HIStalk Interviews Patrick Hampson, Chairman and CEO, MED3OOO

Pat Hampson is chairman and CEO of MED3OOO of Pittsburgh, PA.

Tell me about yourself and the company.

I was a business major in management. My mother was a hospital administrator and my brother was a lawyer who litigated against physicians, so I chose the middle ground of working with physicians. I started a practice management franchise back in 1987 and expanded that into revenue cycle management.

In 1995 when we got our first capital raise, I started MED3OOO. I’m the chairman and founder of the company. Historically during that period of time, I was lucky enough to be befriended by John McConnell, who was the CEO and founder of Medic, and was able to invest and be on the Medic board. Then the same thing with A4 Health Systems. Conversely, John McConnell’s on my board. I think you could say it’s incestuous to some extent.

A lot of people, including the ONC folks, are talking about the usability of physician software. How are MED3OOO and the industry in general doing in that area?

I don’t know anybody that’s like MED3OOO, for two reasons. One, we’re in the physician practice management business, so basically we were born and raised as operators. Whether it’s an Allscripts system or a Sage system or our own systems, we know what we want these systems to do to better manage a practice.

Conversely, we’re also system-agnostic, so if the physician group or the hospital who has employed physicians already has a system, we’re able to use their systems. It’s like BASF — we don’t make things, we make things better. We use their systems to improve how they run their physician practices, or if it’s an independent group, how we run the practice. 

Separately, we have InteGreat, which is our proprietary, Web-based PM system. If we’re talking to physicians for the first time about EHRs, it reduces the barrier to the sale. We let them look at all the EHRs and then hopefully they’ll pick InteGreat, but if they don’t, we’re fine with them picking one of the other vendors and we’ll install it and service it and manage it for them.

How do you separate those lines of business within the organization?

MED3OOO has three lines of business. The first business is physician services. That has three components. One component is where we manage a physician’s group, whether it’s hospital-owned or they’re independent-owned, on a turn-key basis. We do the accounting, the finance, the administration, the billing, the collections. We do the managed care contracting. Usually those are long-term contracts, but it’s turn-key.

Separately, we actually own physician practices in some states where you’re allowed to own them. We have large physician groups that are actually owned and operated by MED3OOO.

Third, we have the revenue cycle management. I think we’re one of the largest private RCM companies in the US. That all falls under physician services.

Separately, we have an ACO division, which is accountable care, and that houses our IPA business. In California, Illinois and Florida, we’re a TPA and we manage large IPAs. Some of our IPAs are taking global risk and some of the IPAs are taking professional risk, so now that the word ACO has come about, we’ve been taking reimbursement risk on patients and quality for quite a few years. We have our own systems for that.

The third division is the technology division. It can either be agnostic and utilize the non-proprietary systems like Allscripts, Sage, or GE, or we’ll sell our own proprietary system, which is InteGreat PM, EHR, and data warehousing. It’s really the physician’s choice. As you know, physicians like different bells and whistles, depending on their specialty. But we try to stay agnostic as much as we can, even though we believe the product that we built with InteGreat has much more capabilities than some of the older legacy systems.

I’m glad I asked you that question because I didn’t realize the scope of what you do. Are you the only company offering physician systems that actually owns physician practices and performs TPA duties?

I think we’re the only company out there that has all three of those divisions, which is  kind of interesting because the market’s now come to us. Again, there’s a lot of hospital groups, there are a lot of hospitals, there are a lot of physician groups that now want to … you know, they’re worried about getting into the ACO business. If you think about it, we can walk in and we already have the risked-base experience because we’ve been doing global risk for 10 years for our clients. We have the technology, because we’re a TPA. Then we have the electronic health records, whether it’s the system that they’re using or developing a community model, and we have data warehousing. So we’re pretty much a plug-and-play for folks that want to go to the next step and partner with someone to become an ACO.

How big is the company?

In 2012, our run rate will be about $200 million in revenues. We have 14 operating centers across the U.S. and about 2,500 employees.

Wow, it’s huge. I’m sure there’s going to be a lot of folks other than me who are going to do a little double-take when they read that. There are potential acquirers out there looking at revenue cycle, different kinds of companies, and you’ve got several sweet spots. Are you getting a lot of interest from folks who see your very large footprint and are interested in participating with you in some way?

Where we get a lot of interest is from companies that want to invest in MED3OOO and then for it to go public. We’ve been in business since 1995.  I have been on public boards, Medic being one of them. Historically, because we are privately held, we’ve been able to pretty much put all the capital back in the company, so we’ve been able to build internally. We already have population health management. We have predictive modeling. All the tools that we need to manage our physician practices or our own risk-based IPAs — we built these things internally, so it’s not vaporware. It’s things that really work in the field of fire, not selling a product and then running off to the next client.

Recently, it’s kind of exciting for us, but we signed the state of Florida to do their children’s Medicaid services. That’s not only a nice contract for us because it’s across the whole state of Florida and it’s a state contract, but they’ve also signed us to build a continuous quality of care modules, which no one else in the industry is trying to do because they might have the software expertise, but they don’t have the operating expertise to actually build it so that once it’s up and ready to go, then it works at the point of care.

I know that you’re a big user of Quippe and jumped on that pretty quickly. How important is that and its acceptance to the strategy on the EHR side?

Quippe’s pretty important because the thing it does that others – I think we’re one of the first to use it – but it’s template-free documentation. The way it’s set up, you don’t have to build templates. It really thinks like a physician. You can really fly.

I think why that’s important is it feels like the market is now down to where it’s the one doctor to the 25-doctor practices. Most of the larger groups have already been saturated with technology. We think there’s a big difference between putting systems in onesy-twosy practices than there are for these large clinics that have tons of infrastructure, they might have their own CTOs, they might have a training group.

The smaller practices don’t have that. You really need to have something that’s low-cost, that’s easy to use, and at the same time, moves the way the doctor moves, not have the doctor move the way the vendor built the system. Last but not least, it’s also cloud-based with our technology, so we don’t need a VPN or network, so it also keeps the pricing down for folks.

You mentioned the small to mid-sized practices. How much of the practice market are you seeing that’s being driven by hospitals that are choosing single-vendor offerings, like from Allscripts or from Epic or whoever, and then subsidizing those offerings to their affiliated physicians?

I’d say the majority of cases, from I can see. The hospitals are choosing their select vendor. We’ve got a lot cases where we have hospitals and we’re not the main vendor for their employed physicians. I’d also say that if you’re a large group, an independent physician group, the problem that you have is that you’re in a marketplace where you want to connect to all the other physicians that affiliate with your hospital or your practice group. In most cases, we might go into a market and there’s 600-700 physicians on staff and they have all the different systems you’d every want to know.

We’re a little different as, again, we’re agnostic. We can work with that hospital system, that group system, or we can help them connect with the marketplace where you’ve got 16-20 different vendors out there that have already sold systems. I think the Web-based technology for us is important, too, because the majority of systems out there are legacies. You’ve got a few Web-based systems, but there’s going to be over time a large capital cost for the folks to get off the legacy systems because they’re just not going to be able to do what they need to do easily. We believe that InteGreat is pretty well positioned for that second phase in the market.

There are people that predict that the small practice is an endangered species, and especially with all the emphasis on technology and affiliations, that it’s going to be tough to survive. Do you see that happening, and how do you see the technology needs either helping them go away or helping them not go away?

I think that the industry is cyclical. In 1995, back when we were first named MED3OOO, you had companies like PhyCor and MedPartners and you had hospitals and everybody employing physicians. From 1995 to 2007, they lost a lot of money on their employed physicians. The physicians weren’t happy, the hospitals looked at the P&Ls of physicians and weren’t happy. 

I think you’ll still see employment models strategically in certain areas like Pittsburgh, for example. Highmark and UPMC are battling, so there’s more competition there. What we see more of is hospitals and/or large physician groups and/or IPAs trying to figure out different methods to align with physicians versus just employ them.

In some states like California, you can’t have a non-compete. Even if you pay the physician a lot of money for his practice, they can go six doors away and reopen a practice or go to someone else. We think the smartest move that people are making is just figuring out different ways to keep the physicians to align with them, not necessarily just use the employment model.

You mentioned the ACO market in general. How do you think hospitals and practices will address that need to collaborate and integrate their delivery, especially with IT?

Right now today, ACO to me means “awesome consulting opportunity.” Everybody is running around, everybody wants one, but very few really know the details. The government just came out with their new set of regulations and I’m not aware of any of the pilots in the ACO realm that have made any money. I think the jury is still out.

Do I think there’s any need for a different reimbursement model that’s based on quality and based on access to care? Sure. But is it the ACO model? I’m not sure but – this is a sales pitch for MED3OOO – if somebody wants to become an ACO, now again, what do you need? You need heavy technology on the reimbursement side, the payer side. You need ways to align physicians and hospitals. You need expertise, somebody that’s actually handled global payments. We believe we’re the best partner, whereas the hospital or physician group to make him successful in whatever the new ACO world is.  It’s just not having it, and so it’s not being a vendor. You have to be a partner to make this really work for a hospital or a physician group.

As a developer of systems, what are the challenges that you see with managing population health?

Right now we have about 2% of the U.S. population in our data warehouse. Getting data is easy. Sorting data and making sure that it’s viable data is much more difficult. then doing it on a real-time basis so that people have that data at the point of care.

But in our world, population, health management, predictive modeling — these aren’t new terms. We’ve been doing it for five years and doing it successfully with our groups. It’s more of an issue of access to the data. Will the states continue to fund HIEs and deploy them so that everybody can share data? With the economy, will that funding continue? And if it doesn’t, what’s the solution were everybody can share data?

The government did a great thing by saying everybody had to be interoperable, but that’s a technology term. It still doesn’t mean that you have to share data. I think this will shake out in the next three or four years, but it’s those that have the data and then those that know that it has to be processed before it’s usable are the ones that will have a leg up.

You mentioned interoperability and HIEs. What customer demand are you seeing for that and what are your strategies in those areas?

InteGreat is certified for Meaningful Use, and interoperability is one the components of Meaningful Use. We’ve got two things. We’ve got the EHR that has Meaningful Use and interoperability, but separately, the data warehouse will let you extract data from disparate systems. Then we can turn that data into actionable information for the physicians.

You need to have a strategy that has different parts, because if you’re a vendor, all you care about is selling your system. If you’re in management, you care about what systems you’re using, but you also care about what system the other 60% of the market is using and how you get access to that data. That’s where we made an investment 10 years ago into the data warehousing piece. I  you think about it, because we are a large user of Allscripts and NextGen and Misys and Sage and InteGreat, we got the data warehousing so we could manage our own disparate systems. Now it’s a plus, because in these communities, we can manage the disparate systems that are in that community and an HIE can’t do that. An HIE can connect them, but it’s really not a place to house data and then turn it into information.

Every executive makes bets about what’s going to happen in the future, making company decisions today that won’t realize fruition for years. What are some of the bets you’re making about what the industry is going to look like down the road?

I’ll be really different. I don’t think we’re making a bet. I think what we decided years ago is that the industry is cyclical, so we wanted to have expertise in technology. We wanted to have the expertise in management and operations. We wanted to have the expertise in data. 

When these markets shift, for example, you might assume that if everybody’s employing physicians, the revenue cycle management business would be less. But if hospitals are employing physicians, that practice management piece accelerates, because they usually don’t know how to manage physicians. What we’ve decided to do is have the components, and then as the industry shifts, two of our components, two of our divisions might be on fire right now. I think just four years ago the IPA market was kind of flat — there wasn’t anybody developing new IPAs. Now the IPA market has become the ACO market and everybody wants one, but very few have the tools and the knowledge on how to really do it. While physician employment might be saturated or systems might be saturated, the knowledge base in our ACO division … it’s tough to keep up right now.

Any final thoughts?

You’re going to have to get to scale, whatever you do as a company. I truly believe that if you want to make a difference — where it’s quantifiable, you’re making a cost improvement and a quality improvement on the clinical side — you really need more. You can’t just be a vendor. You’ve got to provide people with a stepping stone and a map to get to disease management and population health management. There are a lot of people today that are just starting and are not sure where they should start. I think we would be good partners for them, because we’ve been doing it. That’s the core of the company and we’ve got all the tools and services, but more importantly, we actually do it for a living. We’re not a vendor to most of our physician clients or hospitals.