“H.I.S.-tory” by Vince Ciotti

© 2011 H.I.S. Professionals, LLC, all rights reserved

Episode # 61:

HMSPart 3

2nd of today’s “Baker’s Dozen!”• Thanks to co-founder John Doss & Tom Givens,

this week we conclude the 2nd story of today’s HIS vendors: Healthcare Management Systems- $3.2B = McKesson, née HBOC = Walt Huff, Bruce Barrington, & David Owens - $2.2B = Cerner, still run by Neal Patterson, co-founded with Cliff Illig- $1.7B (est) = Siemens, née SMS: Jim Macaleer, Harvey Wilson & Clyde Hyde- $1.4B = Allscripts, née Eclipsys, also founded by Harvey Wilson of SMS.- $1.2B = Epic. Gee, I have to wonder, just who was it who founded them? - $900M (est) - GE Healthcare, née IDX/PHAMIS: created by Malcolm Gleser- $545M = Meditech, still run after all these years by Antonino Papallardo- $353M = NextGen: new Opus & old Sphere financials by Florian Weiland - $174M = CPSI (Computer Products & Services Inc), founded by David Dye - $170M = QuadraMed, née Compucare, founded by Sheldon Dorenfest- $160M = Keane, parent giant by John Keane, but HIS div. built by Ray Paris - $110M = HMS (Healthcare Management Systems), Tom Givens & John Doss- $70M (est) = Healthland, formerly Dairyland, founded by Steve Klick

Amazing Grace Growth!• In 1984, Tom & John started HMS with 2 other employees, and a

handful of clients, mostly small hospital chains based in Nashville.• HMS grew slowly in the 80s, then took off in the 90s as their chain

clients grew & IBM’s AS/400 minicomputer sales burgeoned.• By 1996, HMS had 120 clients in 27 states, with about $5M in

annual revenue. HMS grew amazingly since then, as shown below plotting their annual revenue growth by year in millions of dollars:

2010 2005 2000 1995

Changes in Ownership• In 2000, John Doss & Tom Givens restructured

HMS into an Employee Stock Ownership Program or “ESOP,” giving the 100-odd employees then a piece of the action (no SMS pun intended).

• Tom & John eventually stepped down from day-to-day management of the firm in 2005, turning the management reins over to Tom Stephenson as CEO, one of their first 4 employees from 1984.

• In 2007, an even larger change occurred when HMS was acquired by Primus Capital, a VC firm like Francisco Partners that acquired HIS vendors Healthland (Dairyland) & QuadraMed (Compucare). Who in the world is Primus? To quote their press release: – “Primus is a private equity firm that invests in high-growth

companies within the healthcare, business services, communications and for-profit education industry sectors.”

Product Growth• HMS’s HIS product was originally known as “Monitor” back in the

day, and it grew as rapidly as the firm’s client base and revenue:– From primarily financial systems back in the 80s (which is how

so many HIS vendors started), including patient accounting (census, billing & AR) and general accounting (AP, GL, etc.)

– Augmented by their excellent corporate reporting for their large number of hospital chain clients like AMC and CHS.

– In 2001, HMS introduced an integrated Electronic Health Record and Clinical View, giving clinicians a comprehensive look at electronic patient information, including lab results, vital signs, transcribed radiology reports, the patient’s pharmacy profile and more. Per the ARRA stimulus program, HMS’s E.H.R was certified in 2007 by:

Expansion/Acquisitions• In 2009 HMS announced the addition of an Ambulatory EHR and

physician practice management suite, including modules for:– Registration, Scheduling and 1500 Billing.

• Probably HMS’ most daring product biggest jump however was the acquisition of the premier ED system vendor: MedHost.– I first saw MedHost at Olean Hospital in upstate NY a few

years ago, and was blown away by how well the nurses and physicians loved it, bragging of how much time it saved them.

– This was no salesman’s demo: it was from the actual usersI • Like so many vendors, HMS is now working

on the complex interfaces between MedHost, their HIS suite, and ambulatory E.H.R. If they pull it off, they’ll may become the “epic” solution for small hospitals!?

Recent System Selection• To show how well HMS matured, the scores below shows how they

performed at a system selection at a 50-bed hospital in the Midwest that we helped a few years ago, based on user ratings of key steps:

• Site visits – to local hospitals running the same apps, without sales chaperones!

• Implementation – experience of the actual project manager & # of days on-site

• MD Fair – concurrent demos in adjacent rooms so MDs compare CPOE & EMRs

• Contract – based on our 70-point contract questionnaire on terms & conditions

• Documentation – reviewing the actual CDs and on-line documentation by users

• Phone references – user-to-user phone calls to over a dozen live client sites (not sure how KLAS gets their 90+ point scores – these are from the real world…)

The $64,000 Question?• I’m sure many CIOs out there are wondering how much such a

system costs? Since vendors’ prices are confidential and these are today’s vendors, all we can share are some ballpark figures:

• In the small hospital world (under 100 beds) the three leading vendors today in terms of market share and # of clients are:– CPSI with ≈650, HMS with ≈600, Healthland with ≈550– (“up & coming” vendors include NextGen & Prognosis…)

• To show why these 3 do so well in this demanding market, where hospitals are extremely challenged financially, and usually have IT staffs in the single digits (CAH often have only 1 or 2 IT FTEs!):– Capital costs for license fees, implementation and hardware

(most run inhouse, few do remote) run from $1M to 1.5M– Operating costs for hardware, software and interface

maintenance usually runs in the low 6-figures…– TCO over 5 years of about $2M (eat your heart out big CIOs!)

The Name Game• Funny how these 3 small HIS vendors change their product names,

today calling their suite of HIS apps “solutions,” as if their system solve all the problems hospitals are facing… To whit:

• HMS – the old name of “Monitor” that describes how well HMS’ corporate reporting helped chains watch finances. Now, HMS offers “solutions.”

• Healthland – gave up on “Vision,” a propos considering how vendors are always selling the 4th quarter (they just won’t commit to which year…), and are now calling it “Centriq.”

• CPSI – rather creatively calls its HIS suite the “CPSI System.”

A Final Thanks… and next week!• Besides Tom Givens and John Doss for this story, I’d like to thank

another old HMS-er who shared anecdotes from the firm’s past :– Carl Schneider – who was HMS’ VP of Sales & Marketing

during the halcyon 90s, left the firm for a few years, then came back until just recently. His many old friend can reach him at his new small hospital HIS vendor: Custom Software Systems

cschneider@csshealthtech.com 615/714-9717

• Next up for today’s vendors will be Keane (NTT), whose acquisitions cover many other HIS-tories:• SDS – Source Data Systems, Cedar Rapids, IA• Infostat – my old friend John Indrigo from TX• CHC – Community Health Computing• PatCom – from Professional Hospital

Services• Pentamation – aka Ferranti, from Maryland