November 12, 2007

1. VA Announces Cerner Replacement for its VistA Lab System

Facts and Background

The Department of Veterans Affairs announced Wednesday that it had signed a nine-year agreement with Cerner Corporation of Kansas City, MO to install its Pathnet laboratory information system in 150 hospitals and 800 clinics.

Opinion

This is big news for two reasons: it's a big sale for Cerner (which needs a replacement for the high profile, big enterprise clinical system deals it loses regularly to Epic Systems) and it's a signal that the VA is ready to start dismantling its highly regarded VistA system.

Musings

• As a taxpayer, paying what's most likely a ton of money to Cerner is probably still better than wasting it on consultant-developed software that doesn't work, i.e. BearingPoint's $472 million CoreFLS financial system, which nearly shut down its VA beta site hospital before being buried for good in 2004.
• VistA was an aberration, developed on the cheap by skunkworks VA programmers. It will never happen in government again. Business as usual for Uncle Sam (especially now) is paying massive amounts to SAIC, IBM, and a handful of usual suspects for software that turns out to have no positive impact. Government agencies and the military have successfully quashed projects just like VistA for a variety of reasons, some of them legitimate.
• Government brass have wanted to replace VistA for years. They're the same folks who allowed the CoreFLS fiasco and taxpayer rape occur because they were clueless about project oversight, according to outside auditors.
• Can commercialization of VistA as an open source system (i.e., Medsphere) succeed if it loses its most successful reference site?

2. First CCHIT-Certified Inpatient Clinical Systems Announced

Facts and Background

The Certification Commission for Healthcare Information Technology announced Monday that six hospital clinical systems make up the first group to earn CCHIT's certification. Systems from CPSI, Eclipsys, Epic Systems, and Healthcare Management Systems earned full certification, while those from Prognosis Health Information Systems and Siemens were conditionally certified as pre-marketed until they are brought live at a customer site.

Opinion

CCHIT's certification hasn't had much impact in the physician systems marketplace, other than to raise costs. It will have even less impact on hospitals. Do hospitals really need a group formed by industry cheerleaders like HIMSS, AHIMA, and NAHIT to tell them which systems to buy?

Musings

• Yawn. Hospitals ignore most objective wisdom when buying systems anyway (even those worst in KLAS systems sell to someone). Certification isn't likely to change that practice.
• CCHIT has created a vicious cycle in the physician systems market. They certify some vendors, so the others play catch-up so because they think customers will look elsewhere. CCHIT raises the standards as predictably as a toll road authority raising prices, starting vendors all over again. Meanwhile, customers find product development agendas dominated by CCHIT, not their own needs.
• CCHIT started out as being reasonably humble about its role, but it seems it's getting a bit bolder and more self-congratulatory as vendors line up to kiss its ring.
• Siemens still doesn't have a live site on Soarian clinicals? Oh, my.

3. Allscripts Shares Tumble on Earnings Disappointment

Facts and Background

Shares of Allscripts Healthcare Solutions Inc. tumbled nearly 19% on Friday as the company announced third quarter earnings that were up 26% from last year, but well below the expectations of analysts. The company also cut its outlook.

Opinion

The news may have been disappointing, but the Dow was down 224 points and the Nasdaq down 68 on Friday, which likely magnified reaction to the Allscripts announcement. The best reason to buy a company is its management, and that of Allscripts is very good. Maybe they need to improve at signalling so that investors aren't surprised next time. Companies like Cerner are stellar at this and their share price reflects it.

Musings

• If this happens again next quarter, then all bets are off.
• Now's the time for Allscripts to roll out any stored-up bad news. The stock has already been pounded, so they might as well get it all out there at one time (like cutting the outlook, in other words).
• The stock is down 27% year to date, but a lot of that came Friday. Could be a buying opportunity, could be a good reason to steer clear.
• Allscripts sells a lot of big systems, so that makes financials tougher: long sales cycles, deferred revenue, and higher sales costs.
• The company said it was experience pricing pressure on the low end, most likely its small physician systems. Plenty of cheap upstarts are willing to step in. Expensive systems like GE, Allscripts, and Misys are bought mostly by firing-averse hospital CIOs and big group practices choosing for their affiliated physicians. The vast majority of practices wouldn't even consider these vendors because of cost, complexity, and usability.
• Shares in Quality Systems Inc., home of Allscripts physician systems competitor NextGen, were up nearly 12% on Friday. Athenahealth shares were up 2.5%. Investors may have rotated their HIT investments out of Allscripts and into these shares, which have been free of negative surprises.

4. KU Hospital Purchase of Epic OK, Audit Says

Facts and Background

Auditors reviewing the University of Kansas Hospital at the request of legislators said it was appropriate for the hospital to have chosen clinical systems from Epic Systems instead of those from lower bidder and local employer Cerner Corporation.

Opinion

Cerner loses this kind of deal with regularity to Epic. Obviously the company (and the legislators partial to them) were stung that doctors vastly preferred Epic over the homies. Emotion aside, there's little surprise there.

Musings

• Cerner whined like overpriced local merchants when Wal-Mart comes to town, with the same implication: customers are too stupid to be trusted to make their own decisions.
• The decision was a surprise only because of the location. Epic wins everywhere, not just in Wisconsin.
• Cerner's spokersperson termed the decision "a disappointment to Kansas City". Not to that portion of it that counts -- the clinicians at KU Hospital.
• When a big, local customer tells you straight up that they'd rather pay a lot more for your competitor's product, there's a lesson to be learned: yours had better improve quickly.

5. Microsoft Fires its CIO

Facts and Background

Microsoft confirmed Tuesday that it had fired Chief Information Officer Stuart Scott for violating unspecifed company policies.

Opinion

Did we need another reminder that the CIO title is often jokingly referred to by those holding it to stand for Career Is Over?

Musings

• This isn't really big news since Scott wasn't high profile anyway.
• The firing was never really announced, just confirmed.
• Scott must have been accused of doing something really bad since he was fired outright. Like wanting to have a normal, non-Microsoft life instead of working all hours for a company desperately trying to keep its relevance, maybe.

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