on Tuesday), layoffs are reportedly being planned, and executive chairman Gary Cohen, who I interviewed in April, relinquishes that role to focus on his CEO responsibilities.

Jobs: Senior Project Manager – East, Clinical Pharmacy Specialist, Soarian Clinicals – Plan of Care, Business Systems Analyst.

I got a copy of an Eclipsys customer e-mail describing how the company will handle enhancement requests going forward and I have to say it’s smart (I probably think so because I’ve advocated something very similar here in the past). Instead of the idiocy of requiring requestors to show up at the user group meeting and then taking a show of hands that rewards the rich hospitals that send lots of attendees, the Eclipsys method first involves an internal selection of the best ideas, which then move to the Invest stage. Each client organization gets $500 in Eclipsys Bucks to allocate among all the enhancements they like best, making it easy and fair for Eclipsys to simply choose the ideas that get the most support. Customers are forced to think like the vendor – do they spend their Bucks on several little changes, or shoot the whole wad on a big change and hope that’s enough to get it approved? One refinement might be to get $500 in Veto Bucks so the practical hospitals can kill off all the lame, site-specific monstrosities that the big academic medical centers always demand that will spoil everybody else’s workflow, but maybe that’s a 2.0 project.

New officers for the EMR vendor trade organization that HIMSS runs: Epic EVP Carl Dvorak (chairman) and NextGen VP Charlie Jarvis (vice chair). Carl says he’s excited to lead efforts related to open standards, which is probably driving Glen Tullman up a wall given his comments about Epic’s lack of openness in my interview yesterday.

Best Buy donates its Geek Squad service to Children’s Hospitals and Clinics of Minnesota, providing and supporting Skype, web conferencing, and video games for the families of patients.

The 45-year-old billionaire founder of Salesforce.com will donate $100 million for a new children’s hospital at UCSF.

The federal government sues Oracle for fraud, claiming tens of millions of dollars in overcharges (illegal ones, not just the usual high Oracle prices). A former Oracle employee turned whistleblower claims the company intentionally hid discounts it gave to big customers to avoid giving the feds its best price.

Cambridge Memorial Hospital (Ontario) uses out the Information Builders WebFOCUS BI platform to develop an ED tracking board application.

EnovateIT expands its mobile and wall-mounted workstation into overseas healthcare markets, citing similar demand to the US as EMRs replace paper.

AT&T issues an apology to iPhone fanatics like Inga who had problems trying to get their latest toy (what recession?) Sales were ten times higher than for the 3G last year and they ran out. AT&T says they received 13 million visits to their site in a single day by people checking their upgrade eligibility.

A Madison, WI law firm gets a $1.2 million NIH grant to create an application that will check patient eligibility for government programs. I don’t quite get the business structure: the law firm (ABC for Health) is a non-profit that connects families with healthcare services, but the grant went to its for-profit subsidiary called My Coverage Plan, Inc. I guess they plan to commercialize the result. It actually sounds pretty cool for what it costs, given the huge money being thrown at less obviously beneficial HIT projects (at least if you like the idea of government paying for software to identify more people for which it can pay for healthcare).

 
A vendor demonstrates a 3.7 ounce smart phone that also contains full ECG capabilities at a Singapore trade show. The owner touches their fingers to the phone, their reading is sent to a 24-hour, clinician-staffed center, and within minutes they get a text message back with the results. $100 covers the device and 10 ECGs per month (do people really need all those ECGs?) The vendor, EPI, also offers virtual health records; a global physician network; and a health suite that measures blood pressure, blood glucose, and cholesterol.

The new Kosair Children’s Medical Center (KY) chooses GetWellNetwork’s pediatric health information solution, GetWellTown, for patient education, discharge planning, and patient workflows.

Versus Technology and Iatric Systems partner to bring real-time location system capabilities to Meditech.

Insurance company Wellpoint, most known for cancelling the medical insurance of newly diagnosed breast cancer patients, will offer video chat house calls starting in the fall.

Botswana opens a 200-bed digital hospital that includes an EMR, PACS, a wireless network, cart-mounted PCs, wireless telemetry, and VoIP telephones. I’m not sure its American consultants did them a favor by introducing Western methods: “For example, the notion that in the outpatient setting you get triaged by a nurse, seen by a doctor, then down to lab and radiology for tests, then back to OPD to checkout is a completely different process for them.” I bet they had some really primitive ideas before, like making the freely mobile employees come to the ill patients instead of vice versa.

The suspension of CPSI’s CFO until a misappropriation of funds investigation is complete hurt the stock a little today, with shares down 8.3%.

You can’t make this stuff up: one of the several ambulance-chasing “breaches of fiduciary duty” law firms trying to work up a class action investor lawsuit against Eclipsys is Bull & Lifshitz, LLP.

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Small hospital IT vendor Computer Program and Systems Inc. of Mobile, AL filed SEC documents last night indicating that VP/CFO Darrell West has been placed on administrative leave pending an investigation into suspected misappropriation of company funds. West is suspected of using a company credit card to pay a $55,000 personal tax bill.

CPSI’s Audit Committee is conducting an internal investigation and has authorized engagement of a forensic accounting firm. The company says it expects the matter to have no impact on previously reported earnings, its financial position, or results of operations.

The publicly traded CPSI has a market capitalization of $467 million. Shares closed Wednesday at $42.55, with a 52-week range of $32.78 to $50.05.

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Glen Tullman is CEO of Allscripts. Phil Pead is president and CEO of Eclipsys. This interview was conducted Tuesday evening, June 15.

   

Do you think it’s going to be a distraction, in the heat of HITECH and the window of opportunity that’s there, to be trying to merge two organizations?

Glen:  We are already working together doing many of the things we would be doing as part of the merger. We have top clients of ours who have shared clients like Columbia, like Hartford, like North Shore – Long Island Jewish, who’ve been saying to Phil and to me, separately, “The two of your organizations need to work together to create an integrated end-to-end solution.” So we’ve been doing that in a very haphazard, unplanned way.

The beauty of this is that now we can be much more efficient. Our teams can work together, That actually saves rather than adding complication. That reduces it.

The other piece I’ll tell you is our joint sales forces now have a much broader offering, which is easier to sell, than they did prior to the merger.

The last point I’d make is that usually in a merger the technology is an issue, but the beauty here is that we’re both from an architectural standpoint. We have Microsoft .NET and other technologies that fit together very well.

So from my perspective, it’s not a distraction, it’s actually an accelerator.

Phil:  I’ll just add to that by telling you that we’ve actually had one RFP process reopen after the announcement of the merger because they loved what they saw.

On the poll I’m running, I was surprised that the leading response of who benefits from this is Eclipsys clients, which I didn’t really expect. Does that surprise you?

Phil:  I think maybe the poll views it that way, but I think it’s a great benefit for both sets of clients because as Glen mentioned, we share mutual clients today. New York Presbyterian, Columbia would be a good example of that. Obviously, North Shore, which is our largest client, has also gone with Allscripts.

I think there’s a big benefit, certainly for the Eclipsys clients who are looking to broaden the Sunrise platform out into the community, which was a big driver for us to do this deal. So many of our clients are looking to incorporate the ambulatory physicians into their environment and with the huge footprint that Allscripts has. That meant a lot to us and it obviously means a lot to our clients.

On the flip side, there are a lot of Allscripts clients who would love to create that seamless patient experience going from the ambulatory back into the inpatient. This gives Allscripts an opportunity really, now with Eclipsys, to offer an inpatient solution that ties it all together. Too many physicians used to say, “Look, I’m working in my office, I see a patient, and the next thing you know I work in the hospital and I’m using a different system and I don’t even get the data out of my existing system back in the office.” I think that probably from the poll that you’re seeing it looks that way, but frankly, I think it’s a mutual benefit for both of us.

Glen:  I would just add that this is a merger, and the reason it’s a merger is because both sides benefit. What this is really about is it’s capitalizing on what today is the hottest and most important trend in healthcare, and that is hospitals are aggressively moving to capture the communities that they operate within. Hospitals have said, “We want to connect to physicians. That’s our lifeblood.”

If you think about that, each physician is worth between $1 million and $2 million to a hospital, so they want to be connected. They can’t buy all those physicians, so they want to connect with them. It would be easier to do business with them and do that electronically.

Eclipsys is tops in terms of usability in hospitals. If you believe the US News and World Report list of best hospitals, of the top 21, 18 are Eclipsys. We’ve got the top hospitals that are now going to be connected into the largest base of physician practices out in the community. It’s more than 40,000 practices.

I use the analogy — if you were starting a new bank and you came into a community and said, “I’m starting a new bank and I want to have an ATM network,” and you had a choice: should I build one, or should I connect to the ATM network that already has 40,000 locations? The choice would be, of course, connect to the network that’s already established that has 40,000 locations.

What we’ve done by putting these two companies together, we’ve created a new company that essentially has the top hospitals connected to the largest network in America of not only physicians, but ambulatory care. Post-acute care facilities, I should say. So when you talk about closing the loop of care … because at the end of the day, this is about the patient having one record and that means you pull information from the hospital, from the ambulatory world, and from the post-acute world, and you present it in one patient record. That’s what we can do today. No one else really has those capabilities all bundled together.

Both companies clearly had a reason to both hate and fear Epic. How does that change with the merger?

Glen:  I don’t think it’s so much hating and fearing Epic. I think the fact of the matter is that Epic’s solution is based on 25-year-old software. They have an ambulatory system that doesn’t really work for smaller practices, and that’s half the physicians in America. It’s the equivalent of trying to put a mainframe into a two-doc office. Can we do it? You can do it. Should you do it from a cost, quality, and usability standpoint? You really shouldn’t. 

This is less about fearing Epic. I mean, frankly, Epic needs to worry about what we’ve just created because this is a real solution on modern software with a real connection between usable hospital software and 40,000-plus practices that are already using at least one piece of Allscripts software, 10,000 post-acute facilities that are using it. Now you’ve got a real network. Somebody last week, one of the analysts, called it the Verizon of healthcare, which is a real connected network. For the first time, there’s software that can actually be used. I think this is going to create a very distinct competitive advantage versus an Epic.

Phil:  I’d just add to that. If you just look at the healthcare marketplace, the merger will create a network of 180,000 physicians, about 1,500 hospitals, and as Glen said, 10,000 post-acute, but it actually goes beyond that, because one of the things that I think all the physicians really crave is, OK, so now I’m connected — so what?

Well, the ‘so what’ is … and let me just give you a really interesting example of a client that I talked to just the end of last week. One of their biggest problems is that they track all this data, or all these hospitals do this. They showed — and this is a typical big scenario — one patient that showed up seven times over a two-year span for the same problem in the hospital. When they analyzed why that happened, this patient shows up in the hospital the first time with this problem and they’ve got the best, brightest minds with all the CPOE, the integrated environment the hospital creates, and they see this patient and they go, “I know what’s wrong with this patient,” and they follow the protocols that are already built into order entry. They’ve got their order sets, they take care of this patient, and the patient leaves.

The patient then goes back into a primary care environment and then they start to deteriorate for whatever reason. They didn’t control whatever their chronic disease was. They go to the primary care and the primary care goes, “Yup, I’ve seen this before about 30 years ago, and this is how I treat that patient.” None of the protocols that treated that patient successfully in the hospital transfer to the ambulatory environment.

So, the ‘so what’ here for us is now that we’ve got these physicians connected, our goal is to use clinical analytics and clinical decision support to take the fundamental care that patients are receiving in a hospital. When they move to a post-acute or go back to their home, all these protocols will follow with them so they’re not returning to the hospital at a higher level of acuity because they go back into an environment that doesn’t understand how to treat them.

This is the massive inefficiency that exists in our healthcare system today. What’s interesting is Medicare is going to stop that. They’re already starting at a high level, I would call it, with the Never Events. But at some point when you can look at following a protocol of care and the pathways associated with an optimal outcome that a physician doesn’t follow in an ambulatory setting that results in that patient showing up in an acute care facility and at a higher cost, someone’s going to know that. I think that’s ultimately where we’re going to get to in this bundled payment for quality reimbursement that I think we’re going to move to over the next 3-5 years.

Glen:  One other thing I’d just mention. You mentioned Epic. We are both, Eclipsys and Allscripts, big believers in open systems. We’ll connect to anyone. We’re working with a variety of systems. That’s important because while our offerings will be richer and more vibrant, we are an open system and we believe that the information has to flow. That’s a very big difference from somebody like an Epic.

You mentioned in terms of the differences — again, modern software versus 25-year-old MUMPS; open versus closed; ambulatory — we have it, they don’t; and again, more of a PC versus a mainframe. When you put all that together, what’s really happened is, for the first time, the market has real choice. We think they’re going to choose this new, combined organization that we’ve created together.

Some would say the advantage of Epic is that they’re privately held and all the work that you have to do to integrate two quite different companies and two quite different sets of products has to be done under the careful scrutiny of Wall Street. Are you concerned about how long this will take and what kind of scrutiny you will get while this all takes place under the covers?

Phil:  We actually love the scrutiny. We really do. I think that’s a great point, and the reason that we love it is that you’re going to be able to see the progress every quarter. When you’re a private company, you have no clue what’s going on behind the curtain. You don’t know how profitable they are; how many people they’ve got working on all the problems.

You know, I got LASIK surgery about three years ago, maybe a little longer now. The reason that I chose the company I went with was because they were public. I could read every one of their filings and see who was suing them for not doing a good job. You have no clue what goes on in a private organization.

I like the scrutiny. I think Glen does, too. I’m responsible, with Chris Perkins, for the integration. We’re going to be able to demonstrate the progress that we make, but let me just say this, and I think that Glen started off by saying it. We already have mutual clients that have merged or integrated, where we can believe that there’s a level of integration between our software.

The reason I say, ‘believe it’ is because at their level. what the user sees, what a physician uses at Columbia and that’s integrated with Sunrise, is very real to them. That level of integration has already occurred. You could talk to them tomorrow and they’ll tell you absolutely, I get whatever I need and I’m done. But that level of integration is at that first phase. We’ve made it usable, data transfers, and as far as they’re concerned, they’re done. We’d like to do it at a much deeper level, but it’s transparent to the user. That’s the first thing.

The second thing is we’re both Microsoft .NET and SQL Server. That makes the level of integration far less complex as a result of the platforms being the same, and as Glen mentioned earlier, the open architecture that we have. Allscripts has an architecture called UAI and we have Helios. The similarities are quite amazing, and of course we didn’t realize this until we started doing our diligence, but both of us have abilities to actually integrate levels of applications at a speed that would be very difficult if they were Oracle, Linux, MUMPS. It’s just fortuitous in many ways that we’ve got the similarities in the platform.

As far as the operational integration goes; again, there’s incredible complementary resources between the two companies. I won’t get in and bore you with all the details, but I will tell you that operationally, Allscripts was taking advantage of some of the back office functionality at Misys. They can now take advantage of the back office functionality of Eclipsys. It almost transfers over pretty neatly when we move the operations into a combined company.

We have substantial resources in India for development, for product support, for back office finance functions. Allscripts can take advantage of those. We’ve already mapped out — and of course, we’re going to get down into it at a far deeper level of detail now — but we’ve already mapped out exactly how the integration would work on an operational level. We’ve already started our planning an integration team on the product side.

We’re already getting excited because we’ve already been able to do stuff in just a few days because we’re actually working together, as Glen said, in an organized fashion as opposed to two companies separately sharing clients out there. We can actually do things that we never thought about doing earlier and we can do it a lot more quickly.

Glen:  The timing is perfect. It’s interesting. We were just getting ready to spend millions of dollars on upgrading to a new financial system and, lo and behold, one of the choices is one that Eclipsys is already using and they have great expertise in. Now that makes that decision and saves millions of dollars. It makes the decision easy and they have the expertise to do what we would have probably struggled with. Again, when you look at some of the things we have to do, it fits together very well.

I’d also point out … you talked about being public. Being public means you have a certain discipline, and when you’re well-managed, you don’t mind that. But if you look at what we’ve created together, this is a company that’s going to be accretive in 2011. This merger is going to be accretive, number one.

Number two, we’re going to be producing $40 to 45 million per quarter free cash flow. Forty to $45 million per quarter free cash flow. And we’re talking about a synergy, cost synergies, that will ramp up to about $40 million per year. When you look at those numbers … and doing all that, our R&D spent between the two organizations will be one of the highest in the whole industry. With all of that, we can create great returns for our mutual shareholders and yet deliver world-class products.

Phil mentioned Sunrise 5.5. That’s brand new, it’s coming out. It’s been a year longer than anyone else — a year in QA and QC to make sure that this product, when it hits, is perfect, or as close to perfect as software can be. In the first installs, we’re seeing that … all that investment.

Similarly, on the Allscripts side, both our Enterprise and Professional products have been updated recently. We’ve worked through some of the kinks that we had in the Enterprise product. Professional, that came out — the full redo of that — without any issues, and it has the least number of defects, I think, of any product in the industry.

Quality products, strong financials, and a great base to draw from. We think that when you put these together… You know, the most important thing, I’d say is the genesis of this transaction. Sometimes you see companies merge and say, “Why’d they do that?”  Other times you see companies merge and the clients scratch their heads. This merger was driven, in large part, by a lot of our clients, some of the most prestigious organizations in the country, who said, “The two of you belong together. This would be better for the client if you were  and better for the industry.” A lot of people are frankly saying it’s wonderful to have an alternative to some of the old-time choices that they had before. We think that the clients’ reaction has been strong and we couldn’t be more excited.

There was a number given, I think, in the conference call of expected annual growth of 8-10%, which doesn’t seem all that impressive. Is that basically just under-promising and over-delivering?

Glen:  Well, there’s a little bit of that, but more important, a strength of both organizations is almost 60% of Allscripts revenues — and Phil, roughly the same amount for Eclipsys? — are recurring.

Phil:  That’s right.

Glen:  So you’ve got this enormous base of recurring revenue because we both have such great customer bases. The problem with that … that’s great news for an investor, but on the flip side, that base doesn’t grow the way new sales grow. When you look at that, that base is probably growing kind of CPI. The base is growing 2-3%. If someone’s paying you software maintenance on their software from year to year, you’re not going to be increasing that very much because that’s so big. If that’s only growing — that huge base of 60% of your business — is growing 1-2%, to get to 10%, that means the other parts of your base have to be growing 20, 25, 30%. That’s surely true in areas like electronic health records, where our separate growth in those areas is in the 20s and 30s. Again, you have to accept it.

Phil:  Yes, the metric there is really on backlog growth. As Glen said, if you remember on the Eclipsys pricing model, we sell predominantly on a subscription basis and we spread that revenue over a 5-7 year period. Unlike a Cerner, for example, that takes revenue upfront, that’s why you’re going to get a different metric. But the metric to follow is really the number of deals that we’re signing and the backlog growth that we have.

Glen:  By the way, it’s better for — let’s be clear — it’s better for the clients if you balance the revenue with how they use the product, as opposed to taking a big hit upfront the day they sign it. That’s not a benefit to anybody. We actually have to do the work to get paid for it. We think that’s good for clients, and it’s good for us. It aligns us with our clients.

Probably the one consistent observation is, gosh, there are too many EMRs now under what will be the same banner. Surely some of them have to be retired. What are the thoughts about, are there too many and are there plans, preliminary or otherwise, to prune the family tree a little bit?

Phil:  I love this question. It’s a great question, and I’ll tell you why I love it. It’s because the marketplace demands different kinds of solutions depending on the workflows and specialties of the physician practices and the workflows and complexities of the acute care environment.

Let’s just take the ambulatory piece, and I’ll let Glen jump in here, but if you look at our combined ambulatory EMR solutions, you’ve got MyWay — great product for the single-physician practice, simple, easy to install, allows them to keep a workflow that allows them to see a patient every 15 minutes. Primary care, they’ve got 50 codes they need to bill, and they’re in and out and done.

PeakPractice on the Allscripts side is a great product that will take the market slightly bigger than that, where they’re looking at a more complex environment, and Peak is Software as a Service. Again, it’s a great technology. It’s brand new. As you know, Eclipsys purchased that from a company the end of 2008. We’ll be able to take advantage of some of the great content now that Allscripts has and pour that into the Peak product so we’ll be able to address that next tier up in the segmentation of the physicians.

Then you’ve got the mid-tier market, so we’re looking at the 10-20 physician range, and that’s where Professional fits. Again, it takes those physician practices with a higher level of complexity, different workflows, and Professional is a perfect product for that.

Then you go into the larger-scale practices; the faculty plans, all that good stuff. That’s where Enterprise plays, and that’s where Enterprise is being very successful. Now what you need to do there is you need to do something a little different. You’ll still be able to sell Enterprise on a standalone basis because you’ll still have the large physician practices out there who may want to have a standalone, but a connection back to the hospital. But more often than not, that’s going to be a full Enterprise solution where you’ve got the content and workflows of Enterprise being integrated onto the Sunrise platform.

Again, .NET, single database, single sign-on, auditing, context management will all be built into the Eclipsys platform. So now you get a seamless environment between the owned physicians — especially if they’re at a big group level, faculty plan, and so on — back into the hospital. We see zero overlap on the ambulatory side and we see that market segmentation naturally fits into our respective product lines.

Glen:  It’s interesting because if we wanted to optimize our bottom line, sure, we could only have one. I mean, Epic only has one. The problem is it doesn’t work in a one-doc or a five-doc practice. You’re trying to put a mainframe where a PC can do the job.

Phil:  Which is the majority of physicians.

Glen:  Yes. So they’re actually not optimized. I mean, again, look at the auto industry. You have a pickup truck, you have a minivan, you have a sports car. Imagine if somebody said to you, “Don’t you think you have too many? You have three different ones.” People would laugh. They’d say, they’re for three different uses, three different markets. Even within that, you have some variation for different specialties and the like.

There’s a reason that Eclipsys has been the leader in CPOE. There’s a reason that Allscripts has been the leader across each of the small-doc, midsize-doc, and large-doc practices in the market. That’s because we have products that fit the needs of our clients. The reality is if the clients stop buying them — you know, it’s great to speculate; for analysts and everybody else to speculate — but the fact of the matter is the clients are buying them and they’re buying them in record numbers.

If you look at our numbers from last quarter, last quarter we actually raised our guidance on bookings, on sales. Then, one quarter later, as you heard our CFO Bill Davis report when he announced this merger one quarter later, we’ve substantially exceeded the guidance we had given one quarter earlier for sales. Why did we do that? Because the clients are buying. They like the offerings that we have.

Ultimately, at the end of the day, people can speculate, but I like to use the metric of who’s buying the most. Where we see that, the clients are buying. We feel like the strategy works and that’s, I think, the best vote in the marketplace.

Phil:  One more point, not to bore you to death here, but Sunrise Ambulatory Care, for example, on the Eclipsys side, will benefit hugely from the richness of the content that Allscripts has built up over the years. Again, if you’ve followed Eclipsys, we have really great clients using Sunrise Ambulatory and we’ve made, I think, a huge market out of the oncology area. Now we’ll be able to really address a lot of the other ambulatory specialties which will benefit from that content and workflow out of the enterprise.

So when we talk about too many, we’ve actually got a perfect number, and we’re going to be looking to integrate back onto the Sunrise platform at the top end; and then work our way down through the segmentations. But every single one of those products will connect back to the hospital at whatever level of integration the hospital desires and the physician desires.

Glen, you mentioned some of the analysis commentary. When you look at what you’ve read after the announcement, both from the analyst perspective and from the industry perspective; are there aspects of what people have said that you think are either unfair, or that they’ve missed key points about why you’re doing this?

Glen:  I think that generally, the industry has understood, the analysts have understood, the investors have understood the strategic rationale. I think everyone buys into that. I think where people have had some confusion is the structure of the agreement. That is, why is Misys, who owns 55%, selling, and how is it structured?

The reality is there’s a technical rule on the London Stock Exchange where Misys PLC is traded. That says if you’re going to make an investment, you either have to control that investment, or it has to be de minimis. To translate that in rough terms, you either have to have more than 50% or less than 10%.

Because of that, when we came along and our Board looked at this and said, “It is a perfect fit here for Allscripts and Eclipsys to come together,” we looked at that and we said, “Boy, the way to do this is to use stock for this transaction, because that way, the Eclipsys shareholders and the existing Allscripts shareholders all benefit from this new, combined organization that we’re going to create.”  So that was the way to do it.

The problem is if you use stock to facilitate this merger, then all of a sudden the shared ownership of Misys PLC would drop down to 40%. That’s not allowed, because now they don’t control the asset and it’s not less than 10%. They were faced with a decision: should they invest hundreds of millions of dollars more in that company or should they use the opportunity to give their shareholders $1.3 billion back, keep 8% of the company, and allow us to move forward strategically in a way that best suits our own shareholders?

I think they made a very good decision. That decision is good for their shareholders. They have a billion dollars. That decision was good for Allscripts. The shareholders have a better position than ever. That decision benefits the Eclipsys shareholders because they’re going to, from this combined company, they’re going to have a larger, stronger platform to work with.

I think it was a smart decision, but I think there’s been some confusion because people don’t understand the intricacies of the London Stock Exchange and why Misys was essentially forced to either divest a large portion of their holdings or invest hundreds of millions of dollars more to keep their share above 50%.

I think that’s the most confusing part of what is otherwise a very strategic and understandable transaction. I mean, in today’s world, if you look at this, we’re combining two companies in what is one of the hottest, fastest-growing areas in the largest sector of our economy, and that’s healthcare. It is a $30-billion government stimulus being injected, and getting that money is all based on utilization. Just taking the two companies that are the leaders in utilization, Eclipsys in CPOE and Allscripts in the ambulatory area, and we’ve combined them to create a new powerhouse in this area of healthcare that is going to change the way healthcare is driven in America.

If I were going to grade the two of your performances, let’s say two years after the acquisition closes, what should my criteria be? 

Phil:  Let me start, and I’ll tell you from a shareholder perspective, I would like to see you grow the top line and prove your earnings per share leverage over that period. If I was a client, I would grade you by the integration between the product solutions to make this a great experience for their hospital and ambulatory environments so that the two came together. If you were looking at it from the employees, I would want to say that the next few years will be some of the most exciting with all the new opportunities they have to plan. Of course, the employee part you know you’ll get because employees love to share their rumors and stuff like that.

Then, finally, I’d tell you that the folks who I think are going to benefit the most from this will be the patients. Too often they’re the ones who get left out in any of these merger discussions, but ultimately, our goal — Glen’s goal, my goal — is to bring to healthcare what we’ve all wanted as individuals. That is, that wherever we receive care, by whatever specialists we see, whatever primary care physician we see, whatever hospital we go to, I won’t have to deal with the triplicate forms. I won’t have to deal with the duplicate tests. I won’t have to deal with an environment where physicians have no clue who I am.

Restaurants today, with OpenTable.com, have more information on me as somebody just sitting down to dinner than a physician has one me looking at me and my health, my life. If Glen and I can truly change that in the next two years by what we’re doing, then frankly, I think this has all been really worthwhile.

Glen:  There is nothing I can add to that, which is rare for me, but I think that summarizes it perfectly.

Is there anything I didn’t ask you that you want to talk about or any concluding thoughts?

Glen:  I’d just say that it’s really a privilege — and I think both Phil and I feel this way — to have this opportunity to provide a connected system of health that really gives an integrated, end-to-end solution, which is what everyone has been … that’s been the Holy Grail of healthcare, and it is within reach.

We’re in the perfect storm of all the reasons that people should change. The financials are there, the need is there, physicians are ready, the software is ready. This is the most exciting time in healthcare that we’ve ever had. We feel, like sitting on top of this new organization, we have a very unique opportunity and it’s a great opportunity, as Phil said, for all of the stakeholders in healthcare.

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