One-on-One With KLAS President Adam Gale, Part I

April 11, 2013
As the HIT Policy Committee and its certification workgroup grapple with the fate of CCHIT, many discuss the importance of providing buyers with a “Good Housekeeping” seal of approval. Few, however, directly admit that what they really want is already being produced in the form of KLAS reports.

As the HIT Policy Committee and its certification workgroup grapple with the fate of CCHIT, many discuss the importance of providing buyers with a “Good Housekeeping” seal of approval. Few, however, directly admit that what they really want is already being produced in the form of KLAS reports. Leafing through one of the organization’s two main vendor performance reviews is a fascinating exercise for any industry observer, or critical for any potential buyer of a multi-, multi-million dollar system. In light of KLAS’ unique role in the industry, HCI Editor-in-Chief Anthony Guerra recently grabbed a few minutes with President Adam Gale to talk about the trends roiling healthcare IT.

GUERRA: Many people thought HITECH was going to cause a huge wave of buying, do you think that has happened? If not, might there still be too much ambiguity around meaningful use to move the market?

GALE: While it’s hard to tell, it certainly hasn’t led to that frenzy yet. We haven’t seen the huge wave of buying that I think people were hoping would come in the first few months. I think the reality is there were few people who were ready to go. By that, I mean there were few people who had their plan in place on what vendor they wanted to select; people who had their implementation timeline in place and all they needed to figure out was the funding. I’ve talked to two or three organizations like that who basically moved ahead but they already had a plan in place and were just waiting for some money.

Most of the organizations we talked to today are looking at buying, but this has not sped up the actual action of buying. It sped up the homework, it sped up a lot of discussions with vendors. Many of the vendors we’re talking with are having all kinds of solid sales discussions with people. Vendors are telling me their pipelines are really full, but how much of that is real buying activity versus sniffing around is hard to tell. I have people telling me that there’s a lot of Meditech sites sniffing around to find out what the options are. Some of that is caused by ARRA and the fear that they won’t be able to get their physicians to adopt an older MAGIC system, and some of that is Meditech’s move to Version 6, which means customers would have to spend a reasonable amount of money moving forward. That drives them to go look at other options, but at the end of the day, a lot of these folks are probably going to stay with Meditech. Not all, I mean, there will certainly be several that move, but it creates a buzz around potential buying activity.

GUERRA: You would have to assume that most people will try and get what they need out of their current vendors rather than switching. Does that make sense?

GALE: It does. Definitely, people are leaning on their current vendors, although I’ve been surprised at how many are having at least what seem like real discussions on switching their vendors. I was out with a hospital two or three weeks ago which had bought a system three or four years ago. Right now, they’re in the middle of implementing it and in the middle of moving to CPOE and they’re having very real conversations like, “We think it’s going to be better now to move to a new system rather than wait 4, 5 or 10 years to when our system would have normally come to a natural end,” and so they’re looking closely at buying a more current system.

Another big organization last week called us and said, “We’re pausing our implementation of a system we just bought two years ago until we’re sure we don’t want to implement this other vendor.” So HITECH is causing a lot of pausing, homework and discussions but that just hasn’t equaled buying from what we’ve seen yet.

GUERRA: I interviewed the CIO at NYU Medical Center, Paul Conocenti, recently and he told me that when he first started there, the organization had an inpatient vision, and he selected a system according to that (Eclipsys); but now, the organization has a continuity-of-care vision, and so they are going with Epic. Do you think we’ll see more of that kind of thing?

GALE: Absolutely. So the site which I had mentioned bought a system almost four years ago and is implementing it, their key strategy changed to now look at the ambulatory world and probably employ a whole bunch of physicians (as opposed to just giving privileges to independent doctors), and they feel like the vendor they’ve gone with isn’t a very good option for tying in employed physicians. So, they too are looking at Epic saying, “Hey, if we’re going to have all this ambulatory work going on, we may need to have a totally different strategy.” A number of these organizations may simply choose to go with a different vendor for their ambulatory solution with potentially a long-term shift over to a company like Epic, for example, which can easily move into the inpatient world. So, we’re seeing quite a few folks looking at Epic for ambulatory with a long term, five-to-seven-year plan to swap out their inpatient.

GUERRA: I don’t want to fall in to a rah-rah Epic thing, but it happens sometimes. I saw their scores on your midterm report — it looks like a Christmas tree (KLAS uses green circles to indicate a vendor product has scored six or more points above the market area average). It’s unbelievable. Their strategy – correct me if I’m wrong – has always been to build as opposed to buy. When you look at some of the other large vendors that have grown by acquisition, what’s under the hood may not be all that integrated. Does Epic’s strategy now set them up perfectly for what is needed by the industry’s continuity-of-care vision?

GALE: There’s no doubt that Epic is very well placed for all of this. Two things come to mind, one is the integration clinically between inpatient and outpatient which is huge, and then you’ve also got the financial integration, both of those directions, which no one else can match today. Cerner – you look at them, they’ve got a challenge on their inpatient billing and some questions on their ambulatory. They don’t really have ambulatory billing. If you look at every vendor, there’s some gap somewhere.

I don’t know that you can attribute their success to the fact that Epic built it all themselves. We did some research where we looked at building versus buying, and which gets you further ahead. It was interesting, some of these vendors who have built most of their stuff aren’t that far ahead. Siemens, for example, has done a lot of building; they haven’t done a lot of acquiring and they’re in a decent position, but they haven’t built an ambulatory EMR and they haven’t gotten their stuff out as quickly as people had hoped or as quickly as they had announced six or seven years ago.

So, I think Epic’s success is due to the optimal combination of building yourself so you don’t have to integrate it and their core culture of taking care of the customer. With those two, Epic has created a real win. The problem is that the price tag which goes with it is pretty tough to swallow for someone who has purchased a system in the last few years, and for good reason — you shouldn’t be able to buy one of these every couple of years for $40-50 million and just knock that off the balance sheet.

Part II

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