September 17, 2007

1. Google's Health Executive Leaves, Opening WebMD Acquisition Speculation

Facts and Background

Google Health architect VP Adam Bosworth has left the company "to pursue other opportunities", the company confirmed after a blogger's report. Bosworth joined Google in July 2004. Investors quickly speculated that Google had decided to buy market share instead of build product and would therefore acquire HLTH Corp.'s WebMD, sending that company's shares to an all-time high Wednesday.

Opinion

How could anyone in their right mind leave the hottest company in the world? Against their will, one might speculate. Despite endless discussion about Google's presumed development of a category-killing personal health record, its likelihood of buying big healthcare software vendors, or its creation of a monster healthcare search engine, the company has announced nothing. Either Google is waiting for the right moment (unlikely) or is starting to appreciate the hellishly complex nature of healthcare IT, which is of course why Google's posturing was lauded as a revolution in the making in the first place.

Musings

• Based on unimpressive screen shots leaked over the Web, Google does indeed plan to develop a personal healthcare record, thereby joining every other software company in the world.
• HLTH's market cap is $2.6 billion, 50% more than Google paid for YouTube.
• HLTH's forward P/E of 18 makes its share price reasonable.
• Google is losing its healthcare steam and needs to stop talking and do something. One must assume smart leadership already knows that and will make changes necessary to do so.
• Will Google join other big tech companies (Microsoft, Oracle, Intel) that repeatedly talk a big healthcare game but have had little influence otherwise?
• Google's unique and powerful angle in everything it does: advertising. Page views alone could make WebMD attractive.
   

2. HIMSS Announces Davies Award Winners

Facts and Background

The Healthcare Information and Management Systems Society (HIMSS) announced the 2007 winners of the Nicholas E. Davies Awards of Excellence on Friday, recognizing the use of electronic medical records. The winners are:

Allina Hospitals & Clinics, Minneapolis, MN
Valdez Family Clinic, San Antonio, TX
Village Health Partners, Plano, TX
Illinois-National Electronic Disease Surveillance System, Springfield, IL
Institute for Family Health, New York, NY

Opinion

Allina's big Epic Systems project, with it calls Excellian, has quickly become the standard other hospitals wish they could match. It covers 11 hospitals and 65 clinics.

Musings

• Allina claims their project finish finished on time and on budget.
• Allina spent $249 million on the Excellian project, with 40% of that amount being for its ambulatory components.
• Excellian is the project everyone will be studying and analyzing, most likely resulting in much research and analysis related to hospital systems.
• In addition to Allina's success, this project is yet another feather in Epic's cap. If Epic's competitors found it tough to butt heads with them before, it's only going to get worse.
• No wonder privately held Epic wins high-end bids so often, much to the displeasure of Cerner, which needs those big contracts to fuel its Wall Street growth engine.
   

3. Philips Re-Orgs, Sells Nuance Stake

Facts and Background

Royal Philips Electronics of the Netherlands announced Thursday that it would sell its 2.5% ownership in Massachusetts-based Nuance Communications. That company's business lines include Dictaphone healthcare dictation and transcription products, Dragon NaturallySpeaking speech recognition, ScanSoft document imaging, and systems for telemarketing, automated attendant, and directory services. Philips will focus its business on three product lines: healthcare, lighting, and consumer lifestyle, which was the announced reason for the sale. 

Opinion

Philips has made bad healthcare investments before. This wasn't one of them -- the company sold its share of Nuance for $83 million, yielding a $42 million gain. That's a drop in the bucket to its horrible investment in transcription company MedQuist, with its 2000 investment of $1.9 billion writtten down by $1.4 billion so far, or its failed, ugly pairing with Epic Systems that mostly resulted in Epic getting the European electronic medical records presence that Philips thought it would own.

Musings

• Philips has a promising home care monitoring business gained by key acquisitions.
• The home care business of Philips will likely be consolidated with the company's other healthcare product lines, creating a mini-GE Healthcare without the biotechnology component.
   

4. Brailer's Fund Ready to Start Investing

Facts and Background

Health Evolution Partners, the private equity investment firm started by David Brailer, the former Bush official in charge of healthcare technology, announced Monday that it will invest $500 million in late-stage healthcare companies and another $200 million in early-stage venture partnerships. The company will manage $700 million in funds from the California Public Employees' Retirement Systems.

Opinion

Interesting, but healthcare information technology was not specifically mentioned in the announcement as an investment focus. Still, with $700 million to invest and target investments announced as $10 to $80 million, it is likely that several software vendors will find out what they can do with capital behind them.

Musings

• No wonder Brailer couldn't wait to quit his low-paying government job after getting everyone stirred up over RHIOs, which were just beginning to tank as he cashed out.
• So far, it's all talk, no action, but Brailer surely has enough connections (and that big retiree war chest) to make something happen.
• Private equity is hot, but companies are selling their souls to tap into the cash. Whether healthcare is better served by hot young investment bankers looking solely at company yields remains to be seen.
   

5. AcerMed Goes Down for the Count

Facts and Background

Physician systems vendor AcerMed of Irvine, CA informed customers last week that company operations were ceasing and the business was being shut down after weeks of rumors and denials.

Opinion

Lawsuits and an executive's illness caused the company's problems, so some customers were told. Mostly the company wasn't saying much of anything.

Musings

• AcerMed was highly recommended by some consultants and was CCHIT-certified, casting some doubt on the value of either when it comes to choosing a vendor who will be around indefinitely.
• Software investments always involve some degree of risk due to long payback periods and assumptions based on ongoing product development and support. Luckily, it rarely ends up as dramatically impactful on customers as in this example.
• This doesn't exactly further the EMR cause with physicians who were already wary of immature products and lost productivity. 
  
  

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