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HIStalk Interviews Ralph Fargnoli, CEO, Beacon Partners

July 4, 2012 Interviews 3 Comments

Ralph Fargnoli, Jr. is president and CEO of Beacon Partners of Weymouth, MA.

7-4-2012 7-01-48 PM

Tell me about yourself and the company.

I started my healthcare career in a health system in Rhode Island that was an early adaptor of technology. I started working at IDS up on Commonwealth Avenue in Boston in 1983. That really put me into the forefront of healthcare systems, working for Paul Egerman. I worked at IDS, which changed their name to IDX, until 1988. 

I was managing many implementations. What I saw in the management of those implementations was that they were hiring consultants. The consultants were at the time, I think, Big 8 or Big 10. I felt that I had some things to offer the other side of the table, and instead of working on the vendor side, working on the consulting side. 

I left IDX and started Beacon Partners in 1989. The goal was to provide healthcare professionals with experienced healthcare professionals who understood their business, who understood the technology and how it would impact their business. From there, Beacon has grown substantially from a small company focused mainly on IDX to 300 employees, with service lines of the major vendors including IDX, Epic, Meditech, and Siemens.

We’ve been shifting our business to be more strategic in nature over the last three years. We are focusing more on strategic planning, working with many organizations about aligning physicians, changing over legacy systems, ICD-10, security, and so forth. The business model has changed from just providing implementation and project management services into strategic areas.

Beacon Partners is a national firm. We have clients from Hawaii to Puerto Rico – actually to Ireland — and of course, in Canada. We have a Canadian practice with clients in most of the provinces except Quebec. 

The growth has been exciting. It has been fueled by technology, but also all the opportunities with regard to the regulatory and compliance issues that are either being mandated or pushed into the provider world by the federal or the state government. We’ve put together a good senior leadership team, and you’ll see announcements about new people who are joining the company. 

It’s an exciting time to be in this business. We look for another five to 10 years of growth and opportunity for everyone in the company.

 

Do your customers care about innovation and competitive advantage when they’re choosing systems vendors? Or are they just trying to make modest process changes and measure those in hopes of learning from the data what they should do next?

My perception is that customers are trying to find some type of innovation, something that will help their patients and their provision of medical services and in getting to data to help them with patient care. But it looks like to me it’s unknown whether that will be the ultimate outcome of all these major investments that are going on right now.

We see a lot of demand for vendor software, but what I also see is that it seems to be a market play. Let’s get as much software in as we can, then we’ll go back and optimize it and see what kind of data we want to get out of our system. So to me, it’s more of a technology push. 

I think we also see that in the studies that are being done, physicians are not really bought into all this technology. They feel it’s interfering, or that it’s not the right software for them to practice medicine so far. 

I think that the innovation of how to use data to enhance patient care will be over the next three to five years, versus what we see going on right now, which is basically just a technology replacement and adaption.

 

Have you seen examples where someone truly got a lot better clinically or operationally by just installing something?

I can say that in some of our clients, we have seen that they’re starting to use the data in their research or they’re trying to understand patient access and looking at opportunities for more advanced service lines for patient care. We’re starting to look at that. I also see data analysis for cost controls and understanding what their true costs are.

I think we all know about the Kaisers of the world and Mayo Clinics and Cleveland Clinics. They seem to be at the forefront. I think many organizations need to understand how they’ve turned their technology investments to a competitive advantage, because I see many of our clients still at that phase where they’re trying to get the systems installed and have some type of realization on those investments.

 

Their model is different than 99% of what goes on in hospitals and they can afford technologies that nobody else can. Can what we learn from them be plugged into the average 200-bed community hospital?

That’s going to be very difficult. Kaiser is a not-for-profit, but it’s a well-run business corporation that provides medical services. The 200-bed  community hospital is not there. They’re not business people. They’re not driving it towards running it like business. I think they’re caught up with the patient care aspect of it and the patient services, which is their mission, but they truly need to take a step back and say, “That’s our mission, but how do we do this in the best way to maximize these investments, to get realization of these costs so we can contain them for the future of our mission?”

I think many organizations look at it independently. I look at it that we have technology, we have patient care, we have our physicians. If you look at some of these organizations and the way they’re integrated in their communication of technology and how we’re going to use it, it seems to me very siloed. They’re not there yet.

 

Will reimbursement and policy changes, along with the difficulty in delivering technology, do the same as it did for the solo independent physician practice, to the point that it will no longer be practical to run a 100-bed unaffiliated community hospital?

I do think that most, if not all, of the community hospitals will eventually have to align. It’s interesting here in Massachusetts. We have a very good community hospital, South Shore Hospital, that is now aligning itself with Partners HealthCare System. It has been a strongly-willed independent, but they need access to specialty care to drive their competitive nature. They’re aligning themselves with Partners because they need the dollars for the specialty care. They also want a more competitive edge against other community hospitals that are also forming their own smaller systems. You see the physicians not only aligning, but actually becoming employed by these hospitals.

I see a trend where you’ll have a network of the smaller community hospitals, but they will try to maintain their independence like South Shore. South Shore Hospital is going maintain their independence to some degree and the physicians will become employed, but I think they all have to be at some point integrated to maximize technology investments, to maximize data exchange, and to control their costs. They all realize that with all the specialties out there now and new technologies for medicine, they all can’t afford it. They all can’t just be independent in that degree and make those investments, so they have to leverage each other at what they’re good at. I think that will evolve over the next couple of years.

 

Meaningful Use has been good for the healthcare IT business. Do you think it’s been good for providers and patients?

I’m not sure how much patients know about Meaningful Use in the sense of technology adaption. I think providers look at it with some degree of angst, especially some of our senior providers. There seem to be mandates and a lot of push, that Meaningful Use dollars to grab the incentives and avoid the penalties. From an organizational standpoint, it helps with the investment. Of course it doesn’t pay – I  would be surprised if it paid for 25% or 30% of the total cost of the investment.

Some providers are definitely excited about the adaption, but I think some of them are finding hurdles to it. Now they have to change their work flows. It’s not necessarily the way they’ve practice medicine for years. What we see out there is a lot of hesitancy, a lot of training and educational issues.

On the patient side, we see some questions about, “Why is he staring at his computer? Why is he typing and not paying attention?”

We have many of these physician rollouts going on. The word from the consultants is that patients seems to be curious about the technology and there is a learning for physicians to try to balance the patient attention versus getting the information into their system. It’s definitely going to be a learning curve for both the patient and the provider and how to interact with each other in the technology.

Until the patient sees the benefit for being at home and being able to access portions of their medical record to see their lab results — that’s happening today, but as more and more get that access, we’ll see a better response to it all around. I think even the physicians eventually will see that this is a good use of technology so they don’t have to make phone calls and push out letters and so forth.

 

A lot of the attention of the providers is being directed toward Meaningful Use and implementing the systems required to get the financial carrot. When do you see that tapering off, and then what’s the next hot issue waiting in the wings?

I think Meaningful Use will start to end probably around the 2016 timeframe, but I think the technology adaption will be around for at least five to 10 years. I look at what we see as some deficiencies in technology out there. There’s just so much to be done that the market, from a technology adaption standpoint, could go on for the next five to 10 years. Meaningful Use, because of the timeframe that the government has put in place — there’s a great push to avoid the penalties. When we get to the penalty side — like anything else that happens in healthcare and with the government — they could say, “We’re not going to penalize you. We’ll push it out for another year.” 

What also is driving our business and others like us is the changeover in ICD-10. That’s going to be a major project for many organizations. I believe that most of them are not prepared to take this on. They’re not thinking about how it impacts their downstream revenue when this happens. 

We also have security of patient information as we pass data from organization to organization through HIEs. That’s something that we see as a business driver also, because there’s a lot of questions out there. How do protect the PHI? As you probably see, we’re not very good at it yet. We seem to have PHI on laptops and USB drives. We have basic password issues. 

Business intelligence and understanding data from all these investments that we’re making is going to be a large business driver for us and others the next five years.

 

Any concluding thoughts?

We seem to be spending an awful lot of money adapting technology. Organizations that are no more than maybe five miles apart are spending $75-$100 million to adapt similar technology as a competitor down the street. At some point, some of these boards that approve these projects are going to be asking “We spent this money. Are we getting the ROI and meeting the expectations from these big investments?” Many of these boards are approving these large implementations and procurements of these systems, but not really understanding the magnitude of what it takes to get this done.

As we progress over the next couple of years, this is going to be a business driver. We see it as an opportunity, if you have the right people, to help these organizations be successful. I also believe that someone needs to take a step back and look at this and say, “Do we have the people? Where are we going to get the resources?” 

I think that they’ll be questioning whether these investments are paying off. Also, whether they can use the data they have collected to improve and enhance patient care.

Over the next three to five years, those questions will be asked. It will be interesting to see what those answers come out to be. I’d still question many of these organizations spending these dollars very independently from each other. Why not together?

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Currently there are "3 comments" on this Article:

  1. Good interview.
    Agree with much of what he says, particularly the ROI comments.

    But re:” Meaningful Use, because of the timeframe that the government has put in place — there’s a great push to avoid the penalties. When we get to the penalty side — like anything else that happens in healthcare..”

    Penalty, what penalty?
    The penalty is based on one third of the Medicare market basket adjustment. This year it’s a big 0.9% – (Yes point 9) so one third of that ain’t a whole lot. And if you think the MBI is going to be positive in years 2014-2018…take a good look at the federal deficit.

    If any facility is installing an EMR to avoid a penalty they sure got their eye on the wrong ball.

  2. I agree with Mr. Fargnoli – the penalties are an under-appreciated aspect of ARRA. For hospitals, the penalty is eventually 3/4 of the market adjustment. So, for a hospital with $100 million in Medicare reimbursements, in a year where the adjustment is 1%, that is $750,000 – every year, year after year. The penalties are even more compelling on the provider side – as much as 5% of total net Medicare reimbursements (not tied to the market adjustment). So, for a physician with $500,000 in Medicare reimbursements that could be $25,000 in one year – larger than any single year’s incentive.

  3. Hey HIT Consultant…
    Run the numbers:
    100mill Medicare Payments, times .9 MBI = 900k increase
    900k times .3 penalty = 300k

    Two points:
    1)for 300k it’s hardly worth horsing in a $10 mill system.
    2) May main point is there will be NO MBI in future years – (see federal deficit). So even at year three .75 times ZERO = ???

    …and don’t be surprised if the MBI is negative…see proposed doc MBI last three years!

    I agree on the Doc penalty, it is a different calc/story.







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