September 10, 2007

1. Allscripts Announces Big Sale, Is Named to FORTUNE's 100 Fastest-Growing List

Facts and Background

Clinical and physician system vendor Allscripts Healthcare Solutions Inc. announced this week that Columbia University Medical Center's outpatient physician group and independent practice association will implement the company's electronic health record product for its 2,200 physicians. The ten-year, $10 million deal is the largest in the Allscripts' history. Allscripts was also announced this week as being #23 on FORTUNE's 100 Fastest-Growing Companies, one of only seven healthcare companies named.

Opinion

The physician system market seems to be settling into two diametrically opposite camps. On the low end, companies like e-MDs and eClinicalWorks win on low price, modern technologies, and ease of physician use. Allscripts is beginning to dominate the high-end marketplace, those large group practices and hospital-affiliated physician groups who are less constrained by price and are more interested in integration with inpatient systems. Its products are a safe choice for hospital CIOs looking to take advantage of relaxed regulations for supplying technology to affiliated physicians.

Musings

• Good management nearly always wins. Allscripts has it.
• The company has the revenue and market capitalization needed to have significant influence.
• Profits are coming along, although still a work in progress.
• The company's emphasis on electronic medical records gives it a strong competitive advantage against formerly strong and larger vendors like Misys and GE, which aren't as focused.
• Signing up with another big academic client will open doors, particularly if Allscripts further develops its expertise in integrating its systems with inpatient systems.
• The company has attained enough size and cachet that is likely positioned as an acquirer, rather than being a takeover target for another company.
   

2. Report Says RHIO Market is Small Unless Philanthropy Kicks In

Facts and Background

Healthcare IT Transition Group released a new study called Sustainable RHIO Funding and the Emerging Business Model. It concludes that regional health information organizations are struggling and must look to private philanthropy to grow. If RHIOs can find capital and offer free access to participants, they will eventually ramp up in growth and have a chance to be self-sufficient. For now, however, RHIOs will have only $128 million to spend in the next year.

Opinion

Everybody knows that RHIOs are failing because of poor business models, but this is a fresh perspective. Most RHIOs operate under the hospital non-profit model that emphasizes revenue instead of philanthropy. The small projected RHIO spending will not be encouraging to those already in that market or considering entry. 

Musings

• Would communities willingly fund a RHIO? If the study is right, they'll have to if RHIOs are to succeed. That means RHIO boards need to be crafting a different message for a different audience instead of preaching to the choir about their value proposition.
• The study indicates that too many RHIO board members come from hospitals and therefore don't understand the philanthropy model. RHIOs are leaving money on the table because the aren't asking private donors for it.
• The study quotes Metcalfe's Law, which says that each new member of a telecommunications network adds a greater value to the network as a whole. One fax machine is useless, but a network of them makes the network valuable.
• The study tells RHIOs what they don't want to hear: their governance and business models are wrong, their odds of success are slim, and the benefits are being lost because those in charge are sticking with an untenable mindset that RHIOs should charge membership fees right away to reduce reliance on one-time grants.
   

3. SEC Interested in Germany's Siemens Investigation Records

Facts and Background

The US Securities and Exchange Commission requested legal assistance from German authorities who are investigating alleged bribery by Siemens AG. The SEC started a formal investigation of Siemens earlier this year in conjunction with alleged bribes related to telecommunications contracts. Siemens is under investigation by the governments of several countries for antitrust violations, bribery, and bidding irregularities. German press reports say suspicious payments made by Siemens could be as high as $1.4 billion.

Opinion

Not surprising. The company admits to significant wrongdoing and few would be surprised if much more of it was easily uncovered. The company's imaging and medical equipment competitors have every reason to ask hospitals to document why Siemens products were chosen over their own given the investigations of bribery worldwide. It's not out of the question that hospital executives could be deposed or even charged if allegations are proven.

Musings

• Vendors can sell expensive products through cozy relationships with boards, foundations, and decision-makers. Hospitals should find out whether Siemens was kept at arm's length during procurement decisions.
• Siemens got in big trouble over the law-breaking of its employees in selling PACS to Chicago's Stroger Hospital. What are the odds that it didn't happen in other highly competitive situations?
• This is a great time to examine hospital procurement policies and to develop a code of conduct for vendors and employees involved in buying decisions.
   

4. Former Hospital Employee Sues After Data Loss Firing

Facts and Background

The IT employee fired by Providence Health System (OR) for leaving data disks and tapes in his van is suing the health system for $1 million. Steven Shields left the electronic records in his van parked in his driveway on December 30, 2005. A thief broke in and stole the unencrypted records, which contained sensitive data spanning 20 years and 365,000 people. He immediately reported the theft to police and says he was fired for doing so rather than for breaking approved hospital policy. He says he is protected under Oregon's whistle-blower law. Several Providence employees quit or were fired after the breach.

Opinion

Did Shields break policy or was he doing what his employer expected? Reports differ. Of course the health system had to fire him, but equally sensible is that he'd sue unless the health system can provide documented policies that he violated. Like most aspects of security, it has to start with policies for precisely this reason.

Musings

• Was Shields likely to store records in his van again? Assuming not, the hospital was not too bright in firing him. The damage was already done, although the hospital obviously wanted to distance itself from it and blame the individual action of a careless employee. It would have been safer to transfer or demote him.
• This was an early example of what is now a near-daily occurrence: medical records are breached because of stolen computer equipment or inadvertent access over the Internet.
• The press loves to report breathlessly on local data breaches. Hospitals should create a plan for dealing with that kind of disaster no different than the usual incident command process.
• If I had to bet, I'd say the hospital will settle quickly to keep from re-opening the old, embarrassing wound. Steven Shields won't be set up for a work-free lifetime, but he'll probably get enough cash to hang on until the incident is forgotten.
   

5. Ingenix Acquires Healthia Consulting

Facts and Background

Ingenix added another company to its acquisition list when it picked up Minneapolis-based Healthia Consulting this week. Healthia offers traditional management, solution, and revenue cycle consulting services to hospitals. Ingenix, of Eden Prairie, MN, sells a wide variety of products and services to insurance companies, providers, drug companies, and government agencies. It is a fully owned subsidiary of Unitedhealth Group.

Opinion

Healthia is a focused boutique consulting firm with heavy Epic expertise. They must have been doing something right as a small company that attracted the attention of a much larger one.

Musings

• Healthia was proudest of the work-life balance it encouraged its consultants to have. Let's hope that doesn't change.
• Other Ingenix acquisitions have been rumored recently and their history certainly shows an interest in expanding in that manner.
  
  

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