H.I.S.-tory, by Vince Ciotti

© 2013 by H.I.S. Professionals, LLC, all rights reserved.

Episode #105:

Cerner

Part 2: LIS entrée

Why LIS?• This week we pick up the story

of PGI (Patterson, Gorup & Illig) as they entered the HIS market in the early 1980s (they weren’t renamed Cerner until 1984).

• We saw last week how these 3 ex-AA consultants decided to form a software development firm in 1979, and started with a wide array of industrial clients.

• But what made them pick the HIS industry, and Laboratory Information Systems (LIS) in particular? Actually, they followed in hollowed footsteps:

Genius or Serendipity? • Look at the early days of another HIS giant for a curious parallel:– Medical Information Technology (familiar?) started in 1969 by

offering time-sharing services to a number of industries: auto parts distribution, hotel chain reservation, international oil firm, a cola company, the Hong Kong Telephone company… It was one early client, Cape Cod Hospital, who steered them into LIS in the early ’70s, from which they gradually evolved an ancillary suite for RX and RIS, then added ADT and Orders/Results, and eventually an entire HIS suite over the next several decades.

– PGI – While Cliff Illig worked with Brunson Instruments and Paul Gorup worked for H&R Block and Cook Paint, it was Neal Patterson’s work at MAWD Laboratories in KC that provided PGI with their entrée into healthcare, starting with a billing problem Neal quickly fixed. When Dr. Terrance Dolan left MAWD Labs for St. John Medical Center in Tulsa, he called on Neal again…

The Path to an LIS Network• Dr. Dolan asked Neal to address the entire array of complex sub-

departments within the Lab at St. John’s: hematology, chemistry, serology, urinalysis, microbiology and anatomic pathology.

• Although Neal had learned a lot about Lab operations at MAWD, he turned to a bright, young programmer he worked with there, Liane Lance, who had been hired from North Kansas City Hospital where she learned the Lab ropes as a medical technologist.

• Eventually becoming an executive at Cerner, Liane helped Neal & Co. put together a proposal to automate the entire lab operations at St. Johns. In the spring of 1981, Neal presented to the Board of Directors at St. Johns and PGI won its first healthcare IT contract.

Complete PathNet Design• The daring design of a “Total LIS”

caught on quickly, and three other facilities signed up as pilot sites:– Research Medical Center in KC,

Dr. James Flynn was Pathologist and Janice Woods a Med. Tech.

– Truman Medical Center in KC; Jim Mongan was Executive Director

– North Kansas City Hospital, where Liane was aided by Vanetta Wick.

• Neal Patterson developed a display of cylinders to illustrate the overall design for PathNet (right), which is now legendary in Cerner circles.

Four Rapid & Successful Go-Lives• The four pilot hospitals came up rapidly over the next two years:

-- St. Johns in Tulsa in August ‘82– North Kansas City in May ’83– St. Johns Leavenworth in Aug ’83– Research Medical Center in Oct ‘83

• PGI’s next challenge was finance$: building a total LIS took a large team of costly personnel, and although four hospital sales was encouraging, the maintenance from just 4 sites could hardly cover ongoing expenses. Neal had exhausted all his loan potentials in KC, so he hired Hal Oppenheimer to help raise some venture capital.

• Neal & Hal attended an Inc. magazine seminar in Chicago where Hal met a fellow Harvard graduate from First Chicago Capital Corporation, Paul Finnegan. They talked at length about PathNet over dinner, and Neal left Chicago with $1.5M funding.

LIS Market in Early 1980• The capital infusion allowed them to take PathNet to market, and

PGI started competing with many established LIS vendors. Just what was PGI up against? Check out these charts from Sheldon Dorenfest’s 1980 “Guide,” the bible of the HIS market back then:

• The table from SIDA’s survey of 250 sample hospitals shows just how hot LIS systems were back then, outpacing “Data Collection,” the domain of HBO’s MedPro, SMS’ ACTIon and McAuto’s HDC.

• Pharmacy was way down the list, and RIS didn’t even appear! So Neal & Co. had picked a very hot niche, which probably explains First Chicago’s eagerness to help fund the new system & company.

Just Who Was PGI Up Against?• Just who were the leading

LIS vendors at the time? Here’s another gem from Shelly Dorenfest’s 1980 Guide showing # of clients by major application area out of 250 sample hospitals:

• Anyone remember these early LIS competitors:– Spear, BSL, MedLab,

DNA, LCI, Genetron?Could be its own episode…

• More importantly, how well did fledgling PGI compete against these early LIS-ers?

The LIS Market in 1988• PGI’s PathNet sold very well

throughout the 1980s, as turnkey mini systems for HIS and LIS swept the shared system field. Check out this list I culled from an LIS survey in the March 1988 issue of Bill Child’s Healthcare Computing and Communications magazine.

• Known as Cerner by 1984, Neal & Co. claimed 72 sales, by 1988, ranking 9th among the 23 LIS vendors who responded to the survey.

HIS Vendors By Revenue in 1986• Those of you who follow HIS

Pros’ annual “Top 100 Vendors by Revenue” in Health Data Management magazine may marvel at how different the HIS landscape looked 27 years ago! Only two vendor names remain unchanged in 2013:– Meditech, ranked #15

with $28M in revenue– Cerner, ranked # 19 with

$17M in annual revenue• Most other leading vendors

vendors re-named, sold or went out of business…

Next Episodes…• We’ll pick up the story with:– PGI renamed as Cerner –

how did Neal & Co. came up with that name?

– Going public – what if you had bought a share of Cerner stock for $16 in their 1986 IPO?

– Acquisitions – most of Cerner’s growth was indigenous, but they did buy a few gems, eg:

– Growth – their amazing growth in # of FTEs, clients & employees…