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Peter Smith is CEO and co-founder of Impact Advisors of Naperville, IL.
Tell me about yourself and the company.
I’m the CEO and one of the two co-founders of Impact Advisors. We are a consultancy that is dedicated to healthcare and we are a technology-enabled process improvement firm. We focus on what your readers would consider to be the HIT market, as well as helping our clients optimize their processes across the organization.
Our clients are pretty much all flavors of healthcare providers — IDNs, all kinds of hospitals, physician clinics, and almost any entity in healthcare. We also do a little health plan work as well, but predominantly it’s the provider-based segment that we work in.
It seems like most big health systems are playing around with digital health, innovation projects, and consumer-focused initiatives, to the point that they’re creating C-level positions to oversee them. Is this a fad or are health systems really changing the way they do business in response to changing demand?
It’s a combination of both. We’re obviously seeing a shift in healthcare. Whether it’s the concept of moving towards value-based care or more consumer-directed care, there’s a lot of dynamics that are being backed up in terms of reimbursement models. We’re not there yet. I just gave another interview talking about organizations that have one foot in a fee-for-service world versus the new world. I fully recognize that we’re going to be in that state for a while.
But clearly we’re moving there, and that’s driving a lot of organizations to think about some of the things you just mentioned — digital health, patient and consumer access, how to create a digital experience for not only patients, but families. All of that’s coming into play. Organizations are optimizing the existing environment, but also thinking about how to start building technology services and processes in the new world in preparation for a shifting environment.
To answer your question, I think a good organization will not only retain what they’re doing and optimize it, but also think very diligently about how they move forward with things like digital health or optimizing their a future environment.
Health system competition is no longer just the other hospital across town, it’s regional and soon-to-be national health systems, drugstore chains, insurance companies, and research organizations that are coming in late to the health IT party. Do health systems have the level of expertise, both corporately and in the CIO office, to keep up with the new technology demands?
You’ve hit on a couple of major trends. Obviously many organizations are moving towards scale. Five and $10 billion a year organizations are becoming $20 billion because they need to get to a certain scale. Certainly from a managed care standpoint, to drive economies within the managed care world or the impending value- based care world.
I have a little empathy for folks who are running hospital systems right now. It is not an easy world. They’re getting hit from all sides as they have to aggregate and get scale to be competitive in a new marketplace. They have to create relationships with patients in a different way that I just described, and all the investment that’s associated with that.
Another major driver is what’s being carved out of their systems. Profitable services are being carved out by for-profit companies. If you’re running a large hospital system, you’re getting hit competitively from all angles. That’s a very tough place to be.
You asked particularly about leadership. You’re seeing some very progressive leaders in this space. Those are the ones who are going to be successful, who are thinking about their business models in a new and different way and maybe even challenging some of the traditional ways.
As health systems scale into multi-billion dollar revenue, will the people they choose to lead IT and innovation increasingly be hired from outside the industry?
You’ll start to certainly see that. But there’s a premium in terms of understanding healthcare and understanding healthcare technology. You’ll see entrants, some of them very good, from outside of the industry, but they will have a steep learning curve.
I don’t believe you’ll see a major tipping point where organizations are actively bringing people in from the outside of healthcare. But I do think that condition will exist, and in some cases, it will be very successful, while in others, maybe not. It will be predicated on the individual and what previous experiences they have had.
Providence St. Joe’s is in a geographic area where they have a lot of talent around them — Microsoft, Google, and Amazon — but that access to talent might not exist in places in Nebraska. If you’re in those markets, you exploit the best talent you can. If they also come with healthcare experience, that’s an absolute bonus.
How does having larger but fewer healthcare systems as customers change your business?
We think about that every day. We recognize that in some parts of our business, we have to get to scale. Certainly in some of our implementation practices, we need to ramp up our recruiting to service clients in a much larger way than they have traditionally. When we were working for the mid-sized market — the $1 billion to $3 billion organizations that have IS departments of 100 people — we could serve as the whole team. Now we look at a scaling, not only of our internal resources, but how to partner with others to be a full-service providers.
Providence St. Joseph Health, Mercy, and other big health systems have blurred the line between provider and vendor, with the former hoping to create a billion-dollar annual revenue organization. How do you see that playing out?
I’m very interested in seeing it. I’ll even add a little twist to that, the Optum deal with John Muir that was announced about two weeks ago, a major platform play and potentially extending that platform beyond. This is not a new concept. Many IDNs have created some form of managed services organization over the decades. Some have been successful and some have not.
It’s going to be about leadership, client relationship management, and about how they execute. I think the concept is sound. How do you aggregate services in a better, higher-quality way at a lower price point? Those are sound objectives and the industry needs that. How they execute over the next year or two is going to be critical.
Providence St Joe’s is fascinating. Just in full disclosure, we’re doing work there, so we know a little bit about their designs on Community Connect and beyond. But these models can absolutely be successful. They will probably first be successful on a regional basis and they’ll use those as proof points and qualifications to possible extend beyond.
How do you see the movement toward cloud computing as Cerner announces a deal with Amazon Web Services? Will we see a lot more results of vendors moving to cloud services offered by Amazon, Google, and Microsoft?
We’re just on the tip of it right. In healthcare, most IT processing is on premise. You’re seeing companies that are moving to the cloud very quickly and having a lot of success.
Cerner is probably the best example of having success in their application management services model over the last decade. Epic is now having a lot of success. Workday in the ERP space is using that as a competitive differentiator and people are gravitating towards it because it implies a level of standardization. It makes your maintenance more predictable, your expenses more predictable, and you’re building a support environment that is homogeneous and high quality.
Health systems are increasingly spinning off startups and running incubators and accelerators. How will that change as they start to see the results of their early efforts?
It will absolutely continue. There’s a lot of variability in how people think about, develop, define, and execute innovation. On one hand, it could be just like a tech transfer function, to allow some form of liquidity for inventions or ideas that are coming out of their medical staff. That’s a very traditional look. In other areas, these guys are running shark tanks and small venture capital firms.
You’re seeing this incredible continuum of how they think about innovation and investment and how they want to monetize or get the ROI out of it. I preface my comments that it remains to be seen whether there will be a a common approach in our industry to innovation across the landscape. You’ll see some variability in how organizations think about it, but it will continue to be important part.
We do a lot of digital health planning and it always ends in a plan that is doing a couple of things. It’s leveraging technology that’s already exists in place, foundational systems like the EHR. It’s also buying or developing a series of solutions that might come out of your own innovation area, or you may buy them commercially, and building an ecosystem of digital health. As we get more mature in that space, those solutions will get rationalized and you’ll have greater platform players. But right now, successful organizations are moving in this continuum of knowing that they have to solution a digital world with many different partners and providers.
Are the three significant health system EHR vendors supporting that innovation by opening up their systems to other companies? Is interoperability more of a technical problem or a business problem?
In our business, we joke that the most difficult thing is integration between systems. Why it’s difficult is a combination of factors. One is the competitive factor, where a lot of healthcare organizations don’t want to share with their neighbor across the street because of the competitive advantage. It could also be a cultural, political, or technology reasons that can make it difficult.
It’s drastically improving. You’re seeing integration increase every single day in multi-platform environments, and that will continue. Will it ever be plug-and-play, immediate and easy? I don’t believe it will be, but it absolutely it is improving.
One of the reasons it’s improving relates to that scale we talked about. You’re now talking about $10 billion to $20 billion organizations that have 60, 70, or 80 hospitals across large geographical regions. You’re getting a level of inherent interconnection and integration among data. Things that had been fragmented or in separate organizational structures are now common and are exploiting the technology they have to to break down some of those cultural and political and competitive barriers.
What are the biggest challenges of healthcare IT consulting and staffing firms?
It depends on your entry point. We’ve just gone through a period of time that was the Wild West for consulting firms. We had a lot of entrants into this marketplace. There’s been a lot of work in our environment over the Meaningful Use period and beyond as people considered major platform changes.
You’ve seen a lot of entrants leave this market or have diminished performance because they didn’t have a long-term vision. We call them pop-up consultancies, companies that were taking advantage of a very hot market. God bless them for that, because everyone deserves an opportunity to do that. But we’ve seen a tremendous rationalization. The firms that are left in our space are the ones that had durable business models, paid attention to quality, paid attention to their associates, and most importantly, paid attention to providing value to their clients.
Only a few high-quality consulting firms are left that have weathered that transition. Those will continue to be successful. Our hope is that we’re one of those moving forward.
I guess there’s nothing inherently unhealthy that the industry flexed to meet the short-term demand and now has to flex back. What trends are swinging the pendulum the other way?
We feel really good about the next couple of years. This has been a very difficult or weird environment to manage a consulting firm. We’ve had boom and then site stabilization in this market. We believe that we’re back to a rational market right now, and the next five years will be a rational growth market within our space. Not boom or bust. We’re actually excited about moving forward. We think it will be much easier to run a business in this climate moving forward.
In terms of what we’re investing in as a strategy moving forward, digital health is number one. The concept of planning and solutioning digital health strategies for our clients is a big growth engine for us. The concept of virtual healthcare, whether it’s telemedicine or beyond telemedicine, helping our clients deliver healthcare in a virtual way is another big driver for us.
This market may not all be about our traditional provider space. There are other entrants into this market, these carve-outs. Even employer-based healthcare right now. We are working with employers that have geocentric employee populations, as an example, that are looking to develop internal healthcare systems. How you provide technology within those worlds is another of channel market for us, working outside our traditional marketplace.
ERP, enterprise resource planning, is another hot spot right now that many organizations are now looking at. Those systems have been in place for 20 or 30 years and now they’re replacing them after they’ve done their EMR. That’s another hot area for us.
Lastly, the thing that I think is going to be most important that’s driving a lot of our business is that after clients put in an EMR or have done a lot of their heavy lifting around some of their major systems, about four years after they convert, they take a look around and say, wow, we have an opportunity to kind of fix some of these processes. We maybe haven’t spent a lot of time and attention. We haven’t viewed it in a programmatic way. We had spent so much money on the systems and we’ve let them languish a little bit. So at about the four-year mark, a lot of our clients are popping up and saying, I need a programmatic way to optimize my clinical and revenue cycle solutions. This concept of optimization is going to be really big and we’re investing pretty heavily in that.
Do you have any final thoughts?
We’re excited about the future for a couple of reasons. But the one thing that I’m most excited about is that our industry spends a lot of time putting in foundational systems, while the next generation is about getting maximum value out of these investments. When we move up that continuum, we’re getting closer and closer to moving the needle for the patients, consumers, and families that we all serve.
It used to be that EMRs were going to be the best thing in the world for patients. They are, but they’re used primarily by caregivers. This next generation of conductivity, this next digital world, will have a direct impact on patients and families in a measurable way. Not only better healthcare, but lower cost, with better digital connections and ease of access. All these things that we’ve been working our entire career on. That’s what I’m excited about.