From Allscripts: “Re: the note from Clinical Wisdom on KLAS. We agree that there is a conflict of interest in having vendors pay large fees to the same company that is producing the ratings. We reached the same conclusion a few years ago and discontinued the practice. After our recent merger with Eclipsys, we inherited an existing Eclipsys contract that was in place with KLAS, so the information reported by the writer was technically correct. However, we have now canceled that contract and we do not currently pay KLAS anything. We realize that is counter-intuitive as we currently are and have consistently been highly rated across many product categories by KLAS, but ultimately we didn’t feel it was right to pay a firm that was also rating our products. Over the last two years, we have re-invested those dollars in a ‘Net Promoter Score’ process, which is widely considered across many industries to be the ‘gold standard’ for measuring customer loyalty. Using this rigorous, statistically valid methodology (developed by Satmetrix and Bain & Company), we get client feedback directly in a very methodical way and then act immediately on what we learn. The bottom line is that we agree with the Consumer Reports analogy from the writer – KLAS should provide a full accounting and disclose what they receive from every vendor. In that same light, we would encourage other vendors to disclose how much they are paying KLAS – complete transparency is critical when you’re talking about the core technology that providers use to make decisions vital to every American’s health.”

From Ben Cannoli: “Re: IOM’s study of HIT best practices. The IOM report is incredible even after a decade. I’m glad they are leading. HIMSS has been weak, negligent, and pathetic on this issue, but I don’t believe they can strong arm the IOM.” Inga mentions it below. The IOM gets an ONCHIT grant to look at how HIT affects patient safety. It will cover some industry hot buttons: surveillance and reporting of HIT-related patient safety issues, discussion of the possible roles of federal agencies like FDA or AHRQ, and impact of certification bodies and trade associations (HIMSS, you’d expect). I’d bet that Don Berwick made this happen. I don’t know how much they’ll get done for $1 million, but I’m interested to find out.

From Digital Bean Counter: “Re: real-time claims adjudication. Is it taking off yet? Any big players?” Little help, if you know.

From VaHooGirl: “Re: Martha Jefferson Hospital. No longer a rumor – they are merging with Sentara to become its 10th hospital.” Verified.

From TuTu True: “Re: Mrs. HIStalk. A source tells me that Inga is Mrs. HIStalk. Be honest – true or false?” False. And to answer the other occasional rumors: (a) yes, there really is an Inga – it’s not just me pretending to be her;  (b) yes, she really is a woman, and (c) yes, the Inga picture at the end of her posts really does look like her since I paid some offshore artist $15 to draw it from a photo.

From Luke O’Scyte: “Re: correction about the Canadian government spending $500 million on EMRs. Please replace ‘spending’ with ‘wasting.’ I’m highly skeptical of the value that will be generated from that half a billion dollars.”

From Portly Gentleman: “Re: Allscripts. A couple of executive suite offices are about to become vacant.” PG provided credible names and I’m sure his information is correct, but I feel funny about mentioning names of people leaving jobs. Watch for announcements early next week.

From MSFTGUY: “Re: McKesson Paragon. Just went live at 391-bed Lake Charles Memorial. Several big hospitals have gone live on Paragon this year. Maybe folks have a choice between a system that doesn’t work and is only 1/3 of an HIS (Cerner) and one that’s ridiculously irresponsible to purchase (Epic)?” I did some work at that hospital once. Nice folks. None of the systems you mentioned are for everybody, so it’s hard to criticize their choice, especially if it was a lot less expensive.

From Perineal Flowers: “Re: [name omitted] is one of two finalists to be CIO of Tenet.” I’m expunging the name since I’d sure hate to get someone fired if they don’t land the rumored new job after all, but I did manage to contact them. They humorously (or so I assume) told me the rumors also have them going to Allina, Duke, and Partners, all of which have open CIO jobs along with Tenet. I’m pretty good at reading between the lines, so I think there’s fire underneath that smoke. We’ll see from which direction soon, I’m betting.

Listening: The Tyde, obscure, Byrds-like LA jangle surf. 

A scrappy Austin-based non-profit investigative publication runs a pretty good story on the ongoing sale of de-identified hospital patient data by the Texas Department of State Health Services. Among their customers: GE and a company that runs background checks for border security. Deborah Peel MD was quoted as saying that a HIPAA loophole allows selling patient data to any entity that claims to be doing “research”, which isn’t defined. Now this is funny: the only parties that stay anonymous aren’t the patients, but rather the people who download the free data files covering 1999-2003. The article wanders all over the place and is predicated on your believing that de-identified data can be re-identified (which it definitely can to some reasonably high percentage, but some people refuse to believe that fact). If newspapers weren’t going broke, they should fund a re-creation of that experiment where patient data was re-identified by linking to common fields from other government-sold databases, such as driver’s license records.

Here’s another fun tidbit from the Austin article, even though I don’t believe its accuracy. The guy who wrote The Long Tail estimates that free EMR vendor Practice Fusion takes in $250 million per year from selling the de-identified patient data stored in its systems, dwarfing any possible revenue it could make by selling software. It cites a Practice Fusion job ad on Craigslist for a Data Sales Director, someone with experience creating “an aggressive data monetization strategy” who can pitch to “pharmaceutical companies, medical device companies, insurance carriers, government entities …” and “establish a fair market price for EHR data and negotiate effectively with buyers.” That position is still being advertised on Practice Fusion’s site, but the language has been dialed back a lot.

Cerner caves in to patent trolls Acacia Research (“research” meaning “writing threatening lawsuit letters to companies to see who will pay up”) and will pay that organization for the privilege of selling PACS, which Acacia’s often-waved patent claims they invented. Acacia’s strategy is smart: they threaten to sue, but offer a license for less money than it would cost to mount a legal defense. Most companies pay up and the threatened suits rarely go to court, although Epic mounted a swift legal counterstrike for being threatened. I never heard how that turned out, but it doesn’t matter – I still admire their willingness to fight for what’s right.

This is brilliantly funny: You may know Ross Martin, MD as the guy behind the HITECH Operetta and Meaningful Yoose Rap in his role as President of The American College of Medical Informatimusicology, although he has a less interesting but probably much more lucrative HIT consulting job. He writes a hilarious letter to the editor of The New York Times for not publishing a previous letter of his, threatening a class action suit by rejected would-be authors and signing it, “Yours in the quest for wealth creation through victimization, President, Literary Mediocrity Association.” They whittled his piece down to a paragraph, but they did run it. I think the HIStalk audience is more appropriate for his type of humor than that little New York paper.

WorkflowOne, which claims to be “the nation’s leading name in healthcare document management,” puts that leading name on a Chapter 11 bankruptcy filing. Premier just renewed its contract with the company, claiming that “no one is better prepared to help Premier members reduce costs and gain efficiencies across their entire print lifecycle than Workflow One.” Doh! Still, the company has big revenue and EBITDA, so I’m sure they’re not going anywhere. It seems odd that they even filed, frankly.

Lots of good jobs on the HIStalk Sponsor Jobs Page: Eclipsys Pharmacy Consultant, Natural (Software AG Product) Programmer Analysts, McKesson Workflow Clinician. On Healthcare IT Jobs: Product Manager, Lead Epic Analyst, Senior Clinical Systems Analyst, Solutions Marketing Specialist.

Sharp Healthcare chooses Aternity Frontline Performance Intelligence to monitor application user experience.

Vanderbilt launches its first preventive genetic screening program, testing all cardiac cath patients for clopidogrel metabolism problems and storing the results in their EMR so that a different blood thinner can be used if needed, avoiding expensive and dangerous blood clots. Several other drug-affecting genetic traits will be tested as well. Now that’s just cool.

Several national pharmacy organizations launch the Pharmacy e-Health Information Technology Collaborative, which will work to get pharmacist-needed functionality into EMRs.

CMIO interviews one of my favorite CIOs, Denni McColm, from 74-bed Citizens Memorial Healthcare in Bolivar, MO (the only one of very few HIMSS EMRAM Stage 7 hospitals, a standout on the list dominated by big, rich health systems). CMH has a bi-directional CCR interface with Google Health that Denni says will meet Meaningful Use requirements, saying interoperability doesn’t necessarily required an HIE. They’ll use Google Health to make sure patients who ask get a copy of their medical record within the MU-specified timeframe.

ChartLogic earns EHR certification from Drummond Group.

iSoft convinces its bankers to reorganize the company’s debt. Shares are still at 13 cents. You would think those two events might attract takeover interest, but the company’s chair says conditions remain “challenging.”

A Chicago cardiologist will pay $20 million and spend five years in prison for defrauding Medicare and private insurance of $13 million, turned in by another doc who gets $3.5 million as the whistleblower. The cardiologist submitted 14,800 false claims that added up to more than 24 hours a day of work from 2002-2007, so he enjoyed a lavish lifestyle until the case finally ended. When the Feds raided his house, they found $6.7 million in uncashed insurance company checks.

E-mail me.

HERtalk by Inga

The Allscripts/Eclipsys crew sent over an invite to EUN 2010 Outcomes Through Innovation, which is the user meeting for Eclipsys clients. Wish I could go because it’s in one of my favorite cities, San Diego. The event is October 10-13 at the Manchester Grand Hyatt.

The board of governors of Good Samaritan Hospital (IN) approves the $400K purchase of McKesson’s PACMED and MedCarousel pharmacy packaging systems. At the same board meeting, the director of IS says the hospital is on target to earn nearly $7 million in ARRA incentives over the next six years.

St. Vincent’s Healthcare (FL) extends its seven-year partnership with TeleHealth Services. The health system will implement TeleHealth’s TV and interactive patient education solution at St. Vincent’s and St. Luke’s hospitals.

I noticed that Intellect Resources posted this article about the current shortage of IT professionals in the Nashville area. Middle Tennessee is home to a number of large HIT employers, including HCA, HealthSpring, Cogent Healthcare, and ICA. Several companies are working with on training initiatives at area colleges to help increase the pool of professionals with both healthcare and IT expertise.

Merge Healthcare adds two new perioperative solution clients: Exempla Saint Joseph Hospital (CO) and Kalispell Regional Medical Center / The Surgery Center of Northwest Healthcare (MT).

If you are headed to the American Academy of Pediatrics show this weekend in San Francisco, say howdy to HIStalk Practice’s Dr. Gregg Alexander. He’ll be directing the Pediatric Office of the Future exhibit, which will showcase technologies available for pediatricians. Dr. Alexander is pretty darned excited by the project, as evidenced by his  latest Intelligent Healthcare Integration post.

ONC awards the Institute of Medicine a $1 million contract for a year-long study of HIT’s effect on patient safety.

The Tiger Institute for Health Innovation celebrates its one-year anniversary and provides an update of its work to date. The Tiger Institute is a partnership between Cerner and the University of Missouri Health System to create new technologies. So far UMC has implemented bar-coded medication administration and is rolling out CPOE in a couple of months (not sure why that would be considered innovative) and is working on several prototype projects, including a mobile app that allows physicians to review clinical data and give orders via smart phones.

CIGNA and St. John’s Mercy Medical Group (MO) launch a 12-month accountable care organization pilot program. The pilot will target patients covered by a CIGNA health plan and receive care from one of St. John’s 165 primary care physicians. Physicians have the potential to earn bonuses for meeting quality improvement targets and lowering medical costs.

Mayo Clinic and five other health systems form the Mayo Clinic Center for Social Media, dedicated to the use of social media to promote health, improve healthcare, and fight disease. The Center will offer educational conferences and webinars and develop social platforms to share training and resources. The website www.socialmediahealthnetwork.org will launch October 25.

Baptist Health (FL) partners with Vitalz to provide provider-to-provider portal services between 13 Solantic Baptist urgent care centers and 40 Baptist primary care offices.

Texoma Medical Center (TX) implements Skytron’s RTLS to track and manage 200 hospital assets. When reading the press release, I was amused that either the hospital or vendor thought it was noteworthy to mention that Texoma is also using the RTLS technology to monitor vendor sales rep visits.

This week on HIStalk Practice: BlackBerry thumb, cell phone elbow, and Facebook depression; medical students say having an EHR is a very important factor in their decision what to practice; Phreesia and a few first impressions.

Sponsor Updates

• Fred Castillo, VP of healthcare mobility sales for AT&T and Eleanor Chye, executive director healthcare mobility product management at AT&T will participate in separate panel discussions at the CTIA Everywhere Healthcare event next week in San Francisco.
• Methodist Hospital of Southern California goes live with API Healthcare’s Human Resources and Payroll solution.
• Sharp Memorial Hospital (CA) selects GetWellNetwork’s bedside education/entertainment system. GetWellNetwork’s patient education and communications tools will be interfaced with Sharp’s Cerner EMR system.
• Susquehanna Health (PA) plans will add the perioperative information management system of Surgical Information Systems to its three-hospital system. Susquehanna will integrate the SIS solution with its existing Siemens Soarian applications.
• Albemarle Hospital (NC) selects the Access Intelligent Forms Suite to bar-code patient forms for auto-indexing via a document management system into its Meditech EHR.
• Ingenix CareTracker earns CCHIT Certified 2011 Ambulatory EHR certification.
• Zac Fritz joins My Health Direct as SVP of sales and marketing.

Here at HIStalk, we love well-intentioned works of charity. Thus, I applaud Cincinnati Bengals wide-receiver Chad Ochocinco for promoting contributions to Feed The Children. Ochocinco has his own personalized “OChocinos” cereal and includes a Feed the Children phone number on the box. At HIStalk, we’re also about getting the little details right, so bummer that Ochocinco didn’t get Mr. H to proof the cereal box. Perhaps he could have caught a certain typo before the box it hit the production line. Mr. H likes the occasional smut reference, so I’ll mention that the Feed the Children phone number listed was actually a phone sex hotline. Oops.

E-mail Inga.

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Submit your article of up to 500 words in length, subject to editing for clarity and brevity (please note: I run only original articles that have not appeared on any Web site or in any publication and I can’t use anything that looks like a commercial pitch). I’ll use a phony name for you unless you tell me otherwise. Thanks for sharing!

"Granularity" — A Detailed Analysis
By Robert Lafsky, MD

“Granular” is turning into a buzzword. And that’s not a good thing.

It was a perfectly respectable, albeit not very useful term in the analog days, referring usually to a physical material composed of — you know, little granules. You’ll actually see it used sometimes as a descriptive term in pathology and endoscopy reports, and in general use it describes some thing’s particular type of grainy texture.  But then, of course, computer people got hold of it and gave it a much more specific, albeit metaphorical meaning, which I’ll get to in a minute.

Recently, writers in the mainstream media, with their ears always pressed to the ground and desperate for novelty, have picked up on this word and are starting to use it to describe more abstract things, in a way that fails to grasp the IT meaning at all. For instance, the other day political pundit Michael Gerson described a Karl Rove critique of Christine O’Donnell as “granular and well informed.” If you substituted “detailed” for “granular” in that sentence, you wouldn’t have changed the meaning a bit.

But IT people don’t use “granular” to mean just “detailed.” Hard copy or scanned documents can, of course,  be very detailed. I remember a couple of old docs from my training days who would sit with pen and paper and do beautiful two- or three-page, single-spaced handwritten reports on their patients with every bit of the history, physical, and labs on them. It was impressive effort, very detailed, but even if you found those reports now and scanned them into your EMR, the information in them wouldn’t be granular.

No, for a computer, detail is necessary for granularity, but it’s far from sufficient. The computer has to be able to do something with the details so that it can store them in an orderly way and then use them for searches and reports. That sort of thing, of course, is the “use” that at least has the potential to be “meaningful.”  

So if, say, a particular drug for hypertension is found to be dangerous for everybody over 60 with diabetes, I don’t have to go manually through a thousand records. They are recorded in a yes-or-no fashion in a database. I can query my system and get an immediate list of all my patients who meet those criteria, with their addresses and phone numbers.  

That’s granularity. Facts have to be detailed, but in a fashion where computers can take advantage of them.

Maybe this is obvious to the IT business readers out there, but I sure spend a lot of time in the doctor’s lounge painstakingly explaining this to medical colleagues. And granularity is at the heart of all the arguing about workflow issues in EMRs, as well as interoperability and the coherence of automated reports that rages in the comment sections of this website and elsewhere.

I can’t offer a resolution of any of these arguments. But to get anywhere, we need commonly defined terms, and granularity is a pretty useful one. General media people out there, if you mean “detailed,” say “detailed.” Leave “granular” for those that really need it.

Robert Lafsky is a gastroenterologist in Lansdowne, VA.

A HCIT System Architecture for Cloud Computing
By Mark Moffitt

Note: This article uses a fictional story about Google and Meditech as a backdrop to describe a healthcare IT (HCIT) system architecture for cloud computing.

(Oct. 1, 2020) Today marks the eighth anniversary of Google’s purchase of an obscure private company know then as Meditech that marked the beginning of the transformation of the HCIT industry into what it looks like today.

At the time, the purchase shocked everyone. Over the years, Meditech had repeatedly rejected any notion of a buyout by another company.Then Google offered $1.5 billion, more than a 50% premium on the estimated valuation of the company. The offer, it turns out, was too good to turn down. Neil Pappalardo of Meditech walked away with a $400 million payout. Google’s market cap at the time: $168 billion.

The Vision

Google’s vision for the future of HCIT was straightforward: provide all IT services to healthcare system as a cloud computing service at a price much lower than market rates as a strategy to capture 60% of the worldwide market by 2020. Google’s service included applications, data management, and integration. Google architected the system from the ground up for cloud computing, so they were able to offer the service at a much lower price while realizing higher margins than competitors.

Google bought Meditech for its customer base and use case models that had been hardened by use over many years. Google took Meditech’s functional specs and enhanced and implemented them in a new architecture. In addition, Google purchased several other HCIT vendors and integrated them to provide a total HCIT solution to customers.

Data Storage

Google did not use a relational database management system (RDBMS) as was common at the time, and instead used schema-less, key-value, non-relational, distributed data stores, aka as NoSQL.

RDBMS scale well, but usually only when that scaling happens on a single server node. When the capacity of that single node is reached, you need to scale out and distribute the load across multiple server nodes. This is when the complexity of relational databases starts to bump up against their potential to scale.

Goggle’s key-value data store model improves scalability by eliminating the need to join data from multiple tables. As a result, commodity multi-core server hardware can be used that are far less expensive than high-end multi-CPU servers and expensive SANs. The overall reduction in cost due to savings in database license fees and maintenance and hardware is around 70% when compared to using a RDBMS. Database sharding and the “shared-nothing” approach is ideal for managing large amounts of data at a low cost.

Three Data Types

Another concept introduced by Google was segregating data into three buckets — transaction data, results data, and analytic data — and managing each differently. Competitors at the time combined all three into one big, complex RDBMS.

Transaction data — what was ordered, when and by whom, what tests were performed, or what meds were given to a patient — are persisted to a transaction data store. At some point, all of the transactions related to a patient encounter are collected in a single electronic medical record file and compressed to about 10% of original size. Results are also contained in this file but not images, due to size, as was the case with the original paper medical record and film file.

The compressed medical record file provides an interactive view of the patient’s encounter to satisfy legal and payment inquiries. These electronic medical record files are stored securely in the cloud. Records are never transferred between organization; rather, access is authorized and the record viewed from the cloud.

Data is purged from the transaction data store once the electronic medical record file is created. The transaction data store remains a constant size and, as a result, it retrieves data faster and is easier to manage than if the transaction data store grew in size. Transaction data is concurrently stored in a separate analytic data store and is not purged.

Google partnered with several business intelligence vendors to offer advanced analytical services from the cloud using the customer’s analytic data store.

Results such as images, labs, reports, and waveforms are also stored in schema-less, key-value, non-relational, distributed data stores.

The three buckets — transaction data, results data, and analytic data — are each stored across multiple commodity server hardware using a “shared-nothing” approach. Scaling any individual bucket for a customer is almost as simple as adding server hardware.

Integration

Google used a derivative of their search engine technology to integrate a patient’s records and results across multiple providers and systems.

Application Development Framework

Google used an application development framework that was easier to build and deploy software. In a RDBMS, application changes and database schema changes have to be managed as one complicated change unit. Google’s key-value data store allows the application to store virtually any structure it wants in a data element. Application changes can be made independent of the database.

In addition, Google used a scripting language for code that changes most often — user-facing code. Both of these features combined to make software development easier and allowed applications to iterate faster. In software development, the rate of innovation is directly related to the rate of iteration.

Mark Moffitt, MBA, BSEE is the former CIO at GSMC in Texas and is working as an independent consultant while he searches for his next opportunity.

Software Upgrades – To Be or Not to Be? That is the Question
By Ron Olsen

The day your facility installs a new piece of software, you rarely think about the upgrades that will inevitably come later. You probably ask if such upgrades are included in the maintenance agreement, and then shuffle away that information for future use … or not.

Many times an upgrade is more than just a requirement from the vendor — it’s a welcome relief that offers bug fixes, provides additional functionality, and many times, increases productivity, which equates to money-saving. Hey, any time we humble IT/IS guys and girls can do something to keep the CIO happy, we’ve got to jump on it! That’s what IT should be all about — increasing the ability to save money and/or help other departments increase revenue streams.

Most of us have been caught in the XP vs. Vista vs. Windows 7 debate. The old adage, ‘If it ain’t broke, don’t fix it’ seems applicable here. XP works fine. Vista is, well, Vista. Windows 7 has generated a lot of hype. Windows 7 offers many enhancements, but if your organization’s PCs aren’t up to it, the new bells and whistles aren’t available. To get the full feel of the new Internet Explorer 9 beta release, Windows 7 is now required.

This is just one example of how an upgrade is never a simple, single-issue vote. There are dozens of interrelated concerns that an IT department must evaluate before pulling the trigger on a software upgrade.

And then the software compatibility issues. How many times have we heard from a vendor, “It’s not certified for (fill in any number of OS versions) yet!” This causes a push me – pull you effect. Some vendors are pushing you to move forward, and others you have to pull along with you.

Things to consider before upgrading your software:

1) Can you adjust your current processes to take advantage of new functionality? Many times we take an upgrade and claim there is not enough time to do a full evaluation prior to going live. Then, we certainly do not have time to go back and look again. This could actually cost your company money in the long run, instead of delivering the benefits of a well-planned project.

2) Downtime can be a deal-breaker for upgrades. No department ever wants to experience downtime unless it’s unavoidable. How will each department test the new upgrade? Do they have a full test system to work with? If all of the issues are thought out beforehand and these questions answered, upgrading shouldn’t be that painful.

3) Does hardware need replaced? Could this be a great opportunity to replace some old PCs and servers? Is this the catalyst that moves your facility to server virtualization …finally?!

4) What vendor software (enterprise forms management, ECM/EDM, etc.) will need to be upgraded simultaneously?

Thoughtful software and hardware upgrades are usually embraced by end users and the C-level alike. Personnel get new PCs that increase productivity, which keeps the Powers that Be happy once they’ve overcome the initial sticker shock. Just the idea of new PCs gets most staff members feeling like the hospital is moving forward technologically.

Server virtualization condenses the physical footprint of the server room, decreases power and cooling costs, and in most cases, reduces server administrative duties. And with your software running faster with full functionality from vendors’ latest compatible releases, IT/IS will (hopefully) get less end user complaints. Hey, it sounds good in theory!

Just make sure you plan well in advance; get buy-in from department heads, super users and (if you’re lucky) an enthusiastic executive; and communicate openly with vendors and you’ll be good to go.

Ron Olsen is a product specialist at Access.

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From Waterkeeper: “Re: CPOE reality. Another example.” A study finds that electronically preventing entry of CPOE orders for concomitant use of warfarin and sulfa drugs did great at preventing the potential drug interaction, but also delayed treatment in patients for which the simultaneous use was appropriate, causing Penn researchers to stop the study early as being unethical. Says the lead author: “[It] worked extremely well, but putting it in place actually hurt people … it’s naive to think that CPOE 1.0 is going to be perfect. This is a clarion call for continual evaluation of whatever we’re doing in terms of electronic interventions.” You’ve read it here in various interviews, but it’s worth reiterating: CPOE isn’t done just because it’s live and doctors are using it. That’s where the scientific work should begin, but unfortunately usually doesn’t as everybody declares mission accomplished and moves on to some other fire du jour that requires extinguishing.

From EMR Salvage Here, Can’t Bill There: “Re: downtime in Pittsburgh.” Included was an August e-mail to providers purportedly from Medical Service Associates, apologizing for problems in which a network failure led to the discovery that backups couldn’t be restored from either their own two backup systems or the two of their vendor. At the time of the late August e-mail, they still hadn’t restored anything from before the downtime. All unverified and most likely not the final word on the situation there, but my takeaway from experience is the same as always: backups don’t work at least half the time.

Inga e-mailed our sponsor contacts today about a little get-together we’re having for them in Orlando at HIMSS, separate from our Monday night HIStalk reception (nothing too fancy since it’s on a blogger’s budget, but sincere nonetheless since we really appreciate our sponsors). Response has been brisk, so if you’re the boss and haven’t heard about it, check with your internal person before we run out of space. If your company is on the fence about sponsoring HIStalk, we can probably make room if you sign up soon. Plans for the Monday night reception are progressing nicely as well. Expect a big evening that will go a bit beyond our usual food, drinks, and HISsies (running until late, so pace yourself). Stay tuned.

New readers sometimes get confused about who writes what on HIStalk, e-mailing the wrong one of us about something the other wrote. Here’s the deal: Inga writes the part starting with “HERtalk by Inga.” I write all the rest. I do most of the interviews, but I should mention that Inga did the most recent one with Doug Ardoin. And it’s all Inga on HIStalk Practice. Clear as mud, right? She and I are kindred spirits anyway, so we’ll figure it out.

Medical office patient check-in vendor Phreesia completes a $20 million Series D equity financing round. Jumping in is Ascension Health Ventures, the $325 million strategic healthcare venture fund of Ascension Health. 

Strange: a hospital trauma nurse gets a 2 a.m. call on her cell phone from the California Donor Network, with which she’s familiar because of her job. They tell her that her brother has died and they need her permission to harvest his organs. Agitated, she goes to her other brother’s house and they call their sister-in-law to console her, only to hear the sleepy voice of her I’m-not-dead brother asking what they want. The hospital had given the donor group the wrong contact information, that of a patient with the same name but spelled differently. The hospital can’t explain the mistake except to say that the information was wrong when they switched computer systems in 2005. The coroner’s office claims they would have caught the mistake before taking the organs of decedent with the wrong family’s permission.

HHS’s open source CONNECT program wins the 2010 Wall Street Journal Technology Innovation Award for health IT. Runners up are diagnostic image sharing platform vendor lifeIMAGE (I interviewed CEO Hamid Tabatabaie a couple of weeks ago) and Disease Precursor Identification from Ingenix, which identifies people at risk for chronic diseases. 

Munroe Regional Medical Center (FL) says it dropped ED-door-to-balloon time for heart attack patients to 48 minutes, below the national average of 62, by using incident command management software from LiveProcess to manage the Code Blue calls.  

A Weird News Andy find: NewYork-Presbyterian/Columbia University Medical Center admits that someone accidentally opened up a server containing ICU patient information to the Internet. A patient’s family ran across the information via a search engine and told the hospital. I can’t decide which is more annoying about the hospital’s name: that it’s absurdly long with dashes and slashes or that they insist on conjoining New York into a single word for no apparent reason. 

RIM previews its BlackBerry PlayBook tablet device. Like the Torch, I doubt it will generate much consumer interest, especially since it may work only on WiFi, not 3G/4G. That’s speculation since it’s not coming out until next year, making the video a bit premature in its lost cause of convincing iPad prospects to hold off. Businesses will probably like it, though.

The National Quality Forum endorses performance measures and preferred practices for care coordination. Among the latter is electronic medical records.

Ed Marx has updated his Tool Time post with responses to your comments.

Here’s another bad HIT press release, replete with enough odd phrasing, incorrect punctuation, and bizarrely missing information (like the names of the company’s president and the customer who are both quoted) to make it seem highly unlikely that the writer speaks English as a first language. Not that there’s anything wrong with that, but the company is in Minneapolis, where English is pretty common (albeit with a cute accent, like in this horrible, sappy movie that I just played from Netflix for Mrs. HIStalk while I pretended to watch while daydreaming).

The Canadian government will spend $500 million on EMRs in the next fiscal year, with $380 million of that going toward implementation.

ClearPractice announces GA of Nimble, which it says is the first comprehensive EHR for the iPad. It connects to the company’s cloud-based system by WiFi or 3G. Or maybe it’s not the first after all: an updated press release omits the “first” reference and fixes other unspecified errors in verbiage. The release came from a PR company, but it’s never encouraging (in a “Quality Is Job 1.1” kind of way) for a software company to let obvious mistakes get out the door. And in another tactical error, there’s a beautifully made demo video on their site (where I grabbed the screen shot above) that you’d be watching right now if they were smart enough to make it embeddable like everybody else does who wants widespread exposure for free (it’s called YouTube, people). Now I’ve lost interest.

Deborah Peel, MD of Patient Privacy Rights comments on an Information Week article about healthcare data breaches.

I don’t need a cell phone, but I’m thinking about getting the new model of the iPod Touch for running apps, checking e-mail where there’s a WiFi connection, and playing music and video. Good idea or not? I thought it was perfect until I read that Apple had to downsize the camera resolution from 5 megapixels to one to fit into the slim case. Still, it seems like a good deal for $299 for the 16 GB model.

Mohit Kaushal, MD joins West Wireless Health Institute of EVP of business development and chief strategy officer. He was a key player in developing the healthcare portion of the FCC’s national broadband plan, which includes mobile health, when he worked for that organization.

Bob Mitchell, former editor of the dearly departed ADVANCE for HIE, interviews John Glaser about his new job as Siemens Healthcare CEO.

Deaconess chooses Omnicell for medication management.

The Greater Dayton Area Hospital Association (OH) signs up with the HealthBridge HIE.

It’s funny today how many car problems are fixed with a software update. The same is true for implantable defibrillators, for which a new upgrade checks for electronic problems that indicate wire integrity problems that could cause patients to be shocked inappropriately.

Costs of Care, a Boston-based non-profit whose goal is to reduce healthcare costs by giving providers pricing information as they make medical decisions, announces a national essay contest. The best anecdotes from doctors, nurses, and patients illustrating healthcare cost awareness will earn $1,000 prizes. The judges are former HHS secretary Mike Leavitt, Atul Gawande, Tim Johnson of ABC News, the dean of the Harvard Medical School, and Mike Dukakis. Entries are due by November 1. The group, founded in 2009 by medical resident Neel Shah MD, plans to create smart phone and Web apps to provide pricing transparency.

A nurse at Seattle Children’s Hospital kills an ICU baby by mistakenly administering a tenfold overdose of calcium chloride. A 15-year-old died from a narcotic overdose at the same hospital last year.

InterSystems announces Cache’ 10, which adds database mirroring and a high performance solution for Java applications.

I’m totally behind, so be patient if you’ve e-mailed me. I’ll be vacating soon, which will dig the hole I’m in a week deeper, and then attending the mHealth conference to make the backlog worse, but my lack of timely response doesn’t mean I love you any less (that’s my go-to excuse when Mrs. HIStalk catches me paying insufficient attention to her or her movies).

E-mail me.

HERtalk by Inga

From Jellico Jerry: “Re: reality check. Loved your point today about Cerner and Epic, and which deals Cerner won vs. Epic. Cerner won sites with no $$ (UHS, Tenet). Although they are still significant wins, they are very different client bases.” In case you aren’t up to speed, KLAS recently reported that nearly 70% of 2009 hospital EHR purchases were for Cerner and Epic. A reader then noted that if one were just reading HIStalk, you’d think Epic had “cleaned everyone’s clock.” We countered saying Epic got the bigger, more lucrative deals that really count. Anyone who’s dealt with either or both companies knows that Cerner will darn near give the software away to avoid losing a deal, while Epic won’t discount a penny.

The Ohio Health Information Partnership (OHIP) names its five preferred EHRs from the 40 that were considered: Allscripts Professional; eClinicalWorks Unified EMR/PM Solution version 8; e-MDs Solution Series 6.3.0; NextGen Healthcare EHR; and Sage Intergy suite 6.0. Interestingly, OHIP requires that the selected vendors conduct all technical support within the United States.

Quality Systems, NextGen’s parent company, strikes a deal with Pricedoc.com to incorporate PriceDoc’s online search marketing tool into the NextGen Practice Management system. Pricedoc.com is basically a medical version of the travel site Priceline.com, giving patients the chance to name the cash price they are willing to pay for particular procedures or services. Sounds like the deal gives Pricedoc.com access to NextGen’s PM client base and Quality Systems gets a spiff when physicians and patients connect.

T-System releases DigitalShare, a new solution made possible through a strategic partnership with Shareable Ink. DigitalShare allows clinicians to document patient encounters on T-Sheets using Shareable Ink’s digital pen to capture the data. I first saw the technology at MGMA a year ago and made the Mr. H-esque observation/prediction that it would be great technology for the ER.

Lehigh Valley Health Network selects QuadraMed’s Quantim computer-assisted coding solution to help prepare for its ICD-10 transition.

Confer Health Solutions acquires MediHealth Outsourcing, an HIM and clinical revenue cycle company.

Providence Health & Services hires Summit Healthcare to provide dictionary management and data migration services as it moves to Meditech 6.0. Providence also purchases Summit InSync and Summit Scripting Toolkit technology.

GE was the overall leader in the US ultrasound market last year, according to Millennium Research Group. GE increased its lead over Philips and Siemens and now holds about 27% of the $1.2 billion US market.

Former Cerner Eastern US general manager Greg White is promoted to VP and managing director of the company’s Middle East, Africa, and India region. He replaces Rich Berner, who returns to KC as VP of client development.

Axolotl introduces Elysium Discover, a suite of reporting and analytic tools for HIEs.

Northwestern Medical Center (VT) goes live this week on its first phase of Meditech.

ChartWise Medical Systems signs a strategic agreement with 3M Health Information Systems to integrate 3M’s Grouper Plus Software the clinical documentation tool ChartWise:CDI.

Frederick Jelinek, one of the pioneers in the field of voice recognition, died earlier this month. I had never heard of him before reading this article, but he’s credited with enabling computers to understand English. While that accomplishment is significant in and of itself, Jelinek’s challenging background makes his work even more laudable. He was born in what is now the Czech Republic and his dentist/physician father died in a Nazi concentration camp. After his death, Jelinek’s mother moved her family to the US. He graduated from high school and took a job working in a factory to help support his family Jelinek later enrolled in night classes, studied engineering, and eventually earned a doctorate from MIT. He spent his career with IBM and Johns Hopkins University, creating the bones for today’s voice recognition systems. Isn’t that a great story?

Friday marks the first day of the hospital payment year for implementing certified EHRs and using them meaningfully. Guess it would help to have some certified EHRs out there.

Sponsor Updates

• eHealthAlign selects ICA as a strategic partner to technology and infrastructure for its multi-state HIE.
• maxIT Healthcare earns a spot on Modern Healthcare magazine’s list of Best Places to Work in Healthcare.
• Voalte VP Trey Lauderdale will participate in a panel discussion at next week’s CTIA Everywhere Healthcare event in San Francisco.
• MEDecision announces that its Nextalign iEXCHANGE 8.0 solution is now generally available.
• BridgeHead Software wins a contract with The Rotherham NHS Foundation Trust for healthcare data and storage management.
• Picis and The Sullivan Group (TSG) will integrate TSG Clinical Rules risk management solution with Picis ED PulseCheck.
• HealthEast Care System (MN) implements Ingenix Web.Strat medical coding technology, integrated with its McKesson HealthQuest billing system.
• EDIMS announces that its ED EMR clients can access the admission review service of Proven Healthcare Solutions, which offers a 30-minute guarantee.

E-mail Inga.

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Charles Douglas Ardoin Jr, MD is physician-in-chief of Memorial Hermann Healthcare System and president of Memorial Hermann Medical Group of Houston, TX.

What are your responsibilities at Memorial Hermann?

I’m involved with physician integration, physician strategy, business development, physician employment, that kind of thing.

Is Memorial Hermann considering creating an Accountable Care Organization?

Absolutely. Our goal at a company level is to continue to follow what changes, or what additions get addressed through those statements throughout the law that said, “The secretary shall.” We’re waiting to see what kinds of things may occur between now and January 1, 2012, but our goal is to definitely be prepared.

Here’s what’s interesting about this whole ACO thing. There are bundle payment demonstration projects going on around CV surgery. There are some of these ACO pilots that are occurring right now.

What I think is really interesting about this whole concept of Accountable Care Organizations is where in the law they describe what kinds of entities will be able to participate in some of these ACO demonstration projects, or will be able to call themselves Accountable Care Organizations.

What hasn’t come out yet, and I’m sure is going to have to come out from the federal government — almost like a Joint Commission certification or the NCQA designation for Patient-Centered Medical Home — that includes a real set of criteria that says, “OK, we’ve told you from a structure standpoint what’s necessary and what we’re going to allow.” But there’s got to be certain benchmarks that you have to hit so that when you apply to one of our ACO demonstration projects, we can say, “Yes, you meet our certification designation or whatever they’re going to call it to be an ACO and to participate in our ACO demonstration project.”

The thing is, none of that’s really been finalized. In the mean time, we’re keeping our ear to the ground saying, “What is that going to look like down the road?” But in the mean time, we know that we’ve got a very large hospital system in Houston, Texas with a very nice geographic footprint. We have acute care, post-acute care, emergency care, trauma care. We’ve got so much of the aspects of care covered. We have relationships for long-term acute care, and skilled nursing home help — all that stuff covered.

We have a relationship with our academic partner, the University of Texas, which has a large clinical practice group. We have our own employed physician organization. We have a very large IPA with over 3,000 physicians that is part of the Memorial Hermann system. We think we have all of the pieces of the puzzle, if ACO was a puzzle and you had to have all the pieces. We think we have it all to be able to connect it together.

I think we’re still waiting for the federal government to come out and say, “Here’s how you connect it. Here’s how you fill out the application so that you can get in the game.” I think we have minimal stuff we’ve got to go build or buy, so to speak. I think we’ve got just about all the pieces that are going to be necessary to put it together. That’s not to say that in some ways we’re not already engaged in or doing things that fit within the model of an Accountable Care Organization.

Like our family practice residency program. The Memorial Hermann Family Practice Residency Program was the first family practice residency program in the country to receive NCQA designation for Patient-Centered Medical Home. The things like that that we’ve done have been fortuitous. Things we’ve been working on over the last few years that we think, “Wow, OK, this positions us very well for this.”

Another good example is our independent physician organization, which is called the Memorial Hermann Physician Network. We’ve been, for the last four years, developing and engaged in our clinical integration model. So, much like the Advocate Physician Group in Chicago that’s probably been at it for over 10 years now, we’ve been at it for about four years. But, we’ve consistently followed all of the FTC guidelines and recommendations on developing our program.

We do have one clinical integration contract now and we’re looking at developing others. Our independent physician organization — the whole basis of clinical integration — is about high-quality, cost-effective healthcare where you get otherwise independent physicians to come together and agree to develop a quality platform amongst the physicians that’s both specialty-specific and for the organization as a whole. It buys a higher-quality care that we think creates a real differentiation in the marketplace.

In the ACO model that Memorial Hermann is considering, what would the governance structure be?

Right now, the law is not very specific, other than that they say that it has to be a shared governance model. Our intent would be to create a shared governance model so that you have — I don’t want to say ‘equal’ — but the correct representation of physicians and hospitals, and maybe the academic medical center and all of the right components.

We like the concept of the shared governance model. We strongly believe that it’s going to need strong physician leadership in that governance model.

As you’ve looked at what’s being proposed and the goals of the ACO model, what would you say are some of the bigger implications for both hospitals and individual physicians?

For years, hospitals and physicians have wanted to figure out ways to better align incentives around patient care, managing costs, and driving good revenues and things like that. I think physicians and hospitals have looked for some kind of a model that really pulls it all together. I think the ACO can potentially do that because the ACO, at the end of the day, is very much focused on the patient, where it’s really about how do you give the most highly coordinated, highest quality care you can give. Quality from the standpoint of process and outcomes.

How do you really give that high-quality care in a model that’s most cost-effective that can be efficient? I think it’s a way for hospitals and physicians to be fully aligned in that regard, because I wholeheartedly believe if you focus on the patient, you do the right thing by patients, then you shouldn’t have to worry about the money.

If you’re doing the right thing for patients, you’re giving them high-quality care. You’re not over-utilizing. You’re not wasting. You’re not ordering tests that they don’t need. You’re not leaving them in a hospital longer than they need to be where they can get an injury or an infection or something of that nature. You’re truly doing the right things for the patients. If you do that, I think the finances will follow suit.

But I think there are some issues here. I think there’s some upside and downside for patients. The upside for patients is the fact that patients will be able to get a sense that their providers are better connected, a better flow of information. That the continuum of care should be more seamless and patients should feel comforted by the fact that the federal government is not going to relax its quality standards. As a matter of fact, it will only enhance their quality standards over the years, so the ACOs will still have to give high-quality care.

I think the issue, though, is that there may be some impact on provider choice for patients. Because what may end up happening down the road — whether it’s through CMS or private insurance plans that decide to follow the same model — is that you’re going to see, in order to achieve the level of connectivity, information flow, quality, and cost savings, these networks are going to have to be rather exclusive to some degree. I think patients are going to have to be willing to accept the fact that, whereas there will be choice within the network, going outside of the ACO, outside of the network, is going to be detrimental to the whole purpose. I think there will be some impact on provider choice to patients.

I think some of the issues that the federal government needs to work through is this whole concept of continuing to pay fee-for-service for some kind of a bonus for cost savings because I don’t think that’s going to work. I see the government having to migrate quickly to fixed payment for certain procedures, like a bundled payment, and some other type of a fixed, bundled payment for populations of patients — almost like a capitation model — in order to really control costs.

I still think within both of those, there can be rewards for achieving certain quality benchmarks and cost savings as well. But the fee-for-service model, I don’t think it’s going to lend itself to the level of cost saving that the federal government is looking for.

Could the fee-for-service model, in time, go away?

I don’t know if it will go away or become significantly modified. Look, if doctors and hospitals continue to get paid on a per-click basis, then what’s going to prevent them from adding up clicks?

So that’s my concern about rolling this out and continuing to have it in a fee-for-service model. I don’t know that it’s going to drive the level of efficiency and cost savings that could be achieved without suffering the quality.

As healthcare moves more to the ACO or Medical Home models of care, what will hospitals and health systems need to do in terms of physician alignment?

I think what you’ll see are increasing models of integration. In other words, you may see more physician employment. You may see more PHO development — Physician Hospital Organization development — where physicians are still independent, but either through a PHO or an IPA model, they declare their loyalty to a hospital or hospital system. I don’t think that ACOs will necessitate employment of physicians, but I think it is going to necessitate a unique level of loyalty or exclusivity for private, practicing physicians who want to engage with a specific ACO.

What are some things that Memorial has done, or things you think need to be done, to effect change in physician behavior when implementing new models of care or even new technology?

Two completely different kinds of questions there. The technology issue really has to do with how disruptive the technology is. At the end of the day, you’ve got a certain generation of physicians who maybe aren’t as IT adept. Therefore, sometimes they have a hard time adjusting to new technologies. I think a lot of the physicians coming out of residency and fellowship today, because they grew up in the Internet age, are much more accepting of new technologies. Therefore, I don’t think that’s as big of an issue, but technology’s one thing.

Models of care .. I think what you have to do there is really work on the alignment of incentives. I think that when you start talking about creating a new model of care, it can’t be a zero-sum game, obviously, to the physician or to the hospitals. There’s got to be a consensus that drives a win-win so that both the hospitals and the doctors can benefit from a new model of care and the incentives can be aligned.

That means just as what’s been described in the ACO. Developing ways that cost savings can be shared back with the providers, both the physicians and the hospitals, is important. Or, rewards for reaching levels of excellence and quality. I think that’s important, too, where you can reward and align incentives around reaching certain quality benchmarks.

What are your thoughts on incorporating decision support tools into the care process?

Let me just say this. I’m a big proponent of always learning how to work smarter and not harder. In other words, why does a physician, every time they admit a patient to the hospital, have to sit down with pen and paper and go through the ADCVAANDIML of writing admission orders?

If you believe a patient has pneumonia, then why don’t you use a common pneumonia order set to admit the patient, or a pneumonia pathway that has flexibility within it to adjust it for the uniqueness of the patient? All of the basic things that happen every time are there. They get covered. You know they’re going to happen, therefore they don’t get forgotten.

I’m a big believer in using admission order sets or care pathways, these kinds of things. I think they’re smart. I think they work. There’s evidence in the literature that patients do very well when they’re placed on these things.

Regarding clinical decision support, I think their only issue there is that you have to worry about alert fatigue. I think you can overdo clinical decision support where physicians will be able to ignore the suggestions. I think that there’s a fine balance there as to how you offer that in the electronic medical record setting without creating alert fatigue, but I think it’s smart stuff.

I think any time you’re about to prescribe a medication that’s going to interact with the patient’s blood thinner and you hadn’t thought about it, you get a nice alert that says, “Whoa, didn’t you know they were on Coumadin?” or whatever. I think that’s perfectly fine. You’ve just got to be careful how often those things trigger and at what levels.

Does Memorial have much in place in terms of clinical pathways?

Yes. Not all of our hospitals are on computerized physician order entry. We have a few that are, and they use order sets and there’s clinical decision support tools and things like that that are being rolled out.

Shifting gears a bit, how will recent healthcare reform affect Memorial? Are there changes being considered or that are being put in place to control cost and improve efficiencies?

I would say Memorial Hermann is always engaged in continuous improvement around being more efficient, controlling costs better, etc. I don’t necessarily know that the healthcare reform law has changed what we’ve always done around here. We’re a not-for-profit, community-owned healthcare system. We always practice good stewardship of our resources, so there’s always that opportunity to look at how we’re doing things.

I think it’s going to impact us, though, just like it’s going to impact everyone else. You’ve got up to the 26-year-olds that you have to be able to offer insurance for under a family plan. The issues of the no-lifetime max, when that kicks in; issues of the no pre-existings, all these kinds of things.

Our health plan is self-funded and I don’t think we’ve ever, for employees or dependents, turned anyone down for pre-existing illness, but we’re going to have the same kind of pressures. We are a healthcare provider and healthcare system, so I think we will always do our best to provide a benefit for our employees.

But unlike us, I think there are going to be, maybe not so much in healthcare, but certainly other industries, where large employers and even small employers are going to have to weigh the option of — do I provide a benefit or do I pay the fine? Which is less expensive for me? Then let the employees get out there and get insurance on their own.

The other thing we worry about is really how strong will the individual mandates be? What are the chances that instead of more people having insurance, actually less people have insurance? You know, there’s always that chance that actually, individuals, if they’re not being provided insurance through their employer, may say, “Well then, I’m not going to go buy it on the open market until I absolutely need it.” So what are the chances that actually the uninsured will go up?

There’s just so much uncertainty and potential unintended consequences that the best I can say is we’ll just kind of hunker down and try to do our best to be prepared.

How is the health system positioned for qualifying for Meaningful Use?

I’m not the expert on that, but I can tell you according to our chief informatics officer, we are extremely well-positioned for Meaningful Use. I think we’ve hit all but one of the last remaining checkmarks. We’ve been named one of the most wired companies in America and all that kind of stuff.

Trust me, we’ve got an ISD team that’s second to none. We’ve got a leader there who is really, just a rock star, and he’s been with us for several years. Very well respected. We’ve done a lot of work in that area and I can assure you, we’re there. We’ve done a lot of work on that one.

What are your priorities for the next five years?

I can tell you that my boss, the president and CEO, Dan Wolterman, said that my number one priority is learning everything I can about Accountable Care Organizations and preparing all aspects of our physician organization to be prepared to move in that direction. That really is the number one thing.

A lot of it is working with our IPA and our clinical integration model to use that as a tactical platform to get us toward an ACO strategy. Also, to integrate with our employed physician enterprise to basically do the same. It’s about helping the physician organization develop all of those aspects of high-quality, cost-effective care in partnership with the healthcare system.

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Capitalizing a New Venture: So Many Choices…

I appreciate everyone who reads, especially those who leave comments. A comment on my previous post asked, “Isn’t it ALL about the patient?” 

As I pointed out in my response, for better or worse, healthcare in America is all about entrepreneurship — from medical spas to physician-owned hospitals and imaging centers to million-dollar salaries for hospital execs (I agree wholeheartedly with Mr. H on that topic, btw) to software entrepreneurs like Neal Patterson (Cerner), Judy Faulkner (Epic), or Randy Lipps (who realized that supply storage could be improved while his child was in the hospital and so founded Omnicell).

Anyone in the healthcare system, from physicians to business people to lab managers, who realizes that the current system they are using or experiencing just isn’t working as well as it could or should can decide to take the risk and form a company, develop a product, and go to market. Even before ARRA, HCIT attracted more than its fair share of entrepreneurs. That’s what makes this sector my favorite playground.

That said, I think it’s more like the playground of my youth. Before safety was the law and springy floors and safety teeter-totters came into being, it has historically been an area where start-ups thrive, but a disproportionate amount of investment dollars have been lost. Never a dull moment.

Hopefully someone reading this has started or is thinking of starting a new venture. Let’s explore their options along the continuum to finance it.

Friends and Family

Just what it sounds like. It’s going to Mom and Dad, Rich Aunt Joan, Crazy Cousin Bill, your stoner college roommate who was employee #55 at Google, and all the other friends you ask to put money into your new venture.

This is clearly a mixed bag. While their terms will likely be the most generous and they’ll likely value your new venture at the level you think is fair, these shareholders can be demanding in a psychic way. Family gatherings could turn into business updates. You’ll get calls on nights and weekends.

There’s the risk of that feeling in the pit of your stomach that if it goes wrong, you’ll have to face these people for the rest of your life. Hmm, sounds like a more expensive form of capital then I originally thought.

Angels

“Angel” typically refers to high net worth individuals who invest in private companies for themselves, as opposed to within a fund.

Angel investing has been on an upswing over the past few years for several reasons. First, with the stock market’s mixed performance over the past five years, this class of investor is looking to enhance their returns with some non-traditional investments. More importantly, angels are filling a gap that has resulted from the decreased popularity of traditional venture capital (discussed below).

Angels are typically much closer to the friends and family investor. They also have some of the same pros and cons.

On the positive side, they’re typically easier on valuation and they’ve often been entrepreneurs themselves. On the other hand, they’re not professional investors and so might lack some of the dispassionate views that a VC can bring. While they might have run companies, they might not know healthcare or software at all and might insist that their great success running a plumbing supply business obviously translates to your venture.

Their lack of a traditional venture fund (and its limited partners) cuts both ways as well. Where a VC might care only about an ultimate sale (or IPO), an angel might care more about receiving cash distributions. If you want to invest for growth, that could be a source of conflict.

If you have a choice of angel investors, as the knight in Indiana Jones and the Last Crusade said, “Choose wisely”. Do they bring experience and industry knowledge and contacts, or are they just a source of funds? Whichever it is, would they answer that question the same way that you would? How active do they want or plan to be? Will they want a board seat? Even if not, what will they require for ongoing communication as well as general care and feeding?

The importance of clarity and alignment of goals, vision, and timing here simply can’t be overstated. More than ever before, angels are starting to organize around their activities. Many top-tier business schools and tech associations have formed quasi-official angel groups.

Venture Capitalists

Traditional venture capitalists (VCs) are professionals at investing in private companies. Typically structured as a partnership, the investors (limited partners) tend to be foundations, pension funds, endowments and often high net worth individuals.

Research (and my observation) shows that VCs can bring much more than capital to their portfolio companies. They typically have strong networks in the sector and a great ability for pattern recognition, often having seen similar companies grapple with similar issues.

One of the most successful HCIT entrepreneurs I know once told me that, after herself, she attributed her company’s success most to the VC involved. This clearly suggests that valuation (and even terms) shouldn’t necessarily be the key factor in selecting one’s financial partner.

Beyond that, however, I’ve observed a huge continuum of both personalities and skills. I’ve seen VCs add tremendous value and insight. I’ve also seen VCs where I’d suggest the entrepreneur sell a kidney on eBay before taking their money.

Another factor to consider is that different funds tend to invest at different stages of a company’s life cycle. Loosely defined, these stages range from: (a) a good idea and founder (Seed Stage); (b) great team and product (Series A); (c) proven product and critical mass of customers (Series B); and business seems to be working, but needs growth capital (Series C and beyond).

While topnotch venture capital funds are continuing to fund early stage companies (and HCIT is no exception), for multiple reasons (to be discussed in a future post), fundraising has become more of a challenge to earlier stage companies than ever before. Hence the significant growth in angel investors to fill the gap.

None of the Above

What other options might exist for funding early stage ventures? I’ve seen companies of all stages think creatively to help bridge funding gaps. Government grants (especially lately) are a source of capital. Sourcing expertise from academia can help reduce the burn (many business schools and engineering schools have programs for students to consult).

One of my favorites is customer or partner financing. Perhaps a distribution partner or a few customers will pre-purchase software licenses, allowing you to combine a revenue and capital event. This win-win scenario serves to both build a customer reference and development partner and help your balance sheet.

Many hospital systems now have internal venture funds as well. These range in terms of stage of company they invest in (some are more risk-averse than others), but can also provide an appealing imprimatur to the marketplace of both customers and ultimate investors.

As I said, even though I don’t guard the Grail, my best advice here is to choose wisely. From my research days to now, when I’m looking at a company, one of the first things I do is see how they’re capitalized and who their investors are. Whether it’s shallowness or just a lesson learned, I find that it can tell me a great deal about a company. Is this a fund with a reputation for thoughtful investing and management, or an investor that typically throws companies to the public before they’re ready to maximize their own returns? Are there angels involved with experience and reputations for success?

While perhaps not the best way, assessing the backers is sometimes an efficient way of coming up with preliminary judgments about companies and their management teams.

Thanks for reading, but I’m afraid I’ve run out of space before even getting to Private and Growth Equity investors (who are sometimes also known as leveraged buy-out investors). While I touched on this in my Take Private post, it probably warrants its own, so let me know if there’s interest.

In the mean time, I’ll be attending the Health 2.0 Conference in San Francisco. That will be the topic of next month’s Investing Chair post. If you’ll be there and would like to chat, drop me a note.

Ben Rooks spent ten years as a sell-side equity analyst covering HCIT and related sectors before spending six years as an investment banker where he closed transactions ranging from $40 to 365 million. Seeking to make an honest living, he then founded ST Advisors, LLC where he works with healthcare companies and their sponsors, most often on issues around strategy, financing, and outcomes/exit planning. After all this time, he still can’t wait for HIMSS!

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