This Week in HIT 8/30/13

Tales from Encrypt: Big Breaches to Fill

Facts and Background

Major data breaches were reported this week at Advocate Medical Group (IL) and UTPhysicians (TX), both involving the theft of unencrypted computers from their premises.

Opinion

Both incidents involved somewhat unusual circumstances: Advocate’s stolen devices were desktops rather than laptops, while the stolen laptop of UTPhysicians was attached directly to a medical device and therefore not something IT would necessarily support. The bottom line of this cautionary tale: if there’s a hard drive, encrypt it.

Musings

• Computer security is only as good as physical security unless encryption is installed.
• Computers attached to medical devices may not even be on the network, making them discoverable only by physical inspection.
• It’s interesting that anyone even bothers to steal computers given their low black market value compared to cell phones or iPads. Perhaps they are intentionally stolen for more sinister purposes, such as intending to sell the medical data they may contain or holding them for ransom, but the thieves realized too late that they’re not really bright enough to pull that off.
• Government agencies like HHS and the IRS like to choose an occasional rule-breaker and flog them publicly to keep everybody else in line. Being that poster child is going to cost AMG millions in fines, investigation costs, and remediation.

Hospital EMRs: Epic and Cerner are Kicking Sand in Everybody Else’s Faces

Facts and Background

A KLAS report finds that Epic and Cerner are about the only systems being bought by 200+ bed hospitals and health systems, while Meditech and McKesson Paragon dominate small-hospital sales.

Opinion

The Epic-Cerner domination was obvious, but the staggering declines by conglomerate vendors McKesson, Siemens, and GE Healthcare may not have been.

Musings

• It has always been true that the best and best-selling products in healthcare IT are sold by companies that aren’t distracted by unrelated business lines. The worst and worst-selling products have always been marketed by international conglomerates.
• Cerner is a rare exception to another rule: publicly traded companies usually far worse in product quality and sales.
• KLAS says Cerner is narrowing the previously lopsided five-to-one sales advantage Epic has had.
• McKesson’s only potential bright spot is Paragon. If it wasn’t for that product, they would be better off just selling off their creaky legacy products (Star, Series, Horizon, etc.) and getting out of healthcare IT altogether as big companies often do once the novelty has worn off.
• Most of the laggards came with low expectations, but the zero wins and three losses for Allscripts explain why the company is suddenly steering all conversations toward population health management and away from both inpatient and ambulatory EHRs.
• The only real unanswered question, which KLAS points out, is who the Horizon and Meditech Magic customers will choose once they realize the Meaningful Use drawbacks of sticking with an also-ran EMR.
• Epic and Cerner aren’t cheap. As hospitals feel the budget pinch and swallow hard when writing their monthly maintenance fee checks, will the lower cost of Meditech and Paragon lure them in despite more limited functionality?
• Meditech should have been a better contender, but 6.0 seems to have killed its momentum just when it seemed poised to seize the opportunity to move into the Big Three of big-hospital products.
• As the hospital whales consume the smaller fish, Epic and Cerner will gain more hospitals by attrition as the incumbent vendors get the boot.

Attention Doctor Shoppers: The Database Knows You’re Hooked 

Facts and Background

New York State prescribers must check the I-STOP statewide database of filled narcotics prescriptions before issuing new narcotics prescriptions as of this week.

Opinion

It’s a good first step in identifying drug-seeking patients, but not a very elegant solution in in requiring prescribers to manually look up patients on a secure Web page.

Musings

• Pharmacists aren’t required to check the database when dispensing prescriptions, but they are required to enter their filled narcotics prescriptions into it immediately.
• The database should really be a national one, although state-specific laws always impose maddeningly archaic limitations on any kind of national effort (state-by-state medical licensure, for example).
• It would be nice if the database had the capability to integrate with EHRs to save doctors a lot of fumbling around while they’re in the room with the patient.
• What happens when a patient is identified as a doctor shopper? Most likely nothing except they walk out without a new prescription and buy their drugs on the street instead.
• While some prescription drug abusers pay cash to avoid detection, surely insurance company records (and especially Medicaid records) would already have allowed these patients to be easily identified.
• Use of the database is likely to increase drug dealer profits and drug abuser crime as the reduced drug supply pushes prices up.

Contacts

Mr. H, Inga, Dr. Jayne, Dr. Gregg, Lt. Dan, Dr. Travis.

More news: HIStalk Practice, HIStalk Connect.

This Week in HIT 8/23/13

Nuance Recognizes Icahn’s Voice as Hostile

Facts and Background

The board of speech recognition giant Nuance Communications, alarmed by the rapid accumulation of its shares by billionaire investor and corporate raider Carl Icahn, adopted Tuesday a shareholder rights plan (aka “poison pill”) that prevents any outside investor from holding more than 20 percent of the company’s shares.

Opinion

With Nuance shares up only 22 percent in five years and considerably lagging the Nasdaq after some company stumbles this year, are Nuance’s board members protecting the interests of shareholders or their own?

Musings

• It’s at least flattering to attract Icahn’s financial interest. At the moment he’s pursing Dell and his August 13 announcement that he’s buying Apple stock sent shares up 5 percent.
• Icahn owns 16 percent of the outstanding shares of NUAN.
• Ican is worth $20 billion, mostly made by buying downtrodden companies and selling them off in pieces.
• Healthcare (Dragon, eScription, transcription services) is Nuance’s bread and butter at about 50 percent of revenue, even though the company is mostly known outside of the industry as providing the technology behind Apple’s Siri and voice-powered appliances.
• Icahn’s tactics after he gains control of a company involve replacing the board, then breaking the company up if the share price doesn’t respond.
• Historically, shareholders receive significant benefit if the companies Icahn controls either are taken private or are acquired, but suffer if they remain independent.

We’re Not Intuit Any More: Medfusion’s Founder Buys it Back

Facts and Background

Steve Malik, who founded patient portal vendor Medfusion in 2000 and sold it to Intuit in 2010 for $91 million, confirmed Tuesday that he has bought his former company back.

Opinion

Intuit joins Misys and Sage as examples of why nobody benefits when financial software firms decide to dabble in industries they know nothing about, especially ones involving patients.

Musings

• Cary, NC-based Medfusion had taken in only $2.2 million in outside investment when Intuit bought it, so Malik must have made a fortune back in 2000.
• Malik bought Intuit Health back at an unannounced price, likely a lot less than $91 million since its revenue was declining despite increasing physician adoption.
• Malik says he hasn’t decided whether to revive the Medfusion name.
• Intuit announced that it was seeking a buyer on August 1, when it announced unimpressive quarterly results.
• Intuit wrote down an astounding $46 million in May 2013 after Allscripts, its biggest customer, bought portal vendor Jardogs in March 2013 after years of being stuck with its earlier (dumb) decision to market rather than build a patient portal to complement its EHRs.

Greenway’s Subscription Wasn’t Delivered in Q4

Facts and Background

Greenway announced a wider than expected loss and decreased revenue in its earnings report Monday, blaming its shift toward a recurring revenue model.

Opinion

Competition, the HITECH slowdown, and regulatory development costs are making it tough to meet lofty expectations in the ambulatory EHR world.

Musings

• Like all software companies, Greenway is trying to wean itself off sales-driven revenue and move toward a recurring revenue model involving maintenance fees, training fees, and add-on services such as revenue cycle management. Like most software companies, they aren’t finding it easy, especially while doing it under the watchful eyes of Wall Street.
• Sales to Walgreens boosted revenue, but at reduced margins.
• The company says it expects system sales to drop 50-60 percent as it moves to subscription pricing.
• Tee Green said in the earnings call that Meaningful Use Stage1 created market “carnage” that will benefit the company in the form of more astute prospects.
• GWAY shares are up slightly on the week.
• The report wasn’t great overall, but GWAY is a work in progress having gone public only 18 months ago and share price unchanged since.

More Parking Lots for Neal to Watch: Cerner Plans a $4 Billion Campus

Facts and Background

Cerner’s planned development of a 251-acre abandoned mall site will be the biggest office development in Kansas City history, eventually housing 15,000 employees.

Opinion

Campus projects are a good indicator of company optimism, and even though taxpayers will be on the hook to give Cerner $1.2 billion in tax incentives for a 70-30 private-public split, a capital project of this magnitude indicates a lot of confidence about the future for a company whose market cap is $16 billion.

Musings

• Cerner will put $8 million into a fund intended to improve the seed neighborhood that surrounds the abandoned mall.
• Cerner employs 9,000 in the Kansas City area.
• Cerner will buy 221 acres of the property from co-founders Neal Patterson and Cliff Illig.
• The former Bannister Mall closed in 2007 due to suburban flight and rising neighborhood crime drove customers away. It was torn down in 2009.
• The site is near Cerner’s Innovation Campus.

Contacts

Mr. H, Inga, Dr. Jayne, Dr. Gregg, Lt. Dan, Dr. Travis.

More news: HIStalk Practice, HIStalk Connect.

This Week in HIT 8/16/13

FDASIA Minor

Facts and Background
The 2012 Food and Drug Safety and Innovation Act (FDASIA) requires HHS to evaluate the patient safety risk of healthcare IT in the context of encouraging innovation and avoiding regulatory duplication. The FDASIA committee released its draft report this week, which concludes that FDA regulation of healthcare IT is not necessary, but better surveillance of live systems and post-implementation testing is needed.

Opinion
The committee likes the status quo a lot. Vendors can breathe a sigh of relief that the draft suggests only better communication about product safety issues and potentially a move away from product certification. 

Musings

• The committee found it frustrating that definitions of healthcare IT and specific functionality that would trigger FDA oversight are not clear.
• The report calls for creating a surveillance mechanism to track patient harm and near misses for unregulated software. Surveillance is an easy first step, but somehow it never seems to get done successfully. Who would a practicing physician contact when faced with a patient-endangering software defect?
• The report wasn’t a big fan of product certification, saying it pushes vendors to meet the same checklist, gives prospects no way to compare products since they all pass, and focuses on features rather than outcomes. It recommended marketplace transparency instead.
• The committee agreed with an earlier IOM report in saying that the federal government should discourage vendors from interfering with the free flow of product safety information.

Epic Has a Cow (Campus)

Photo: Amber Arnold, State Journal

Facts and Background
Epic Systems is finishing up construction of the third office complex on its 950-acre Verona, WI campus. The Farm Campus will house 1,000 employees.

Opinion
Whimsy is a strong attraction for candidates not overjoyed at the prospect of moving from a major metro area to Wisconsin farm country. The company needs the space and can afford it, employees and customers like it, construction costs are way less in Verona than many places, and building a cool building probably doesn’t cost much more than putting up a drab one. Non-profit hospitals and thus patients (and taxpayers via the federal government) are paying for it, but healthcare waste and extravagance is a target-rich environment.

Musings

• Epic has 6,500 employees, hired 1,000 people in the past year, and took in $1.5 billion in revenue.
• Construction of a fourth campus will begin almost immediately, expected to have a Harry Potter-type theme.
• The 11,000-seat Deep Space auditorium will be ready for Epic’s user group meeting in three weeks.
• Cost of the Farm Campus and Deep Space was estimated at $400 million by the city, with the total value of the property estimated at $800 million.
• The company has 4,500 offices on the Verona property.

Merge Purges Surges

Facts and Background
Merge Healthcare fired CEO Jeff Surges after another bad quarter in which revenue fell and losses increased, replacing him with former CEO Justin Dearborn.

Opinion
Merge has a lot of problems as a company. Jeff Surges may or may not have been one of them. He gave a pretty rosy outlook during last quarter’s earnings call, so poor results forced the company’s hand.

Musings

• Surges joined Merge in November 2010, but was a director of the company since May 2010.
• He came from Allscripts, where he had been president for three years. Both Chicago-based companies have struggled with proxy fights, management turnover, and poor financial performance.
• Surges was named as one of Modern Healthcare’s “Healthcare’s Hottest” fluff award at #21 in September 2012, although perhaps they were referring to his seat.
• MRGE shares have dropped almost 50 percent in the past week.
• MRGE share price tripled during Justin Dearborn’s previous stint as CEO from 2008-2010.

Health Plan’s Leased Copy Machines End Up Costing $1.2 Million

Facts and Background
Affinity Health Plan pays $1.2 million for failing to erase the hard drives of leased photocopiers it returned to Canon Financial Services, which were later found to contain the protected health information of 345,000 patients.

Opinion
It’s likely that most hospitals have made the same mistake, either because they didn’t think of copiers as containing PHI or wrote unenforced policies for their disposal. It’s interesting that Canon Financial Services didn’t erase the drives themselves just like a seller of refurbished computers would – while not all customers copy PHI, all of them copy confidential information.

Musings

• Talk about bad luck – one of the returned copiers was then sold to CBS, giving its news people an easy story to hype.
• The Federal Trade Commission offers a reminder that “digital copiers are computers” and provides advice on how to secure their information.
• Affinity should sue Canon Financial Services for failing to exercise reasonable care to prevent exposure of its data.

EHRs Aren’t Disruptive

Facts and Background
A blog entry by the Clayton Christensen Institute for Disruptive Innovation says that EHRs aren’t disruptive.

Opinion
Who said they were or should be? EHRs were primarily designed make data retrieval more convenient for regulators and insurance companies, not to provide innovative benefits to clinicians or patients. EHRs, rightly or wrongly, reflect what the market requires, excepting of course the skewing of that market by HITECH.

Musings

• The article says that 80 percent of hospitals now have EHRs, yet none of the $81 billion per year in healthcare savings predicted by the vendor-funded 2005 RAND study have materialized. Nobody believed that study other than Presidents Bush and Obama, so that’s hardly a surprise.
• It points out that “disruption” means small companies with cheaper, simpler technologies that target small customers or non-customers, but then move upstream to threaten entrenched competitors. That’s not the case in healthcare, where EHRs are a “sustaining innovation” that offer more features at a higher cost, but within the same customer business model.
• “Implementing new technology to sustain the way you already make money almost always keeps costs high and prevents true disruption.”
• The article recommends building systems that are based around doctor workflows instead of replicating paper, but that’s a lazy conclusion that assumes doctors are in charge rather than the government, insurance companies, and employers. The real problem is the lack of motivation for disruption and the absence of possible disruptors. There’s nobody to arm with technology to topple the status quo.

Contacts

Mr. H, Inga, Dr. Jayne, Dr. Gregg, Lt. Dan, Dr. Travis.

More news: HIStalk Practice, HIStalk Connect.