One-on-One with KLAS President Kent Gale, Part II

June 24, 2011
It’s rare that a company occupies a truly unique position, but that seems to be the case with Orem, Utah-based KLAS. The organization is one of the

It’s rare that a company occupies a truly unique position, but that seems to be the case with Orem, Utah-based KLAS. The organization is one of the most respected sources of information in the healthcare IT industry, producing reports that CIOs pay major bucks to possess. In fact, a number of CIOs have told HCI that KLAS reports are one of the main tools they use when starting down the path of vendor selection, at the very least, giving them a baseline of who’s who in the market. But nobody’s perfect, and KLAS has had some rocks thrown its way. In the following interview, HCI Editor-in-Chief Anthony Guerra talks with KLAS President Kent Gale about all of the above, and more.

AG: That seems so counterproductive, for vendors to spend energy to game a report rather than improving products and services. They’re almost hiding from themselves the truth of the problems rather than fixing them.

KG: That is just the obvious black and white of it, and there are a number of vendors who may have started off with a marketing view of KLAS and later ended up using it as a way to get better. There are some vendors who sell strictly on price and commodity-level product, and they don’t care what the KLAS ratings are. In that case, even the providers don’t really care how the vendor scores, because they bought it for a particular purpose, low cost.

AG: So you work to manage any weaknesses in the reporting, where you could anticipate people trying to game the system, you keep an eye on it, you try and manage it. Is that the hardest part of doing what you do?

KG: Our biggest concern is making sure there is no bias, that the data is real. Yes, there’s a little gimmick to this, for example if the first time we talked to a vendor, we say, “Oh gee, we understand you have this product, how many customers do you have?” and the first thing they’re going to do is puff out their chest a little bit and say, ‘We have 240.’ Then a little while later we say, ‘By the way, we’d love to measure you, can you give us a client list,’ and all of a sudden you get a client list of 30. You say, ‘Wait a minute, you said you have 240. You must have given us a cherry-picked list of 30.’ Now, we have a way to manage this and it’s kind of interesting.

The other situation is if they give us a list of 30, while we’re on the phone the first thing we say is what other customers of XYZ Company do you know of, and right away a list of 30 becomes 90 and then 130. Then it is real easy to chase down the other people, and then you can compare the list given to you by the vendor with the data we get from others and see if there was cherry-picked list, and see if there is a difference between how happy those customers are versus the ones that are not on the list. So it’s kind of a fun game on our end, and it’s pretty easy to see the vendors that are honest and the ones that aren’t.

AG: It definitely seems, like every business, that what you do is something you are continually refining, working on, tweaking and improving.

KG: That’s true. We just had a vendor that’s very mad at us and they gave us a big list of things they didn’t like. On the list, let’s say they gave us 10 things, on the list we found three things that we didn’t like about ourselves, we didn’t even notice, something like the print on the front of a report is small, the parameters of the report needs to be bigger so people can tell what the competence level on this report is. We love those kinds of complaints, ‘Gee you guys are hiding this,’ well we didn’t realize, and we thought that print ought to be a lot bigger, that’s an important piece we haven’t highlighted.

So we get a lot of feedback that helps us become better, just from energized, typical vendors that are looking for flaws in what we’re doing.

AG: What do you think is the state of the relationship between providers and vendors today? I would couch that by saying; perhaps on one end of the spectrum you could say it’s an adversarial type relationship; on the other you could say it’s a real partnership. Do you see any trend that tells where things are today and where they might be going?

KG: I’ll throw this out from at least my perspective. I believe the schmoozing that used to go on 10 years ago is a lot less. It used to be that you partnered with a big vendor, you’re part of a vendor’s family based upon that and you’re playing golf with them, having the executives that are friends with the company, but the actual performance of the products was hard to compare. Now, in today’s society with all the electronic blogs and opportunities to share data, the vendors, to a large extent, can’t hide problems as easily, and so they have to face the brutal facts of how well a product is doing. I would say that the relationship is less adversarial today than it has been. Adversarial relationships become public quickly now and vendors can’t afford that. In the past, you couldn’t go on the Internet and spread the news. The Internet has really only been effective for the last seven or eight years.

AG: What do you think is the best mindset for a provider to go into a negotiation with, is it to realize that the entity opposite the table is my friend, wants to help or is not my friend? Which gets you into less trouble?

KG: Well I would suspect, at least this is my perspective, from looking at this through the eyes of a lot of providers, don’t buy from a vendor that doesn’t have your interest as part of the relationship. If it is a purely a financial deal and you don’t care, the service isn’t that important and you’re just buying a commodity, then it doesn’t matter. If this is something that you’re going to have to depend on for your success, you better go in as partners and not as adversarial players. The vendor will work much better with their partners than those that are adversaries, they’ll give everyone what they need to eliminate the screaming, but they won’t get any extra. The ones who get the extra are the ones who end up being business partners; they’ll be the ones who will get the extra help.

I’d add one other thing. The providers themselves have to have all the information up front, a buyer needs to understand what they’re going to get. We’re much better today, and KLAS plays one piece in that but there’s others, your magazine plays a role in sharing information. So they have a better opportunity to go in with their eyes open than they’ve ever had and, that being the case, they should negotiate a win-win. People who try to negotiate a win-lose rarely have things turn out well.

AG: Some see products getting commoditized and companies competing on service. Do you think that’s where the industry is going?

KG: Yeah I do, I believe that we go through commodity stages, if you would, there are lab systems that to a large extent are commodities. It is tough to differentiate a lab system by functionality and/or the service because it can run, run well, they’re fast and they do basically what the lab people need. Now what happens when genomics comes out? What happens when other capabilities occur? Then the lab systems will have either modules or replacements, and they will no longer be a commodity and we go through those stages. We’ve gone through the stages when the old patient accounting systems became commodities. Now those patient accounting systems no longer start at the registration desk, the patient actually registers from home, they walk into a kiosk; they can pay their bill online. Now we move from commodity to new revenue cycle management solutions and now that segment is no longer a commodity. So we go through stages where things are commodities but they move to a new stage, based upon a demand of what the buyers want.

AG: Do you see any evidence that vendors come out with more bells, whistles and other toys than the actual marketplace is ready to adopt?

KG: I think that’s a great point, and I think it happens all the time. Bells and whistles are not necessarily useful and can be used like they’re expected to be, and then, on the other hand, when they do hit a home run, wow it seems to hit the marketplace by storm and everybody jumps on it right away.

AG: Do you see a growing divide between haves and have nots among hospitals, where some are just completely awash with cash and millions of dollars for the executives and some just have nothing, struggling community hospitals. It’s probably especially true when it comes to healthcare IT adoption. Are you observing that?

KG: Yes, I would say that that’s very true. The problem in that environment is there probably is more of a commodity product. When you get in that environment you just have to be able to do the basics and there’s three or four players that are going to be able to do it, but it’s all price based and they all kind of look alike, if you would. The real problem you’re going to run into is, you and I are getting to a point where we’re pretty smart when go to the doctor and we’re wondering why they can’t make sure that I don’t get a medication that’s going to kill me. Not only that, but we’re wondering why they don’t remember that I told them before that I have this pain or ache or problem and they’re not combining that with what they’re doing to me today.

We’re moving to a knowledge-based artificial intelligence-type model where the doctors are going to have all kinds of electronic help because we’re going to demand it of them. We’re going to say, ‘I’m just tired of having problems. You guys need to get your act together and have this data at your fingertips so when I come in here, I get better care.’

AG: A question about KLAS and business issues in general. Where do you want to take your business going forward and how do you reconcile the temptation of getting into other business angles and venues and products versus staying with your core strength and just building on that?

KG: You know the typical American model, the capitalist model, is more is better, more money, go public as a company. We’ve had offers from many, many people to buy KLAS. KLAS wasn’t built so that we could have a lot of money. Yeah we have to have enough money so that we’re pleased with what’s going on. KLAS was built as a great place to work and a great tool in this industry. If we expand beyond what our normal, if you would, core competency is, then we’re not going to do a good job. So we have to be careful, stay within the range of what we can actually do well and we’re going to have fun doing it.

If the goal was to sell the company that would have happened years ago, and so most of us work here because we like what we get to do and, if we had to sell this and go do something else, it would be horrible. So our thought is, let’s just keep this going, this is a great place because we get to work with providers, vendors, investment firms, consultants all over world, and everyone we talk to has something of value we can gain. Almost every phone call conversation is a value to KLAS. What other company can you work for that gets to do that? I mean I just don’t know any.

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