2016 HIS Vendor ReviewPart 3: Mid-Range Vendors

© 2016 by H.I.S. Professionals, LLC, all rights reserved.

By Vince Ciotti & Susan PouzarHIS Professionals, LLC

Meditech Paragon NTT Data Medhost Q-Med

Mid-Range Vendors• After the intro summed up the market, these episodes delve into

the details of 3 vendor niches of the HIS market, this week:– Mid-Range = community hospitals of 100-300 beds in size

• Interesting how the size of the annual revenue of our 3 vendor groupings corresponds to the bed size of their target market…

• This episode covers these mid-sized vendors’- Annual revenue: both for 2015 and their

20-year HIS-tory, “only” in the hundreds of millions, rather than billions of $s

- Product lines and client base by bed size- M & As and other recent developments- Candid assessment of future prospects

• Ranked # 5 in terms of 2015 revenue is Medical Information Technology, 46 years after their humble beginnings in 1969. They weren’t really much of a hospital player until the mid ‘70s starting with an LIS, gradually expanded to a full HIS in the ‘80s.

• Notice the two drops in their impressive revenue growth to a over a half billion $s, circa Y2K and 2012:

#5:

• Actually many HIS vendors experienced the same dips due to:– Y2K – after the mad buying rush to replace “legacy” system pre-2000 for

the date change crisis, hospitals then stopped buying for several years.– MU - the ARRA stimulus program has done the same thing the past few

years, stirring thousands of sales in 2009 to 2012, then far less since:

Two Meditech Revenue Dips

Y2K

MU

• Meditech actually has 3 distinct HIS products & client bases:– Magic – first developed in the 1970s as Meditech’s version of

MUMPS, there were over 700 hospitals using it during it’s heyday (aka “MIIS”), probably less than 600 today...

– “Client/Server” - the quotes are from their contract, as it’s merely a Windows front-end to MAGIC – a vastly-improved GUI, but hardly a true C/S like McKesson’s Paragon. C/S sold very well during the 90s, with ≈500 clients, since dropping.

– Release 6.x – aka Focus and MAT (Meditech Advanced Technology), this is the latest & greatest iteration product.

Three Meditech Products

• Still a proprietary data base, but far more modern than Magic or C/S, it is more of an “Append” data base than B-trieve like the older technologies, and easily the most feature-rich, with over 300 sites & growing.

• If Meditech were publically held, we’d recommend the stock:– They should do well among the mid-sized Siemens clients on

Invision and Medseries4, as Cerner stirs them up with its promise of “support” for 3-5 years...

Meditech Prospects

- Plus they have those 1,000 clients currently on Magic & C/S to sell Release 6 to, with nary an RFP…

• They have one other major development that should help sales:– Their acquisition of LSS for physician practices was a bit of a

bust due to being a separate, interfaced product & data base.– They recently completed a integrated physician system within

Release 6 with Practice Mgmt. (Reg, Sched, BL) and an EHR.– With 5 pilots live and scores of sales, this could make them

the mid-sized equivalent to Epic’s integrated MD/HIS – hot!

• This may seem a bit redundant in that we covered McK in the previous episode on “macro” vendors, but if you’re a mid-sized hospital looking for an HIS, you have to consider their “Paragon” of HIS systems with about 300 clients. - When the decision was made to shut

down Horizon and replace it with Paragon as their “go-forward” solution, McKesson put all its eggs in this mid-sized basket.

• Like Meditech with LSS, they also learned a lesson from Epic:– They built an integrated practice management (reg, sched &

BL) on the same Microsoft SQL data base & Windows OS, to replace the (poorly) interfaced Practice Partners system, which they sold along with other MD systems last year to eMDs. The practice management portion is now live, and they are now promising an integrated EMR by mid 2017…

• Known as Keane for several decades, it’s hard to remember this new name in HIS systems is actually selling several tried & tested products as “Optimum,” which has several proven components:

- Full suite of clinicals: EHR, CPOE, LIS, RIS, RX, etc. - Robust revenue cycle (formerly PatCom), with a

long track record going back to PHS in the 80s. - Solid ERP suite from “partner” ORMED, who has

since bought small competitor CSS/Healthtech…• Like Siemens & GE, their parent firm is an international giant

with billions (of Yen) in annual revenue, and their healthcare IT division includes many pieces beyond a pure HIS, including: - Long Term Care – in which they are an

industry leader over a thousand clients. - In pure HIS, they have about 200 clients

on various modules of Optimum.

#5:

• It’s been a wild ride since Keane sold to Caritor in 2007, who then sold to NTT Data in 2010. All 3 parents had much larger generic IT revenue in multiple industries besides healthcare, so we’ve been estimating what slice HIS comprised of them below:

• NTT Data should make some sakes (strange typo!) of Optimum to mid-sized Siemens’ clients on MS4.

• They are good at selling to existing clients, like Ernest Health putting Optimum in 4 new hospitals.

NTT Data Revenue HIS-tory

(Y2K)

Caritor

NTT Data

Keane

• In March of 2016, NTT Data shocked the industry by agreeing to buy Dell’s IT consulting division for $3B - yes, that’s a “B” for “buying too much”! Turns out Dell is spending $60B to buy EMC, and needs these few billions to help trim its $43B of debt…– Dell acquired Perot systems back in 2009 for $3.9B, so they’re

actually losing a little, but EMC is quite an enticing target.• The odd thing is what this does to NTT Data which will now be

both a “consulting” firm and an HIS vendor. Imagine a scenario where Dell/Perot consultants issue an RFP for a mid-sized hospital looking to acquire a new HIS – would they send it to themselves? And other vendors?? Evaluate other proposals???

• Many HIS vendors have “consulting” divisions that offer assistance during implementations, interim staffing, technical assistance, etc., but strategic planning, IT assessments, system selections and contract negotiations usually require objectivity…

2016 Game Changer!

• Founded as Health Management Systems in 1984, HMS was acquired by VC firm Primus in 2007, who formed HealthTech Holdings as their parent company, then merged them with EDIS leader MedHost in 2010. Confused? So am I, but at least now no one mixes them up with the other “HMS” vendor in NYC…

- HMS grew rapidly by selling to the many hospital chains also based near Nashville, like Community Health Systems, with 200 hospitals in 29 states.

• Their forte for these chains is an ERP designed to pool cash payments from many hospitals into one central bank, while centralizing AP, purchasing & materials as well - tricky stuff! - MedHost was a long-term leader in EDIS

systems, and with a slick interface to HMS, they pose a nice solution to how EDs are the source of most admissions.

• Being privately held, we’ve had to estimate their revenue for some years between these acquisitions and mergers, the only time $ figures are made public, but the strong growth of hospital chains like CHS has given them a solid base for revenue growth:

• Adding Medhost’s EDIS revenue in 2012 gave them a huge revenue jump, but they’re down a bit since…

HMS/Medhost Revenue HIS-tory

HMS

Medhost

• Their HIS client base is mostly smaller & mid-sized hospitals that proprietary chains like CHS tend to acquire; included in the hospital figures below are ≈370 EDIS clients of all bed sizes.

Medhost Client Base

Acute Care Hospitals Non-acute Care Facilities

• The last player in the mid-sized hospital market is a familiar name but one that has gone through a number of owners & products:

- Starting as Compucare in the 70s, they developed their Affinity HIS in the 90s, which sold very well.

- Bought by QuadraMed, who tried to build an EHR & CPOE in the early 2000s, but failed leading to:

- Sale to VC firm Francisco Partners who acquired CPR from Misys/Per Se (née UltiCare from HDS).

• Francisco then sold QM to the N. Harris division of Constellation Software, a Canadian firm, who left the name & products alone: - Affinity – a solid RCM and basic HIS, with

about 100 hospitals still running it. - QCPR – “QuadraMed’s Computerized

Medical Record,” with about 50 clients

• QuadraMed made their revenue figures public for about 25 years, so here’s a chart of how they grew handsomely during the 90s when Affinity was hot and hospitals were buying like crazy to prepare for the Y2K “Armageddon” (that never happened...)

• Revenue dipped after the sale of Quantim to Nuance 2012.

• Purchase of NextGen’s HIS systems gives them a nice client base to sell QCPR to…

QuadraMed Revenue HIS-tory

Y2K

Quantim Sale

Next Week• Our final episode next week covers the remaining HIS vendors,

specializing in the small market (in terms of beds and revenue):– Their client bases consists of mostly under 100 bed

community hospitals, including CAH (Critical Access Hospitals) of under 25 beds (with over 1,000 in the US!):

• Evident (CPSI) – leader even before acquiring Healthland– Plus two new entrants shaking up the HIS field:

• athenahealth – MD giant now in HIS through RazorInsights• eClinicalWorks – physician practice giant entering HIS…

– And several small hospital players deserving mention…

• With the HIS industry being so wide and deep, we might have missed something, so if you’d like, have your attorneys contact: - vciotti@hispros.com spouzar

@hispros.com - 505.466.4958

407.321.1110