Ivo Nelson, founder and CEO of the former Houston-based Healthlink consulting firm that he sold to IBM in 2005, has started a new firm with the convenient acronym EHR (Encore Health Resources). He can be reached at email@example.com.
Is this a really great time or a terrible time to be starting a consulting business?
That’s a great question. The answer is that I don’t know and I don’t think anybody else knows, either. When I first decided to start this business, I was not aware of how fast the Obama money was going to start coming into healthcare. It’s not the reason why we started Encore. It may turn out to be a great day for Encore. I just don’t know that right now.
The reason I can’t predict what is going to happen is that we’re faced with conflicting agendas. We’ve got CFOs out there that are putting a screeching halt on capital investment because of the bad economy, and yet we have an infusion of capital coming from the government to help fund IT projects. I don’t think there’s anybody in the industry right no that can predict how that’s going to play out. So as a businessman who’s staring a company, I have just have to fall back on the experience that I’ve had and just do what’s right, basic blocking and tackling and take what the industry has to give us.
Surely you made a fortune when you sold out to IBM. Why do you want to do this all over again?
This is just what I do. That’s kind of like asking a lawyer why he practices law, or asking a doctor, “Why practice medicine?”
When I left IBM, I took 3-4 months off and just kind of chilled out. I took the kids to school, cooked meals at night, watched regular TV shows. I even played some golf. It was a needed break from having been a global road warrior for a lot of years.
I’m 53 years old. I’ve still got a lot left in me. I just absolutely love surrounding myself with great people. I love working with clients. This business of starting up a consulting firm and building it gets my blood flowing and it gets me excited. It’s just what I like to do. I think everybody dreams of doing what they love to do. I’m following my dream.
When you went with IBM, did you think you would do something like this again at some point?
When I left IBM, it truly was … I just needed a break. I really just needed some time to get away from the business for a little while. I would recommend anybody that hits it as hard as I was hitting it for as long as I was … to take a time out just for a few months. Kind of a sabbatical of sorts.
I had no intent, really, on starting another company. Not that I was opposed to it, it just wasn’t something that I had a plan to do. I didn’t really have any plans. I had gotten some advice from friends of mine who had gone into semi-retirement. They said, “Do nothing for awhile. Allow the fog to lift. Allow your head to clear and then start making important decisions about the future.”
Those were some very wise words. I think once I had a chance to really sit back and reflect and decide what I wanted to do here in the next stage of my life, my call was answered.
When you look back at what Healthlink was when it was independent and then afterwards when you sold it to IBM, what are your thoughts on how it changed? Is it something you are proud of or something that you wished you hadn’t done?
I have no regrets at all about selling Healthlink. Healthlink was at the right time at the right place.
At the time that we were building a privately held company, we kind of hit a wall of sorts. We were trying to penetrate the federal government business. We were in the process of going global. We opened an office in London. I was working at Australia Asia Pacific for the next move and it struck me that this next step in the company … and all companies kind of go through steps.
We’d hit $100 million in revenue and needed to take a big move to take the company to the next level. We were not capitalized to be able to do that adequately. On top of that, we had investors in the company that expected to get a return on their investment. We put those two things together.
The logical thing was to look at a partner, someone we could partner up that already had a global presence, that already had a strong federal business and needed the United States domestic business that we had built a good market share in. IBM was a good fit because they had acquired PWC some years back but did not acquire their healthcare practice, so they had a gaping hole in healthcare and Healthlink was able to fill that.
So, to answer your question, I really had no regrets. It was the right time. I think it was the right company and I think we’ve helped IBM have a stronger footprint in the healthcare business.
Healthlink was among the two or three highest regarded consulting companies out there. Did those folks fit into the IBM culture? I can imagine a lot of them turned over.
There’s people that are born to work in small companies and there are people born to work in big companies. So the kind of tradition that we saw at Healthlink was pretty much what you’d expect. People not comfortable working in a larger company, they are going to have a lot more process and bureaucracy than a smaller company is going to have. A different kind of culture.
I don’t think anybody can fault IBM for not being a great company. It’s an institution. But there’s some people that … whether its IBM or Oracle or Microsoft or General Electric, it doesn’t really matter. People have to find their home where they feel comfortable. So the Healthlink people that felt pretty comfortable at IBM still are there. Some of them didn’t and they left.
I did some analysis and it’s frankly not that much different from what we would have seen or any consulting firm would have seen otherwise. There’s a natural, pretty high turnover in consulting firms because of lifestyle issues and all the traveling you have to do. So we’ve seen between 15-20% per year. Over a course of three or four years, you’re going to almost turn over your whole company whether you’re getting acquired or not.
So that’s a long-winded answer to the retention issues and how that relates to the culture of Healthlink versus the culture of IBM. My analysis shows that there is slightly higher turnover at IBM, but not as much as what people think.
Now that you’ve done it both ways as a big enterprise and as a start-up enterprise, what are the business goals for Encore and what kind of culture do you build?
Encore is owned by two people. Those are the two founders, who are myself and Dana Sellers. We don’t have any expectations. If I had a bunch of investors or if I was publicly traded, they’d never accept that as an answer because they want to see a very strict business plan. They want to see you hit the goals that you set.
I’m perfectly happy with having an expectation that says we’re going to hire really good people and we’re going to do great work for our clients and the growth is going to be whatever the market has to give us. If this is a 30, 40, or 50-consultant company in five years and we’ve got 100% referenceability and we’re considered the place to work in the industry and every time I talk to a consultant they tell me how much they love working for Encore, I consider that to be a grand slam home run.
If it’s 500 people and we’re not providing great services to clients and we’ve got people quitting because they hate working for Encore but we’re making a ton of money, I’ll consider the company a huge failure. Dana and I, we really just want to build a really good company that clients can be proud that we’re working for them and our consultants can be proud to say that they work for Encore.
It seems like all of the old-schoool companies that were at that level — Healthlink, Superior, FCG, maybe JJWILD — were bought up. Is that good or bad for coming back with what may look like a Healthlink in an environment where there aren’t many more Healthlinks?
Well, I think it’s good for Encore because there’s a hole in the market that those companies left. It’s what I call the trusted advisor. Our clients really like to be able to have a 1-800-Ivo or 1-800-Dana that they can call and just say, ”I need help with this” or “Can you do this for me?” And they know that when we tell them that we’re going to take care of it, that we’re going to take care of it.
We’re not a no-name, no-face, resume-pushing company that’s just out there trying to shove consultants down their throats. We really are looking out for their best interests. That’s all about relationships and that’s all about the trust and confidence that you build over a whole lot of years having done it a lot of times for clients. So that’s the hole out there right now, those types of companies. It’s a gap that we hope to fill. I think it’s a huge advantage for us and hope that we can live up to that.
A lot of what you and the others did along the way is either acquire somebody or be acquired. Is that anything that you even care about at this point?
As we were growing at Healthlink, I acquired a number of boutique firms. The way we got the name Healthlink was through a merger with another consulting firm called Healthlink. Before that we were called IMG, Insource Management Group.
All of those acquisitions tended to work out pretty well for us, but it was not always easy. Having been acquired and watched other similar companies get acquired, too, I think it’s extremely difficult to take a people company like a consulting firm and have cultures meshed with a technology company that’s more asset-based. It’s a very difficult thing to do. So that’s one thing to consider — it’s hard to pull something like that off and have that be a win for everybody involved.
That said, for Encore, we have no intention of selling the company. I can make that very clear. I think it takes not just years, but decades to build really great companies. This is a company I’d like to see built the right way and I’d like to see it last a really long time. If it will last forever, that would be perfect, but that’s naive to say that a company can last forever. But if this has got a 15, 20, 25 or 30-year life span, I think that would be a great thing.
I don’t want to overanalyze the situation, but since you’re not motivated financially, is this your wanting to leave a legacy and proving that you can do it again?
The short answer is no. I hope I’m past that. I’d probably as soon be in the back office, frankly. Dana is really the CEO of this company. I’m the chairman. She will run the company. She is one of the greatest operators that I’ve ever worked with in my professional career. I’ve got tremendous confidence in her and her ability to manage the company.
This is nothing more than me doing what I love to do. If it leaves a legacy, I think that’s OK, but I’m not sure what you really get out of that. When I’m hopefully up in my 80s or 90s and I pass away, the people that are going to come to my funeral are going to be my family. It’s not going to be clients. It’s going to be people that are close to me personally in my personal life, my kids and my sisters and a handful of friends probably that I have. That’s a legacy.
You say, "What kind of legacy would I want to leave?" and it would be a legacy that’s more related to being a good father to my children and being a good husband to my wife. That kind of stuff. Not anything I do professionally.
Do you think you’ll end up working with some of the folk that were consultants at Healthlink again?
I hope so. I mean, there’s a bond and sense of camaraderie with people that worked at Healthlink that I’m proud of. People who feel like they worked for a really good company. To have that caliber of person back to be a part of Encore would be something I’d be proud to have.
Are you getting a lot of calls now that the announcement has been made?
I think it’s around 350 resumes that have come in. That’s a by-product of a lot of people that would like to come back and people that knew of us in the industry, clients. Also, it’s not that great of an economy, so you’ve got people that are looking for a job.
I don’t think we’ll have any problem at all hiring great people. Great people are looking for companies like this to work for. They like the family feeling that they get. An analogy I had a client used for me once was, "Being in business with you guys is like going to the corner grocery store, where I go in and, I’ve forgot my wallet, and Joe the cashier says, no problem, you can bring it later today. Pick up a couple of loaves of bread and some meat. Walking out, he says, how’s your son? I heard he had his wisdom teeth taken out last night. Is everything OK? Yeah. Everything’s fine, Joe. See you tomorrow. Sorry I forgot my wallet."
That’s the feeling that they get. People like that feeling of culture when they’re in a company. They feel better about that than if they feel like they are walking into a Super Wal-Mart where nobody cares.
What kind of consultants will you be hiring?
I hate to sound too generic, but we’re really looking for really good people. We tend to go after experienced people more that inexperienced people. It’s not the kind of company that hires people out of college and sends them to a program to get up to where they can be consultants. We hire them once they are already proven at what they do.
We also have a bias for hiring people that have a lot of direct industry expertise. We had a couple of hundred nurses at Healthlink, doctors, pharmacists — people who had walked in the shoes of the client. They can really relate to the client’s issues more than they can the process issues. So, we’ll be more inclined to go after those types of people.
Encore will have a different focus than at Healthlink. Healthlink was much more enterprise-wide, process-oriented IT consulting firm. At Encore, we’ll be focused more on the data. There’s a huge number of implementations that are going on, transaction systems being implemented, whether they are Cerner or Epic or MEDITECH. Very few organizations have really thought through how they are going to manage the information side, the by-product of huge amounts of data they are going to have to organize that they haven’t had in the past.
We’re going to help these organizations get value out of their IT investment. It will be more of an information focus. Then we’ll provide them with the relevant skill sets of people to get this.
When you say working with data or using what information they are capturing, what kind of engagements would you say would be typical for what you are envisioning?
We’d like to walk into, say, an operating room on an OR department and be able to work with leaders there and say, “Are you getting these five key reports to be able to manage your business? Are you operating to these 10 metrics that are considerably best in class for an OR?” Then, work with them on the gap analysis between where they are now and where they need to be without any bias as to whether they need to buy any new technology.
The best engagement for us would be the client doesn’t have to buy any new technology at all. They just take what they have and they introduce better operating results as a result of getting better information, better processes. So that’s the type of a project that we’d take. We’d also do that for an emergency department. It’s a little different than looking at the entire enterprise and saying you’ll do clinical transformation. I think that has been proven to not work very well for these organizations. So we’re kind of parsing it up, taking it in chunks and then bringing the relevant expertise to be able to do that.
It’s also quite different form the usual small company that grabs a couple of Epic consultants and starts billing them out like crazy. Whether it’s already been selected or its already been planned, you want to ride that middle between system implementation and strategic planning to optimize the use and look at the outcomes.
Yeah, I think that’s good way to say it. There’s a large number of consulting firms out there right now that I wouldn’t even call consulting firms because I don’t think they do consulting. They do staff augmentation. The body shops. They shop resumes. That’s really a different business than really going in and working with the client on a solution.
Some of those same people would be great in Encore because they may have a tremendous amount of understanding and expertise of the application, whether its Picis or Epic or Cerner. But we combine that with people who have strong process or information capabilities and then throw them at solving a problem for the client. Hopefully, that’s why we’ll get hired — to help solve those problems. Not just to be a headcount in their organization.
It seems that’s the hardest thing for a consulting firm to do — to arbitrage what they can pay a consultant versus what they can bill them out for and try to add value without becoming a commodity.
Exactly. The key word that you used there is commodity. We’re always going to run into clients that are asking, “Can you provide me with a person that’s got this kind of expertise?” If they are a client that we’ve been working with in the past, we’ll be happy to try to do that, but by and large, we really want to be in the solution business. We really want to go in and help solve problems for clients.
I agree, it’s a harder business to be in. It takes longer to build your credibility when you’re in that business. You don’t get a quick hit with some client calling up and saying, “Hey, You’ve got these five Epic people" and so you’re throwing them over the wall and you’ve got instantaneous revenue from doing that. It’s slower and it’s harder to build and it looks harder to build a company this way, but it’s lasting, built to last. That’s the kind of model and company we want to be.
Do you think stimulus money will create a lot of new companies and will yours get lost among 20 new ones people just throw together?
I don’t know. I wish I did know. I’ve never really worried much about the competition. I think being in this business is kind of like playing golf. You really want to take where you are, whatever your handicap is, and when you go out and play, you want to do a little better than you did the last time. Who I’m playing with is not relevant to me.
I would encourage and hope that people who have the entrepreneurial spirit and have a way they can go build a company, do that. I’ve loved being an entrepreneur for most of my life and I respect and encourage other entrepreneurs, but it really has nothing to do with Encore and how we’re going to build our business. The stimulus package is convenient based on the timing of starting Encore, but its not the reason why we started Encore. Five years from now, it certainly will have nothing to do with Encore.
Healthcare IT had always been in flux, but it’s arguably more so now than ever. What people or organizations do you think might emerge as the leaders in what ever the next phase is?
I’m not so sure about people. Clearly Epic has shown tremendous success. In the last five years in particular, I’ve spent a substantial amount of time in the global markets, I’ve seen Cerner finding a lot of success in the global markets. MEDITECH has continued to be a Steady Eddie in the market. I think they have been able to continue to progress their products and seem to have happy clients out there.
Those three in particular are the ones that seem to have been the winners in the more recent past as we’ve seen clinical applications proliferate across the industry. I think on a go-forward basis, those companies that can really solve the information problem, that can take their transaction systems and help their clients really produce information for better decision making and better process, are going to be successful.
I think those that are poised to address the global marketplace are also going to be successful. Because a lot of the rest of the world is kind of where the United States was maybe back in the late 90s, but they are a lot more sophisticated because they have watched the Unites States and they watched the UK make mistakes, they can learn from as they move forward with their healthcare IT initiatives.
You probably have had more of an international vantage point than just about anybody in the industry. How important, both for Encore and for the industry in general, is it to look globally and not just domestically?
If the goal is to be able to consistently grow your company, I think it’s a big advantage.
One of the things I’ve learned having worked around some of these companies within this industry and outside this industry is that they have a difficult time servicing the global healthcare marketplace because they are too siloed around particular geographies. At Encore, we designed the company to go global from the start. So if we send somebody to Dubai or Singapore or Beijing, it’s the same to us as if we are sending someone to New York or Kansas City or Los Angeles. We have to he attentive to HR issues, to labor laws, and additional administrative processes that we have to go through.
From a skill set perspective, it’s really not all that different when you go across the world. There’s a huge gap in expertise overseas. So the United States, amazingly, may become a resource tool. They may be outsourcing for us for the expertise they need for the healthcare IT implementations, at least for the next probably five years, as they’re starting to build up their own teams of people.
HIMSS says the stimulus bill will make it hard to find skilled resources, especially for vendors who wait too long for the downturn to end. Are there enough skilled people or will they have to sacrifice quality just to get a body in the door?
I hope not. I think there will be an increase, but I don’t think it’s going to be as much as what some of these folks are predicting. One thing that all of our clients out there are going to have to be attentive to is that this is going to create a tremendous amount of hype, particularly from the software vendors and outsourcing companies that have a lot to gain — and consulting firms, frankly — that have a lot to gain from hospital CEOs, CFOs or COOs who are sitting there watching the news or sitting there listening to documents coming in from the American Hospital Association or whatnot, that this is going to be a big deal for them. So we don’t know yet. There’s not enough level of detail in what’s coming out on the stimulus package.
I think to have clear enough understanding of exactly how the hospitals are going to need to respond to this or need to be compliant to get the money. A lot of them are going to be focused on what’s minimally required to get the money, which may not require a huge amount of resources or technology. We just don’t know yet. It could go anywhere from being moderately more than what we see now to being a tsunami of labor that is going to be required to get everybody up to a Level 4 HIMSS Analytics standard, depending on how ultimately "meaningful" gets defined.
I have a wait and see attitude right now. As we talked about earlier in the discussion, my focus is on really hiring good people that are going to manage the services that are our core business well regardless of what happens with the stimulus package. Those companies who over-respond too specifically to what the stimulus package has to offer are going to have big problem in three or four years.
Hospitals always seem to have the problem where they buy technology, but turn into a bitter customer because they don’t have the commitment or knowledge to do anything useful with it. Do you think the stimulus package will just encourage more of that?
I think that’s a big concern. I would advise people to read the John Glaser article that you had. I think he talks specifically to the fact he nothing really has changed in terms of how you get value from the IT. So just because there’s a bunch of money getting poured into the system doesn’t mean that the focus on quality; that the focus on making sure the processes are aligned; the physician adoption is there; all those things we’ve learned really haven’t spilled a lot of blood and broken a lot of bones over the last 15 years with these EMR implementations. None of those lessons have changed. They are still there. I would certainly hope it encouraged all of the hospitals to stay focused on doing it the right way.
What the industry is going to look like in three to five years?
I would take whatever the industry pundits say and divide by two. That’s what we’ll see.
I think this is an industry that moves slower than people have ever wanted it to move. Anytime I tried, to steal a Wayne Gretzky quote, "to skate where the puck is going to be," I’ve always had to slow down some and realize the decision processes and change processes — they just don’t happen very fast in healthcare. It would be great if we had something that Obama did or a massive change in the healthcare system to make it more efficient. I think that would be great. I’m not expecting that anytime in the near term.
So, three to five years from now, I think we’re going to see more of the same of what we see now, and hopefully some incremental improvements to how the system works because of initiatives that have come out of Obama’s administration. I am not going to predict that we’re going to see massive levels of healthcare reform. I think this country will be challenged with that level of disruption in how this process is working. I’m not saying that I wouldn’t support massive healthcare reform or that we don’t need massive healthcare reform. I’m just not predicting that’s what is actually going to happen.
Anything else we should talk about or that’s on your mind?
Anything that you wanted to ask that you didn’t ask?
I don’t hold back, so if I thought of it, it came out of my mouth. I’m always curious about how the whole arrangement with IBM worked out. It’s none of my business, but I’m curious when you’re IBM and you grab this company Healthvision and say ,“I love you, now change".
I’m a little bit of an anomaly in that I was there for three years and three years is far longer than how long most entrepreneurial CEOs last in big companies.
I can honestly say that IBM provided me with some unique opportunities that I had a hard time finding at Healthlink or anywhere else. They put me up in the very senior team of people. To be able to see how a $100 billion company operates is fascinating. They sent me all over the world. Some of that was healthcare related; some of that was just around helping IBM become more of a global company.
It was a great mind-expanding and challenging, enlightening experience for me. But my roots are really in being an entrepreneur. In healthcare, it’s just 10 times easier to deal with the hospitals when you’re in a smaller company than when you are with a big company, The hospitals prefer it, frankly.
A lot of them got burned paying $280 an hour for some kid right out of college to create credenza-ware. All these people bought strategic plans and IT assessments and all this advice but just never did anything with it. Every place I’ve worked paid these people to come in, we asked their opinion, and then we ignored their advice because it was too much trouble to actually do.
I think there’s a been a lot of lessons learned. I hope there’s been a lot of lessons learned. I don’t think these big enterprise clinical transformation projects, $20 million consulting gigs — I don’t think those things really delivered value back to the clients. Encore services will break things down into manageable components. Let’s just go do this in the OR and let’s use a similar philosophy in the ED. Let’s look at revenue management and medication management. There’s ways to parse it out. You still have this common thread that connects them. So in time you get the enterprise changed, it’s just done incrementally — a more practical, pragmatic, doable, get-results approach.
Look at it this way. It’s a hobby for you at this point. You don’t have to starve. So at least you’re only risking your ego if it fails this time.
It might be my ego, but it’s a lot of these people’s jobs. I care a lot about that.
Wouldn’t it be hard for a consulting company to actually fail if they make a fairly good effort?
I think when we were in Healthlink, I felt that way a lot of times.
Really? You can’t scale the business as you go? It seems like since you don’t have a huge capital investment other than people capital that the risk would be lower. You don’t have high fixed costs other than salaries.
There’s kind of an economy of scale there. I think where you get up to where you’ve got 40 or 50 consultants, there’s less risk. Frequently what happens with a lot of these consulting firms is, until they have close to 100 consultants, they generally have three or four clients that really make or break them. There are a lot of times, if a one client were to go south on me, I felt like the company was going to be at risk.
That can happen. The CEO changes. She walks in and says, “Who are these consultants? Get rid of them”. Overnight, you may have 10-20 people billable somewhere that are gone. The easy thing is you just let them go. When you’ve built a culture that has got a family feeling to it and people know that they are cared for, it’s not such an easy thing to do.
I guess the thing is maybe keep the projects a manageable size where you do have your eggs spread out among a few baskets, where one client can’t hurt you that much and you spread the risk among smaller projects.
Smaller projects or more clients. I remember going into one client once and going to five of the different executives with a transition program and saying how they needed to get rid of us and hire their own people to do the stuff our people were doing. The reason why is, I told them frankly, “I’d rather have you as a long-term client than all of a sudden somebody realizes you’ve got more consultants than you need and we get hurt from it. So let’s manage this in a responsible way. By the way, you’ve got too many consultants here. It should be staffed by your own people”. They were very appreciative and they turned into a good long-term client of ours. Hopefully, they’ll be a good client for Encore.
I guess that’s the question I didn’t ask you, but since you bought it up, how many consultants are you going to start with? Do you have a number in mind to hit that peak, that higher efficiency?
I really don’t. Like I told you earlier, we’ll take what the market has to give us. If that’s 20 or 30, that’s great. If it’s 50, that’s good. We’ve been doing this long enough, so we understand how to manage the projects, the utilization in the bench to try to keep the company profitable as we’re building a client base out there. We’re taking one step at a time.
Have you had a lot of calls of that kind where people say, “Wow, glad you’re back. How about helping us out?”
We’ve had about five of the CIOs so far call up. They aren’t necessarily big projects. They’ll say, “Can you come out here and talk to me about this?” I’m encouraged by that. Those are five projects that you get right off the bat.
In a small company when you are starting up, you don’t always have a skill sets of people that meet the need. Let’s say three customers of the five work. You’ve got three customers. That’s the hardest thing about a startup is getting those first initial core clients out there that are willing to take risk on you. I’ll never forget the first clients I had at Healthlink and I’ll remember them forever. I feel like I’ll owe them forever because they gave me a chance when nobody else would.
Have many of those have called you?
I would say half of them have retired. [laughs] As a matter of fact, I have. A couple of them have called. Interestingly, one of those clients did retire and one of the projects that came up for us was an interim CIO job at an academic medical center. We called him up and said, “You want to come out of retirement and come do this work?”, and he said, “Yeah”. So what goes around comes around.
The word on Encore won’t have really gotten out very far by the time this runs. I bet you’ll get a lot of calls, if nothing else, just to say, "What are you up to? What are you offering?" You know everybody in the industry, right?
I don’t know everybody in the industry. The industry changes all the time. New people coming in, old people going out. It’s always a grind just getting out into the industry and getting to know people. Our business is a relationship business, so it takes me hiring people who have good relationship orientations. That’s what helped make me successful and that’s what has made Dana Sellers successful and frankly that’s what made Healthlink successful. We were able to build that team of people that could be trusted in the marketplace.