Regardless of how you feel about how multi-national conglomerates have changed healthcare IT, you must at least acknowledge GE Healthcare’s size and influence. GE Healthcare, formed in 2000 and headquartered in the United Kingdom, replaced the old GE Medical Systems Information Technology (GEMS-IT) and brought medical imaging, patient monitoring, and drug research into the fold to form a $17 billion business unit (over ten times Cerner’s size, to put that into perspective). The company’s IT profile was raised with its 2005 acquisition of IDX for $1.2 billion.

I don’t hear all that much about the company’s plans, so I was pleased to have Laurent Rotival volunteer to be interviewed (or, more precisely, to have one of his executives suggest it with his subsequent approval). To have a top leader of the industry’s largest vendor agree to be interviewed by an anonymous blogger … well, I was surprised and delighted to take him up on the opportunity. Thanks to the folks at GE Healthcare who made the arrangements.

Tell me a little bit about your background and your responsibilities at GE.

I’ve been with GE for about twelve years. I’ve just joined this role. I’m senior vice president and general manager of what we call the Enterprise Solutions business that includes five product lines. The most notable one is Centricity Enterprise, with the Carecast line or LastWord. We have Centricity Perinatal, Centricity Perioperative, Centricity Anesthesia, Centricity Laboratory, and Centricity Pharmacy. So, it’s basically the clinicals.

Vishal Wanchoo, who’s the CEO of GE Healthcare IT, has two other business units. One of them is called Imaging Solutions, which is run by Don Woodlock. That’s our RIS/PACS solutions, and with the recent acquisition of Dynamic Imaging, it includes that product as well. And then the third business is called the Clinical Business Solutions. Actually, that’s the integration of two businesses. They were separated before. One is called Practice Solutions that was focused on selling EMR solutions for physician practices, smaller physician practices and distributive physician practices. And then the business side is what used to be Flowcast or the revenue cycle management solution, again for physician practices and standalone hospitals. That’s run by Jim Corrigan. That’s the total entity, so I’m one of three business leaders under the GE Healthcare IT umbrella.

I’ve been here one year. Before that, I was the CIO of GE Energy Services, which is the service arm of the GE Energy business, which is based out of Atlanta. It’s about a $9 billion service business that basically takes care of all the support services that follow the sale of the turbine from installation all the way to its life cycle management.

Prior to that, I was the CIO of NBC in New York. And prior to that, I was the CIO of GE Oil and Gas based out of Florence, Italy, which was also an acquisition, a state-owned Italian business that GE had bought that went through tremendous growth. From what I recall, from a $900 million business to a $5 billion business while I was there. I think they’re reaching to $10 billion now, so that’s quite a neat story.

What about your personal background?

I went to Brown University. I have a bachelor’s and a master’s degree in Material Science and Solid Mechanics. Loved that. Prior to that, I’m what you might call a United Nations brat. I was born in Kinshasa, Zaire, now called the Democratic Republic of the Congo. I spent thirteen years in Africa and lived in Chad, Malawi, Niger, Ivory Coast, and Congo of course. I also lived in France, Switzerland, Italy, and Romania prior to graduating from high school.

I used to have lots of hobbies. [laughs] Not too sure anymore what my hobbies are, but I do have three young kids, married, living in Seattle and absolutely thrilled to be in the Pacific Northwest. I sort of accepted this job sight unseen, but I was not disappointed by this region. It’s a very beautiful place and I’m getting into all kinds of outdoor sports kind of things, like hiking and skiing and those types of things, which seems quite natural around here.

GE moves executives around a lot around their vertical markets. You’re a healthcare outsider. What’s your assessment, being fairly new to it and seeing it as a CIO who’s been in other industries?

You know, its fascinating and daunting at the same time. What’s fascinating from a technology standpoint is that healthcare is going through a lot of the same struggles and transformations that other industries have been part of.

What is not the same is the extraordinary impact technology can have in a positive and a negative way on the processes and workflows that we impact. And I think that’s quite a thrill, but also very intimidating in my position, because clearly not having the clinical background, ramping up as quickly as I can, of course, with the help of our clinical leaders here at GE Healthcare IT, not to mention the CMOs and our customers.

But I have to say, I guess it’s a bit of a dichotomy. You have this tremendous opportunity to upgrade the technology, to bring in new solutions that have the potential of significantly improving the quality and cost of the operation. The flip side is the risk associated to those conversions are probably greater that I’ve seen in any industry I’ve been part of, and so it’s something to be taken very seriously. That’s probably what makes this job one of the most exciting jobs I’ve had in my career — because of the impact you can have.

Also, when you work in gas turbines or in broadcasting or oil and gas pipelines or automotive plastics – you know you’re part of something important, but its all about money and cycle time and inventory turns and things of that sort. Where here, it’s neat to be able to go home and know that you have a real personal impact in everything you do every day. It adds a personal and maybe even an emotional dimension that is probably wasn’t as strong in other roles that I’ve had. I find that’s actually an extremely positive thing.

GE buys most of its applications instead of building them. Do you think that’s a good strategy as far as the customer is concerned?

That’s a good question. Actually, what’s interesting is what we’re doing with this business is a bit of a shift on what you’ve just stated.

There’s no doubt that the GE Healthcare business has been built by acquisitions. So, the GE was not in the space. I mean, they had some nominal departmental applications that were extensions of the diagnostic equipment that is the bread and butter of GE Healthcare, but very small activities in software. You could argue even that GE, especially under Jack Welch, never thought of software as necessarily a core competency.

What has changed over the last fifteen years, however, is that there is practically no technology that we have in our portfolio, whether it’s in healthcare or outside of healthcare, which is not differentiated by the software products and the software technology that we associate to those products. So I think in the healthcare space, we’ve made a number of acquisitions.

We’ve created a business that in 2000 was just under $400 million and we’re closing in on $1.7 billion this year. A lot of this was through acquisition, but a great deal of it actually was organic growth and, of course, on almost all the platforms that we’ve acquired or inherited, we’ve followed an evolutionary path to enhancing them, rather than re-writing them from scratch.

What we’re doing in the Centricity Enterprise space is actually taking Carecast to that next generation, which we call Centricity Enterprise 6, which we just launched a few months ago. Actually, it was one of the first major releases of the new product in this business in at least three years as far as I can tell. What we’re doing is grounding ourselves and reinforcing the very strong position that this business has been able to build over at least 25 years. And then what we’re doing in parallel to that is starting to build a state-of-art tech stack for the Intermountain partnership. A set of applications that will extend the Centricity Enterprise 6 platform, and then ultimately over a long period of time, overtake it.

We’re very sensitive to the risk our customers are facing as we re-write a platform. I think it’s dangerous, sometimes. On the one hand, you’d love to write from a clean sheet of paper because you have no constraints and you can usually develop a new application faster. But then when you look at the risks associated for one of your existing customers to actually convert from what becomes a legacy platform to the new platform, you find yourselves getting into some significant risks.

So the approach we’re taking, that might take a little bit longer, is to reinforce the foundation that our customers depend on every day for the same values and benefits and risks that I mentioned earlier. Then, incrementally add on some cutting-edge components, which ultimately will add up to a completely new footprint. We believe that that’s a path that presents less risk for our customers, protects their total costs of ownership, and ultimately takes them from a legacy architecture to a state-of-the-art architecture.

GE’s healthcare IT acquisitions were mostly middle of the pack, not the best or those with the biggest market share. Is that contrary to the overall GE strategy?

I think GE has multiple strategies. I’m not sure there is a single strategy for acquisitions, but then again, I won’t speak on behalf of all my colleagues across the company.

You know, the #1 and #2 thing was very much something we were aligned to in the Jack Welch days. But as you want to grow as a business, you can’t afford to just go for #1 and #2 because then, by definition, you don’t have that much growth left.

So the approach we’re taking now is to try to position yourself, not always necessarily with the absolute best technology, with the absolute best customers and partners. And one of the things we found that was extremely valuable, and is proving itself out every day and every week that we work here, is the customers that we have in the Carecast installed base, organizations like UCSF and Wake Forest and University of Virginia and so on, are really exceptional. And as you look at developing that next generation platform, what’s more important is not to have the best technology today, but to have the organizations that are the most distinguished in practicing care so that they can influence us as we build this next generation software.

So we actually think that we have a ton of room to grow and, because to some degree, you could argue this is the silver lining in not having the absolute best dominant technology, is that we’re not quite as anxious about leaving some of it behind.

Someone once said, “No company has ever benefited from being acquired by GE.” Your reaction to that?

Well, in my personal experience, I mentioned the oil and gas business. So this is a state-owned organization, somewhere around the $900 million range; a strong supplier of a certain type of technology but without a dominant position. Today, they’re probably a $6 billion or $7 billion business. Not only the company and the employees have benefited. The city of Florence, Italy has benefited because it has only depended on tourism and now they’ve got a global giant right there in their back door. Which, by the way, is not a pure American brainwashed entity, it’s actually a very Tuscan Italian company that’s part of the GE company. I think that was a fantastic story.

Now you know sometimes, if companies are too small, they can kind of get steamrolled. That happens. I won’t say we haven’t had our fits and starts. But in my experience, companies have done pretty well. I mean, NBC, the RCA acquisition in the eighties — NBC Universal is certainly an impressive outfit today.

There’s no doubt there’s complexities. When you look at GE Healthcare IT, there are a number of entities. It’s well published and reported that we have become part of this business. Sometimes change takes time. Coming up with technical solutions to integrate everything in a seamless fashion is not easy when most of the products weren’t meant to work together to start with. But, we’re making good progress there. You start with the culture; you line it up with the financial and the common set of metrics, and then you start attacking the more complex parts, which is bringing all the products together and delivering on the promise of the very rich portfolio of technologies and products we have.

Healthcare IT has two camps, the conglomerates like Siemens and GE and McKesson on one side and the “we built everything” group on the other side like Cerner and Epic. How do you think that will play out?

I won’t comment on our peers’ strategies, but what I can certainly say about ourselves is that we feel very confident that there is not only value in the individual components of our organization, whether it’s Centricity EMR or the Centricity Enterprise business from the Carecast side, but we truly believe that these solutions have got to work together.

I think there are two dimensions. There are solutions that should be fully integrated, ideally intrinsically,like the clinicals. We believe there are tremendous benefits from a patient safety standpoint, from a workflow efficiency standpoint, to have the clinicals integrated. But then at the same time, for solutions like imaging integrated with Centricity Enterprise, we believe that it is our responsibility to provide a seamless integration of those solutions, but they don’t need to be intrinsically sharing the same database or the same back-end data storage or data management solutions. It become more of a connectivity play. We have not made these acquisitions or invested in these programs to pretend that they are integrated or to put some lipstick on them and hope that nobody notices.

I think GE culturally has a tradition of being very transparent, which of course a lot of people can use against us because we’ll tell you pretty much what it is, and whether it works or doesn’t work. But we are committed, and if you look at the resources we’re dedicating to integrating the portfolio, we believe that integration is critical. Now compared to some of our colleagues who have built their own applications, I think they’re doing a fabulous jobs and it’s simpler to integrate. By definition, they’re built to be integrated.

The flip-side is that I don’t think its going to be as easy for them to integrate the complete continuum of care from not only the software standpoint, the data management standpoint, the clinical decision support standpoint, but especially all the device connectivity and the integration from a total workflow standpoint in the space and the environment the physician or the clinician themselves is surrounded by. Not just a software company, not just a hardware company, but actually working through the total space in which the clinicians are working. That’s where GE Healthcare is trying to position itself.

How close do you think we are to that picture where the traditional lines of demarcation like being FDA approved or having sensors that actually touch patients, or whatever it is, separate IT companies from bio-medical equipment companies?

I don’t have the answer to that. But I can tell you that is a big question. It has very significant implications for all of us, especially in the IT industry.

The key to success, and this is certainly what we’re pursuing, is rather than trying to demonstrated absolute integration on a seamless basis across all these technologies and all these disciplines, we want to create an environment where we have a technology stack and a technology framework that makes it easy to integrate all the things that you know today, and also to integrate all those things that you don’t know you require in the future, but you will acquire and that it will make it significantly easier than it is today.

So all the investments we’re making today are based on open architecture and open tech stacks, so that as you invest in our products, whether you start at the departmental end or you come to the enterprise end, as you continue investing in them, it will not only be easier to integrate GE technologies, but it will be easier to integrate any technology. Where the regulatory impact to all this is — I unfortunately don’t have the answer to that, but I’m sure we’ll all experience that over the next 10 or 15 years.

Do you strive to be #1 or #2 in the inpatient and the ambulatory EMR product segment?

That’s certainly what we strive for, but we want to do this correctly. We don’t look to growing at breakneck speed without having the quality and the support and the services. I had a business leader I admire who used to say, ‘You have to earn your right to grow’. And you can’t just grow because you have a lot of money or you have a lot of capacity or you have a lot of engineers.

We recognize that we have some work to do to improve the quality of our products and our services. We’re making very significant investments as we speak — to the service, the engineering, and the support side — to ensure that we are ready to grow. We’re GE and we have every intention to grow and we have every intention to be market leaders. That said, we don’t want to do it at the expense of delivering high quality products that serve our customers as we promised they should.

How is the $1.2 billion GE paid for IDX being realized?

The IDX portfolio was a very rich portfolio of products and customers. I described to you the three major business units we have. All those business units are doing very well and the business is growing. Certainly from a financial standpoint, the performance is very positive.

What’s particularly valuable about the realization of the IDX acquisition is that GE Healthcare needed a very strong information technology backbone to integrate all the various products and solutions that it offers. And what IDX had been able to bring was not only strong ambulatory products, but particularly the Centricity Enterprise side, is the platform we’re going to use to provide that core centerpiece of information management for the hospitals and the large IDNs. So we recognize we’ve got some gaps, but we’re making some significant investments jointly with Intermountain and a number of our other development partners.

The continuum of care is vital. There’s not a single healthcare organization that I meet with – certainly in our customer base, and even potential prospects – who doesn’t stress the essential importance of having a fully integrated IT backbone to run your operations, not only on a day-to-day workflow basis, but also on a retroactive advanced decision support capability, to be able to analyze how to improve care and how to tighten up the tolerances on how care is being delivered across different physicians, operations, hospitals, etc.

So I think that’s where the real return on investment is going to come, where we’re going to be able to not just deliver and implement a Centricity Enterprise inpatient or outpatient solution, but when that solution will actually allow our customers to fully integrate all their diagnostic equipment, all their labs, all their practices, and do it in a seamless way. So that’s the bed we’re in. When we reach that point, the $1 billion plus will be a small cost in the context of the rewards we’ll be able to get not only as a company, but for our customers.

When does the work at Intermountain come out from under the covers?

It started 18 or 19 months ago or so. There was a ramp-up of resources prior to the IDX acquisition in 2006. And as we acquired IDX and started integrating the business after the first quarter of 2006, we were at about 100 resources. We’ve been fully staffed for about three or four months. We’re a little over 310 or 320 resources, not only at Salt Lake City, but also in a couple of other GE sites.

We’re going to be releasing the first major parts soon. Not releasing to the market, but implementing them within Intermountain, the first major phase of the program, which will be focused on the emergency department. So we’re very excited about that. We’re targeting that for the end of the first quarter or beginning of the second quarter next year.

So the team is heads-down working on that, and we’re designing and developing the specs for the next two generations of the product and we’re very excited about it. So, it’s going very well. I think there was a little bit of silence for awhile because the team was really getting its sea legs. We had acquired IDX, and we bought in the Carecast business. As we were looking at the exceptional partnership we had with Intermountain, we also recognized that there were some luminary customers within the installed base that IDX brought in. We wanted to make sure they could participate and help enhance what is designed to become a transformational, next generation platform.

We talked about the acquisition integration, getting the cultures aligned, understanding what’s in conflict and what’s not in conflict. So that perhaps delayed us a little bit, but the result is that we’ve never been in a better place when it comes to our partnership. Our customers are excited about it. And, we’re having a pretty impressive set of collaboration across half a dozen large, very respected healthcare organizations, with Intermountain, of course, at the core. So it’s very exciting. We’ll have some cool things to show at the beginning of next year.

Do you think the end result will be targeted at large organizations like those ones you just referred to, or will it be something that the average community hospital can use?

It’s targeted for the average community hospital. We’re architecting it so it can be run completely on commodity hardware. So, it’ll be completely available to scale up to the Intermountains and the UCSFs of this world, but it also has the capability of running off Linux boxes and a fully open tech stack. Pretty much a state-of-art technology stack, which will provide not only a very low cost point and a low TCO, but also provide tremendous opportunity for integration, not only our products, but also third party products.

As we all know, and I certainly know from my 10+ years as a CIO, there is no such thing as a homogenous portfolio of applications in any organization. So I think that’s the other element we’re trying to address here. You’ve got to have something that can work easily with other technologies. I think that will be a differentiator as well.

When do you think you’ll have the first fully commercial sale of the end result?

We’re not looking for a big bang, “Here’s the GE-Intermountain EMR, ready for sale with a nice ribbon.” We’re basing everything on the Centricity Enterprise 6 platform, which we released earlier this year. And the way we’re looking at it is to implement it on a modular basis. So what we’re recommending is that you implement Centricity Enterprise 6, and then we are building all the engineering integration requirements so that, as modules come out, whether it’s for ED, whether it’s for a flow sheet, whether it’s for a PDA, whether it’s for other types of services that we’ll be releasing over time.

Basically, every year we’ll be releasing different components. You’ll be able to enhance the Centricity Enterprise 6 platform with those components. And over time, and it all depends on the appetite and the rate at which an organization wants to consume these things, you will find yourself having the center of gravity of your application will be increasingly the new tech stack rather than the old tech stack. But it really will be up to the client organization to decide at what rate they want to absorb them. So we’ll start releasing some things next year.

You will be marketing it to new customers, correct?

Absolutely. But in 2008 and 2009, the output of the GE-Intermountain partnership is not going to be a full, complete, 360 EMR solution. I mean, we’re building this, we’re very focused on starting with ED. We’re going after ambulatory. We’re going after certain infrastructure components. We’re going to sequence it that way.

This is sort of the internal debates we’re having these days. What are we focused on first? What will we focus on afterwards? Where are we strong? And so, to a degree, we think we have the best of both worlds. We have a very strong orders and CPOE solution with Carecast. We recognize that there’s some areas of improvement, but we also have departmental products that compliment it well.

I thought one of the braver, more honest things I’ve seen a vendor do was when GE responded to the KLAS nursing adoption study and pretty much said, ‘Look, we admit it. We and our competitors haven’t really done a good job of giving nurses the systems they need.” What actions resulted from that?

It was a hard decision, but we certainly didn’t want be rewarded by trying to sugar-coat it. GE has a strong culture of transparency.

We’re trying to get our customers upgraded to the latest release of our product. There are a number of features in the latest release of our product that actually mitigate some of the issues that were identified in that report. But we’re also putting a very strong focus on nursing workflow. We’re taking advantage of a lot of the best practice methodologies and the operational rigor that GE can bring here to ensure that we not only interact with our nursing client communities in a productive way, but we also translate their requirements and their requests into actionable product requirements that will be built out and integrated into our future releases.

It’s a tough situation to be in, because clearly nurses are among the largest population of our users, probably without any competition. And at the same time, we would obviously prefer to have better solutions for them. But I feel good considering the resources we’ve invested in this business. Just to maybe give you a sense of the kind of resources we have in development today compared to the resources this business had in the IDX days, the Centricity Enterprise business or the Carecast had about 250 engineers when we acquired them. We’re now in the range of about 620 or 630 engineers dedicated to this one product.

So the exciting part is that if you combine the clinical expertise, the software expertise, the domain expertise that the IDX team has, and you combine that with the rigor and the operational excellence and the focus on execution that GE brings, and you add on top of that the significant resources to actually walk the talk, it’s not just a question of gathering the requirements, but its doing something with them. I think the prospects are very positive and optimistic.

What we’ve also done from an organizational standpoint is a CxO kind of client forum called the Physician Advisory Group, then the CIO group. We’ve added a Chief Nursing Officer Advisory Group. That was one of the things we did early last year. We have a chief nursing officer internally. We’ve been hiring more experienced professional nurses into our organization. So I think there’s a very strong culture so our nursing users have very strong advocates internally and we’re including them now in what was already a good communications process with the CIO and the CMOs or CMIOs. Now we also have the CNOs included in that. It’s making a huge difference in helping us understand how to continuously improve our products.

If you look at the broad spectrum of healthcare IT, which areas would you say are most popular right now?

One is a tremendous focus on clinical workflow. The software industry has had a tendency to always think in modules or components of modules and has always focused on the connectivity side and the automation side and the paperless aspect. Everybody has been talking about paperless and eliminating the paper artifact. I think a lot of organizations have taken care of that and are less focused on paperless and more focused on ‘How do I really optimize and maximize the efficiency and the quality of my workflows?’, which of course doesn’t always work naturally with the way IT solutions are architected.

I think the other aspect is driving evidence-based medicine; making sure the data is available, so it’s not just gathered after the fact through some kind of manual reporting, but that every transaction, every encounter with the patient captures data on a standardized basis. And as you look at the work we’re doing with Intermountain, literally leveraging knowledge terminology, management, setting up standard databases, and setting up clinical data models, ensuring that the data is captured at the moment of the transaction or the encounter with the patient, which then allows you obtain a very, very rich database that then can be mined for analysis and for discovery of how to improve care.

The other thing that we’re doing, of course, is including in the workflows best practice care. So I think that is something else that we’re hearing more and more about. How do we keep our physicians and our clinicians fully up to date on the latest developments in healthcare? How do we help them as individuals who have a tremendous amount of pressure both transitionally and from a responsibility standpoint to be aware of the latest developments, the latest adverse interactions, the latest discoveries on how to practice care and how to address certain types of concerns?

Through the software we’re developing, we believe we have a unique opportunity, not just as GE, but as a partnership with other organizations like Intermountain healthcare; organizations like UCSF and others, to take the best practices that they’ve developed and make them available, not only to large institutions, but particularly to community health hospitals and others. And so that’s what we’re targeting going forward.

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Photo: Hartford Courant

I was certain I knew Eric Rosow of Premise when he introduced himself as a new HIStalk sponsor, but I couldn’t place him. Finally, I remembered: I had seen his presentation at the 2002 HIMSS conference in Atlanta called “Real-time Executive Dashboards and Virtual Instrumentation: Solutions for Healthcare Systems”. It was one of a handful that I thought were interesting enough to cull out for further review, the idea that a feed of information and instrument sources could, like a car’s dashboard, provide an array of information needed to keep the vehicle operating efficiently and going in the right direction.

Patient throughput and its underlying components (patient assignment, bed managment, housekeeping, and patient transportation) have an enormous impact on hospitals that I’ve seen first-hand: ED waits, patient satisfaction, staff satisfaction, and even clinical outcomes (another great HIMSS presentation from years ago was from CareScience, which dealt with bed assignment and the clinical variation that occurs when nursing units get patients whose needs are vastly different from the average patient on that unit).

Hospitals need the kind of measurement and transparency that products like Premise’s can provide. Many (most?) of them have the expensive symptoms of poorly managed patient throughput. No wonder Premise has enjoyed growth of over 2,000% in five years.

Tell me about yourself and about Premise.

First, I have to say that I feel like I’m talking to an underground celebrity. I really love your blog. It’s just so refreshing and humorous and insightful and thought-provoking. It looks like at the rate you’re growing, it could blossom into a great vehicle for communication.

I’m a geek by definition, in some respects. I’m an engineer by training. I went to Trinity College here in Hartford, Connecticut. I majored in mechanical engineering and then got my Masters in biomedical engineering.

My Masters program had an internship, so not only did I get my degree in biomedical engineering, I also spent two full years at St. Francis Hospital and Medical Center in Hartford. That’s really where I fell in love with applied technology in healthcare. After graduating, I got to row with the US team for a couple of years, which was a great experience to see other parts of the world. I then went back to Trinity and taught for a year. It’s very true that you have to learn something to teach it.

After that, I joined Hartford Hospital as clinical engineer, where I was immersed in front lines of healthcare delivery and the role that technology can play in addressing those challenges. I did a 13-year stint at Hartford Hospital and was the director of biomedical engineering for the last seven. I served on the capital committee and was involved with the technology assessment of major projects, including enterprise-wide monitoring and re-engineering engagements.

It was the reengineering initiatives in late 1990s that led to the opportunity to develop what we now call our bed management platform. Hartford Hospital was faced with a number of challenges. A top initiative there was to find, build, or buy enabling technologies to help streamline capacity management/bed management. They had looked at different solutions on the market, but felt there was need for better communication and better integration of clinical information. That provided the opportunity to co-develop the Bed Management Dashboard.

I love the sport of rowing and helped started a rowing team in our town. Through that experience, I learned to value the passion, the teamwork, and the commitment that can come with a high-performing team. I think that experience fostered the entrepreneurial DNA that must have been in me. Or, the lack of a fear gene – I’m not really sure which [laughs] that resulted in us creating this crazy thing called Premise.

Premise is an interesting ride. It wasn’t just, “Let’s go off and create this thing called Premise.” It started out as two guys in the basement, myself and a long-time friend and colleague named Joe Adam. We met as high school lab partners. We were the yin and yang of complementary skill sets. In the early days, we were more of a consulting firm. Over time, we evolved to apply our applications to product-focused and decision support and business intelligence, ultimately to workflow applications. That was the next generation of Premise, in the late 90s, where we evolved from consulting and data acquisition and data presentation and focused on how we could apply those tools and visualization dashboard metaphors to really impact healthcare. For me as a biomedical engineer, it was such as great intersection of connecting devices and communications with workflow and safety and efficiency initiatives.

Hospitals used management engineers a lot a few years back to find and fix process problems. Did that work and are they using them enough today?

One of the ways I got engaged in developing the bed management dashboard was that I was one of first non-GE employees to go through GE’s Six Sixma quality training. Whether it’s management engineer or TQM or CQI or Six Sigma, I think the goal of trying to make informed decisions based on data and trends is what will always be required in healthcare, particularly given the challenges of aging nurses and baby boomers, the perfect storm that’s happening with capacity demand.

Hospitals respect the science of management engineering in day-to-day operations, but saying and doing it are two different things. In our focus area of capacity management, there’s a huge opportunity where information technology can play a huge role in improving that. Specifically, in things that IT is really good at – providing transparency across the organization, analyzing variation, looking at historical trends like where are peak discharges and admissions by time of day, day of week, time of year – and most importantly, streamlining communication among stakeholders.

MRSA is an example of where, when we developed our application, it was really important from the get-go to provide that type of clinical information so that caregivers could take the precautions they needed to and not put patients at risk, particularly if they’re in a semi-private room.

How big a problem is patient throughput in hospitals?

It’s amazing to me how ubiqitious it is, not only in large hospitals, but small hospitals, and not only here in the US, but internationally. We’ve been fortunate to work with a lot of great thought-leading hospitals, places like Cleveland Clinic, Mass General, MD Anderson, and even recently at a kickoff for our first international application at Singapore General Hospital. Places like that who have lived through the SARS epidemic have an even greater appreciation for the challenges when it comes to emergency management. The day-to-day issues include ED wait times, the metrics around diversion, people who leave without treatment, satisfaction indicators, not only people coming from what we call portals of entry, like ED and ancillary areas, but are transfers from other hospitals.

The challenge I’ve seen is that ED backups or diversions and OR and PACU backups are symptoms of a much broader patient flow challenge. Studies have been done that show that ED wait time isn’t necessarily tied to volume or ED staffing, but the visibility of upstream bed capacity. That’s the challenge in hospitals from 100 to 1600 bed hospitals throughout the world. The opportunity to create virtual capacity by better utilization of existing beds is important, especially when we’re seeing bricks and mortar and cranes helping to build out capacity, but at a cost of half a million to a million dollars per bed, plus several years to do that. That’s the real benefit.

It’s looking at the right metrics. The bed turns in a year or in a given time period is a key operating metric that all hospitals need to monitor in real time to better manage their operation.

What are the symptoms that your hospital has a throughput problem and do executives recognize them?

Certainly diversion, excessive wait times in ED, people who leave without treatment, operating room cancellations or delays or backups in PACU. Corresponding derivative effects of that are upset physicians, caregivers, and surgeons who have to cancel or delay their cases due to lack of ICU or stepdown beds for patients to go to after the surgery. Also the challenge of what we call the shell game, where patients are placed on off-service units. An orthopedic patient who’s had their hip done that morning may go to a medical floor. That creates a whole host of challenges. Those units are not trained to manage an orthopedic patient and they are often placed in a temporary holding state. Medications and meals may play catch-up as the patient moves from one holding area to another. You create work for the organization because you’ve got a bed that was occupied that has to be cleaned and prepared for another patient to come in.

There’s great efficiency if you can get them to that right level of care the first time. We’ve seen hospitals that have done more than 40 intra-unit transfers per day. You’re just not getting the throughput you need because of poor visibility across the enterprise. In our experience, capacity management in many hospitals is reactive and decisions made round a diversion, cancellations, and delays are made without good, real-time information that can support these decisions. That’s the biggest value that Premise is focusing on – increasing that visibility and decision support.

Can throughput problems be fixed without an actively managed patient transportation program?

Clearly it’s a continuum. I’ll go on record as saying that you can’t fix throughput with any technology solution. It’s a holistic approach looking at as-is, the to-be state, gap analysis to configure a solution to manage that continuum. The way we look at it is that you’ve got a circle – a portal of entry, bed assignment, bed management. Then, you need the transportation on site to move the patient and/or assets and other equipment to their room and level of care. Communicating all the activities throughout the length of stay to discharge, when a housekeeping event occurs and the room and bed are cleaned. We were originally focused on clinically driven bed management and evolved to environmental service functionality. Our newest module, Transportation Dashboard, provides that visibility across the transportation team as well.

Are hospitals getting better at discharge planning?

I think they’ve had to. As more information becomes available, it becomes easier to plan. The challenge we’ve seen is this notion of hiding beds. People can only make decisions only based on timeliness and accuracy of the data they have. Patients may leave the hospital at 10 in the morning, but that event may not be broadly visible across the organization. If you’re looking only at one ADT system, it could appear that that patient is still up there occupying that bed. That’s the type of mis-information that can create a cascading effect of backups. That continues to be a challenge in terms of visibility in discharge planning and overall patient flow.

Hospitals often think that bed turnover is a housekeeping issue. Is it?

No, I absolutely don’t think so. I often think one of the most rewarding aspects of our solution and the clients we’ve worked with is vindicating and supporting what a great job the housekeeping departments actually do. Because housekeeping departments may not have all the tools and data to support the job they do, they can be the easiest to blame. By providing metrics such as response time to a cleaning request and bed turnaround time, and doing that both on a shift and employee basis, Premise can really empower an organization to see where the bottlenecks can be in their patient flow process. In general, they’re not with housekeeping.

Can census levels be predicted?

I think hospitals can predict some of them. Certainly if you’ve got scheduled procedures, you can see what’s coming up. You can look at histograms and historical trends and control charts of what patterns have been historically for different regions of the country. There is a growing capability with some of the business analytic tools to look at what patterns have been and to use that going forward.

Having been at Hartford Hospital on 9/11, a tragic day for this whole world, the ability to look at patients that were in the hospital that day … there were only three open beds that morning and calls were coming down from state and federal authorities. There were two questions: how many beds do you have available right now by type and how many can you have available in one, two, and three hours from now? Without technology to augment your hypothesis, it would be almost impossible for many hospitals to answer that question. Hartford was able to free up over 140 beds that day to make room for anticipated casualties from New York City, which tragically never came.

What’s the ROI on your products?

There are different pain points for different organizations. Many we’ve worked with have looked purely at their ability to increase admissions without increasing their bed compliment or increasing their staff. Going back to virtual capacity and making better use of the beds they have. Other ROI elements can tie in to reduction in diversion, reduction in OR delays and cancellations. We’ve developed quantitative and qualitative ROI metrics that may or may not apply to a particular hospital’s geography or challenges.

We’re seeing more and more organizations view patient flow as a strategy, not just a problem. It’s critical, it’s real time, it’s strategic. The ability to increase efficiency and therefore profitability is why inpatients are such a high profile. It also plays an important role in patient and staff satisfaction. Chief nursing officers and other leaders use tools that help manage beds and and patient flow as a recruiting tool that makes it a more desirable place to work. All the years I’ve worked with nurses and physicians, they want to do the best job possible and take care of patients like they’ve been trained to. When you have such a potentially out of control system with patients not appropriate for their population, that can create anxiety and risk. Getting the patient in the right bed the first time is critical.

What vendors are competitors to Premise and how would you compare your offerings to theirs?

Certainly the market continues to mature. The vendors we typically see are Tele-Tracking, who I have a lot of respect for; Navicare; Statcom as a pure play vendor as well; and certainly Awarix is a really impressive company and obviously McKesson thought so as well. Those are the pure play vendors we see most often. The large healthcare IT vendors have some functionally. We see ourselves as complimentary to them. We can work in concert with the big HIT or ADT vendors out there. It’s good for the market that we’re all raising the bar, all bringing features and functions to bear as strategy that allows hospitals to better utilize their beds.

In terms of differences, our architecture is open, flexible, based on industry standards. We’re a Microsoft technology platform. We’re unique in the clinical functionality we use to match the patient’s clinical attributes to their level of care. If a patient presents with chest pain and tuberculosis and MRSA, we might need to find a bed with a patient monitor and negative pressure capability in that room. We used to joke that if you have a Yankee fan and Red Sox fan, you may not want to put them in the same semi-private room during the playoffs.

There’s all kind of attributes that may not be readily apparent. Some hospitals have to track gang affiliations. You don’t want to put rival gang members in semi-private room. This ability to complement ADT demographic data with specific attributes, like monitoring infectious disease, is really important to optimize the patient flow experience.

We want to have a highly intuitive look and feel and an easy-to-use user experience. We have patent pending technology called our Intelligent Workflow Engine to optimize and load level how tasks are assigned, particularly in the area of bed turnover, environmental service/housekeeping, and transportation tasks.

I do think it’s not just about technology. You don’t just double click the install button and it’s done. We measure the as-is state and the to-be state based on desired outcomes, and then gap analysis. We bring subject matter experts, a number of clinicians who are nurses with backgrounds in clinical patient flow, project managers, and technical specialists to make sure that when we go live with client, we tune that application to align with their desired workflow. For that reason, our solution may not be right for everybody, but for those it is, it will fit like a glove when we’re done.

Deloitte recognized Premise for outstanding growth of nearly 2300% over five years, one notch behind Google. How did you create that growth and how do you manage it?

We’ve certainly been excited to have grown the way we have. We joke internally that we were right behind Google in terms of statistics, so we love that “lies, damned lies, and statistics.” [laughs] We have great people who have a lot of experience in building companies and also focusing on what’s important. Our goal isn’t to grow, it’s to have 100% referencability. People here are exceptionally passionate. We say we have a company, but we have a mission to make a meaningful difference in healthcare. Hiring the right leaders, the right skill sets and, most importantly, the right culture and chemistry is key to any high performing organization.

In some cases, we’ve been better served by hiring people from outside of our industry. We recently created a chief technology officer position and, after an extensive search, hired a person from the digital media space, somebody familiar with innovation, user experience, and time to market, unencumbered by the traditional healthcare IT world. That has been an advantage for us to innovate. We also made a decision, for the first time, to take on a round of investor money. Through that process, we’ve got a very strong board of directors and thought leaders who have been wonderful advisors and strategists and also mentors to me and other members of our team. One gentleman in particular, Joe Zaccagnino, was the former CEO of Yale New Haven Health. He brings a tremendous insight into the challenges going forward in hospital management and administration.

You said when you hired Craig Gavina as CTO that innovative consumer technologies have healthcare potential. What are some of them?

Certainly as we look at different forms by which information can be displayed. Form has to fit function. We don’t want to be too ahead of curve, but we want to be responsive to what’s out there. One thing we say here at Premise is NEHITO – nothing every happens in the office. We want to make sure we understand what is the most effective way to deliver information, through touch screen interfaces to PDAs to iPhones, as well as traditional vehicles.

The other thing that’s exciting to me as a biomedical engineer is the convergence of other medical devices and applications with patient flow. We have relationship with Stryker,where their next generation smart bed, or iBed as they’re calling it, can communicate bed parameters. For example, are the side rails up, are the brakes on, is the bed at a low height. That information can be critical to another hospital challenge, falls and fall risk and the ability to integrate that type of information into an application like our patient flow system. The same applies to scheduling and resource management. We have a history of form fitting function.

We do what’s right for the customer, and by having a lot of what I call Chuck Yeager accounts – hospitals that push the envelope of this company in a good way to make sure we’re thinking ahead but also grounding our thinking in what will work and what won’t. I know from my experience at Hartford Hospital that things that don’t work the first time often don’t get a second chance. Applications that are innovative and functional and, at the end of the day, will get used.

I love to read books and ideas from thought leaders. One of my favorite authors is Guy Kawasaki, who describes himself as Apple Computer’s evangineer, someone who wants to change the world and has the technical ability to do it. That’s what I see that at Premise. We’re excited to have this technical ability to influence how patients move through organization. We’ve had housekeepers come up to use with tears in their eyes and hugging us, thanking us for being able to show what a great job they do in helping that organization improve their patient flow.

Where does the company go next?

We see a tremendous challenge of continuing to focus and build on the base we have. The opportunity we have to extend into the ability to tie into other devices, staff scheduling, analytics – the market will see a lot more functionality on reporting and analytics. We will continue to be opportunistic as we see challenges and synergies that are presented. We don’t want to boil the ocean – we want to focus on what we do really well. We see the benefits and value of RFID technology.

At Singapore General, we’ll see the integration of advanced RFID technology into our patient flow platform. Technology that can not only show the location of a patient, of staff, or an asset, but also be able to measure physiological signals of those patients, like core body temperature. In Singapore, that can be a useful tool to for precursors or outbreaks of infection or disease states like SARS or avian flu.

Who do you admire in the industry?

I think people like Michael McNeal, who I know you interviewed a while ago. What he’s doing with Emergin is really exciting, how he’s looking holistically across multiple vendors and providing that glue, middleware that can tie information and devices together to enable companies like Premise to add value quicker. Outside the industry, I really admire Steve Jobs and the elegance of what Apple has done and continues to do. I’m one of the heretics here at Premise that carries the iPhone and MacBook running Windows applications. I hold that as the standard to try for in terms of elegance, ease of use, and functionality.

Also, Bill and Melinda Gates and the incredible work their foundation is doing for global health with access to vaccines and drugs and research to develop health solutions that are affordable and practical. I’ve been an Apple evangelist since college, but I’ve always admired Bill’s ability to scale his vision and organization through the vehicle of Microsoft and especially the standards and rigor of the Gates Foundation. It has always been my goal to create social value through my profession and now through Premise. I’ve been in the healthcare profession my entire career because I can think of no better industry to devote one’s time and energy to. Their leadership by example has been a tremendous catalyst for others to contribute, like Warren Buffett, to such an important initiative — global health and the challenging inequities in the world.

Any other thoughts?

The patient flow is a strategy and looking at logistics and analytics is a platform to look at the core processes of delivery. That’s what we’re really focused on doing.

Our success to date has been a combination of our company’s humility. We don’t think we know it all, but we have have great advisors and customers to guide us through a dynamic market. I think it’s due to our passion, a desire to innovate, and our commitment to realizing that vision that has made this place, while at times challenging given the growth we’ve experienced, rewarding. Everybody who works here wakes up every morning excited about what we’re contributing to healthcare. It’s not for everyone, I wouldn’t want anything else. I’m really proud of this team. I don’t want to sound like an infomercial, but I really mean that. It’s a great experience we’re building on and I really appreciate the opportunity to talk with you and I appreciate all the great work you’re doing with your website.

A doctor I worked once with made a great analogy. Why do people buy drills? What they’re really buying is holes. I love that analogy. What is it you really do? What we really do is provide workflow automation, but what we really provide are analytics and real-time information. That’s what people need. We are never going to be a replacement, nor do we want to be, for the big HIT vendors. What we want to be is a decision support tool and real-time dashboard that can work in concert with ancillary systems to make the best, accurate, timely decisions so that the patient gets to the right place at the right time. That ties into patient safety and a whole host of other benefits.

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

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

Tell me about yourself and your job.

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

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

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

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

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

How do you define an all-digital hospital?

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

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

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

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

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

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

How did you create the process maps?

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

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

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

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

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

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

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

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

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

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

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

What kind of user devices are in place?

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

How’s the battery life?

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

What kind of IT infrastructure was created for the hospital?

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

Is your data center on campus?

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

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

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

What about your wireless infrastructure?

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

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

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

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

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

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

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

How does the downtime EMR work?

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

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

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

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

What’s your IT staffing?

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

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

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

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

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

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

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

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

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

Where do you see yourself in ten years?

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

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

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

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

What do you do when you’re not working?

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

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

Characterize the M&A market so far this year.

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

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

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

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

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

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

What’s hot and not in healthcare IT?

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

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

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

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

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

What do you think about Health 2.0?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

McKesson

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

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

Eclipsys

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

Cerner

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

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

GE Healthcare

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

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

Perot

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

Quality Systems

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

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

Sage Healthcare

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

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

Misys

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

Mediware

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

Allscripts

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

Siemens

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

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

I don’t know much about InfoLogix.

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

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

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

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

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

Are Microsoft and Google serious about healthcare or posers?

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

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

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

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

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

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

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

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

How about the practice management market? Any projected winners?

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

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

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

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

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

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

What is athenahealth’s IPO telling the market?

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

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

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

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

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

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

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

What changes would you predict for the upcoming year?

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

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

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

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

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

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

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

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

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

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

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Photo and site: Jay Parkinson, MD, MPH

I didn’t have much trouble tracking down Jay Parkinson. He’s ubiquitous for a guy whose medical practice is just a few weeks old. He’s been interviewed many times, has a blog, and apparently is coming soon to a TV near you, all because of his Medicine 2.0 – which is actually Medicine 1920s – making house calls, charging reasonable cash prices, and being available whenever his patients need him, all in the hip Williamsburg neighborhood of Brooklyn.

He insists that it’s not about the technology, which in his case is the PC tools everybody else uses (Google apps, e-mail, IM, etc.) He doesn’t even use an EMR system any more, having given it up because it didn’t meet his needs. So, the lessons to learn from Jay aren’t about use of cool technology, but more about practicing medicine the way he wants, addressing some of the challenges of the healthcare system along the way.

Tell me about your background and your practice.

I’m a 31-year old male. [laughs] I practice in New York City, mostly in Williamsburg and Brooklyn. I started the practice September 24 after two residencies, the first one in pediatrics at St. Vincent’s Hospital here in the West Village and the second one in preventive medicine at Johns Hopkins in Baltimore. Seems like it’s going pretty well for me.

Most people associate house calls with country doctors carrying little black bags, but you’re in New York City.

I still have my black bag that I carry. Just getting around the city is next to nothing. You take the subway, walk, or take the bus. In the near future, I’ll be buying a scooter so I can scoot around. Hopefully I can keep every house that I visit within a 15-minute travel time.

Describe a typical patient encounter.

It’s great because they submit all their information ahead of time, so I pretty much know what’s going on prior to the meeting. I know what to talk about, what points to hit, what things I can skip over that other physicians would concentrate on and waste time on. They spend 10-15 minutes giving me all their health information via an online form. It’s very streamlined, but I still spend about an hour and a half per visit, talking to them, having them show me their art work. It’s very laid back.

I’m not a very formal person. Everybody that I’ve seen has really enjoyed seeing their doctor rather than being in some sterile, foreign environment that everybody knows and loves as a doctor’s office.

What’s it like making house calls and what do you learn that an office-based doctor wouldn’t?

Somebody has asthma, maybe lives in a dirty warehouse loft, I can pick up the fact that it’s pretty friggin’ dusty or has mice. It just gives you a feeling for who somebody is. You can tell a lot by how they live, more from a mental health perspective. The United States is a pretty clean place so we don’t have a lot of sanitation issues or something, but it gives you a more full picture about the person.

What technology do you use to run your practice?

It’s very basic, freely available technology. I have a Macbook and an iPhone. IM programs, like ATM and iChat for the Mac. I just use regular e-mail, Gmail in fact, because it’s very powerful.

I use a website called Formspring for my online forms. It’s very simply drag and drop forms creation. Any form can be made in three minutes or so. It uses skip branch logic, so questions can appear or disappear based on responses to previous questions. I use that to get another diagnosis through a careful history, because an early question is a branch in the algorithm for proper history taking. I think it’s safer because doctors aren’t perfect and sometimes they forget to ask very important questions about something rare. If I can spend time asking these questions beforehand, I don’t have to be worried about always thinking about every little thing during my interview session with the patient.

I saw on the Web that you use the Life Record medical record system. Tell me how you chose it and how it works for you.

Actually, I have abandoned that, simply because it’s not very customizable and I thought it was going to be. So, I’ve abandoned that. But, I was fascinated by it because it has a lot of features that I think would be very valuable for a traditional office-based practice with multiple practitioners. Having access to records by iPhone on a Friday night at dinner is vital in some circumstances.

Now I use Apple’s version of Excel called Apple Numbers and have created templates for nearly every condition that I have. I can use them for a physical exam or generating an invoice. It’s really just using Apple’s iCal for scheduling synced to Gmail’s calendar. iCal and Gmail and iPhone are all updated at the same time in real time. It’s pretty basic stuff.

You’re an iPhone fan, I hear.

I love the iPhone. I think that’s amazing. Hopefully I will be able to put Apple’s Number files on my iPhone. I think they’re coming out in with developer’s kit for iPhone in February and I’ll be able to use my iPhone a little more intensely. I could only get to my records by iPhone with Life Record. He’s a great guy, the guy that developed it, and I’m sorry it isn’t specific for what I need.

When it comes to technology, you seem to be a geek, but you deal with artists and are one heck of a photographer. Where do you fall on the geek-doctor-artist continuum?

I’m definitely fairly geeky, I guess. I really like technology and gadgets. Right after the iPhone came out, I wasn’t going to wait in line forever down in Baltimore. I’m all things Apple. I did the iPod first day it was announced years ago. I designed my own website and can do programming. I don’t know CSS or anything like that. I’m not trained in any technology, I just kind of figured it out on my own.

You charge $200 a house call. Do patients find that competitive and can you make a decent living at that price?

Sure. Look, I have no overhead whatsoever. If I charge $200 a visit, $195 of that is straight profit. I think that’s a pretty good living. If I see eight patients a day, that’s $1600. Without having staff, an office, billers … it becomes a very easily doable practice. I definitely designed the business model looking at that. The concept of doing the housecall was a way to open a practice without putting $300,000 upfront. I started this whole thing for less than $1,500.

Would your med school classmates think this is weird, or are they looking for more satisfying practice models too?

Everybody that I’ve trained with has been extremely supportive. I just got done with an interview for the London Times. Obviously there’s something interesting about what I’m doing since now I’m making international news.

What I’ve created, not to toot my own horn, is pretty ingenious. It’s a Band-Aid to a gaping wound in a lot of ways, the fiasco that is the American healthcare system. 50 million people without health insurance – there are a lot of voices behind what I’m trying to do. I’m doing a good job, I guess, getting the word out about the plight of the uninsured and also seeing patients at the same time.

A few people have mentioned security and privacy issues because of the technology I use, but because I don’t deal with insurance companies and don’t submit any patient health information online to insurance companies or Medicare or Medicaid, I don’t have to follow HIPAA regulations. I’m considered a country doctor, which is kind of interesting.

On your website, you talk about how you search the market to find the lowest fees for specialists and other medical services you can’t provide directly. How do you do that and what interesting stuff have you found as a result?

It will blow your mind what I found out. I graduated residency June 30th. Since then, between June 30 and September 24, there’s a good three months where that was what I was doing, finding accurate contact info for physicians in New York City and calling them up and asking what they charge, putting the information into a database. A mammogram ranges from $175 to $750, both of them amazing facilities, but nobody’s regulating healthcare prices.

Also, there’s widespread belief in the healthcare industry that they shouldn’t be competing for cash-paying patients because there’s so few of them. 50 million isn’t that few at all, but there’s no free market in the healthcare industry. The vast number of people have health insurance and doctors aren’t competing for their business at all. Its so funny, when I tell radiologists or pharmacists or anyone who stands to benefit from me referring my cash-paying customers to, it’s laughable how they kiss my ass to try to get my business.

The ultimate goal here is to create more transparency in the healthcare pricing scheme. I’m trying to create that transparency on my own because the healthcare industry won’t do it because they profit from that.

How would you compare what you do with the retail clinics that are springing up everywhere?

Most of the time, it’s simply a profit-driven marketing scheme. I’m personalized service. You call me up, I go to your home, physically examine you, follow up by IM or e-mail or text messaging. I get to know you as a person. I’m not remotely competing with retail clinics at all. People who go there want something different than I provide.

From your viewpoint, what’s the most wrong and most right about the US healthcare system?

It depends on who we’re talking about. Older people and very poor people, there’s absolutely nothing wrong with it whatsoever. For people who have insurance, there’s not much wrong. People who don’t have insurance because they’re young and healthy and priced out of paying an average $10,000 here in New York for an HMO, there’s a lot wrong. It really just depends on who you’re talking about. It’s hard to generalize that way.

My patients are people who are concerned about having or not having health insurance. New York State has policies that ensures that everyone pays the same for health insurance. That’s great for sick and old people, but young people can’t justify spending $9,500 when they only make $45,000. That to me is a significant problem for the uninsured in New York State. It’s a great solution if you’re old and sick.

You just started this practice and here you are, four or five weeks later, you’re in newspapers and on TV. You mentioned in an interview that you’re getting unbelievable offers to do TV and books. What’s coming your way?

You name it, I’ve gotten it. It’s pretty insane. Keep your eye out, probably next fall, for a TV series from a producer of movies that the whole world has seen, She’s getting back into an original series. I’m starting to write with her in a week and we’re going to start developing a TV series together, not a reality series. The major networks are interested in this concept. We’re developing it so it appeals to everybody, but it deals with the healthcare issues that are afflicting America. That’s in the works.

I got a book offer on Monday, so I’ll be writing a book about the healthcare industry using examples from my life and practice. The London Times was today. I’ll be doing a big talk show soon and Steven Colbert on November 12. It’s kind of insane. They’re all coming to me. I don’t have a PR person. I’m doing everything myself. I haven’t put out a single press release.

Is is scary that people want you to comment on an industry that you’re brand new to?

No, not at all. Sure, I don’t have experience in private practice dealing with insurance companies, but I’ve worked and talked about the healthcare system for years, getting my master’s in public health. I worked with Sidney Wolfe in Public Citizen’s Health Research, Ralph Nader’s consumer watchdog group in DC. I’ve worked at the Maryland state department of health level. I worked with National Association of Firefighters as their medical consultant. I’ve done a lot.

I’m not like a normal doctor who finished a residency and sees patients. I intensely studied the healthcare system and figured out its strengths and deficiencies. I spent the last three months at Hopkins on quality of patient care, studying quality in the American healthcare system. Doing Six Sigma and Lean Kaizen in various departments in Johns Hopkins, trying to figure out where the patient problems lie, problems with reimbursement and unsafe practices that lead to poor outcomes. I’m not worried about being a spokesperson.

Do you think you’ll keep practicing with all these offers?

I wouldn’t mind doing part-time for both. One thing I don’t want to be is part of the industry. I’ve got plenty of offers to join companies and form alliances, but then you become part of the problem, like most doctors. The practice of medicine is very conservative and appeals to a conservative type of person. They don’t really teach you to think outside the box. They try to prohibit you from thinking outside the box.

A lot of people are getting hung up on the “doctor who makes house calls.” Really, there’s no difference in seeing a patient in their homes instead of in the office. I don’t have a laboratory, so I can’t do rapid strep tests. It’s a little difficult to do male urethral swabs, stuff like that. Female exams, I just don’t do, but I refer to someone.

There’s really no difference between a house call environment and an office environment. I draw blood as I need it and a car comes up and picks it up outside my apartment door each night. To me, it was just a business model to start a practice on the cheap. People are also hung up on the technology, but it’s the stuff that everybody uses in every other industry in America. It’s just not being used to communicate with doctors.

Most doctors don’t even want to get patient e-mails.

Congress just passed a 10% Medicare reduction on to physicians yesterday. The only way doctors are making money these days is volume. If you see 30 patients a day, at 6:00 you go to your computer and there’s 30 e-mails, God, I can’t charge for these just yet. Why would I entertain the possibility of receiving e-mails from my patients? I understand why doctors are averse to that.

The way I treat patients, I can see six to eight patients a day, and as I’m traveling, I can answer e-mails. I’ll receive forms in my e-mail from patients who want to see me in the next hour if I’m not busy. With an iPhone and a Macbook, its ridiculously easy to keep track of everything.

You obviously love New York.

I’m a big fan. It’s the center of human culture. Everything is right here. If you want to go see this really obscure movie, it’s playing down the street. If you want to see this amazing photography by the best photographer in world of all time, it’s coming to town next week.

A woman was visiting me from Ireland and said something that describes New York as a summary. She said, “The one thing I love about New York is that the answer to every question is yes. It might cost some money, but the answer is yes.” She asked if I’d been to Ireland and I said no. She said the answer to every question in Ireland is either no or maybe.

The architecture and infrastructure here is just awesome. You don’t have to have a car.

Will you stay there or go Hollywood? You could leave your practice after one month and be in the public eye constantly if you wanted, doing stuff that people only dream of.

I’m not to going to go Hollywood, at least not yet. It seems that way, doesn’t it? We’ll see what happens. If I can start some sort of system … I have ideas and I have people backing me to create something along these lines that can benefit more than the 1,000 patients I can see here.

You could easily be rich and famous.

You should see my apartment right now. [laughs] It doesn’t look like I’m rich and famous just yet. But It’s New York, where the answer to every question is yes. The opportunities for me are endless, I think.

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