One-on-One With Allscripts CEO Glen Tullman, Part I
As one of the main vendors in the ambulatory EHR space, Allscripts has been getting a lot of calls since HITECH moved the market. But in a change from the past, those calls are not only coming from interested physicians, but from hospital CIOs who want to underwrite licenses for both owned and independent practices. As the vendor’s deal with North Shore Long Island Jewish attests, the sale of ambulatory EHRs is, more and more, moving through the hospital CIO office. To learn more about how HITECH is effecting the sale of outpatient EHRs, HCI Editor-in-Chief Anthony Guerra recently talked with Allscripts CEO Glen Tullman about where he sees the market going.
GUERRA: What effect has HITECH had on your business? Are you seeing a lot of buying or are people just investigating?
TULLMAN: Well, I think we’re seeing both. This has gone through stages. The first stage was a steady state for the industry – this was a nice growing industry before ARRA was discussed and then, right before the legislation was signed, we actually saw a bit of a blip, and that blip came from some of the legislation, including the Snowe-Stabenow Bill, which basically said we’re going to give every physician $15,000 who hasn’t already bought an electronic health record.
Now, that would have been very bad if you already bought one. It would have been very bad for the innovators, and finally, it would have been bad for the taxpayers because it didn’t say anything about using the electronic health record, it said we’re going to give you that money if you buy it. So fortunately, that was changed and the legislation was passed with something called “meaningful use” and it said, “Listen, we don’t care if you already have one. In fact, if you already have one, it’s an advantage. So we’re going to reward the early innovators, as long as you use it and deliver results for the government, for the taxpayers, for the patients.”
And right after that legislation was passed, we saw an immediate increase in sales and interest. And so that was the first blip, if you will. And there, what you had was people were very interested, number one, and we started to see buying behavior increase. That was immediate following this.
Now, there is a group – there’s no question about it – that’s saying, “I want to wait until we see meaningful use finalized.” That will be another step up in the market and then, the next step will be when the first payments go out, because when the first doctor on the block gets a check for $18,000, every other doctor on the block is going to say, “This is real. I have to get going.”
So, we’ve see this move nicely in stages, and that’s very good for Allscripts because it’s given us the time to adequately prepare, hire, make sure the software is ready, focus on our implementation cycles. But let’s be clear – and I think this is evidenced by the strong bookings numbers that we are seeing – there is no delay, there is no pause, people are buying today, and they’re buying at an accelerated rate. In fact, if you look at the North Shore Long Island Jewish deal – that’s the largest deal probably in the country that was done – their interest in rolling out EHRs to over 8,000 physicians and investing their own money in addition to the stimulus demonstrates that the time is now.
GUERRA: Couple of things there. I’m wondering if you think there’s a difference between the buying practices in the ambulatory market versus the acute care market. I say that because KLAS came out with a report a month or two ago that said among the acute vendors, they had seen their weakest sales in years. What’s interesting is that the Long Island Jewish deal is not a purchase by ambulatory practices; that’s an acute care organization offering to subsidize ambulatory licenses.
TULLMAN: Well, there’s no question that those selling to large hospitals have had challenges. These deals – by the usual suspect, the Cerners of the world, the McKessons of the world – have had challenges, and that is because they cost $25, $50, $100 million dollars, and many of them require outside funding sources, whether it be bank involvement or bond issuances or the like. We know that, given the economy, all of that has largely stopped. So it’s completely understandable that part of the business is slowing down, the acute part of the business.
What has accelerated is the ambulatory piece of the business. (1), it’s less complicated, (2) it’s less expensive, and (3), especially with Stark, what you’re starting to see is hospitals are becoming the organizing force in the healthcare information technology sector. That’s because they have the capabilities to manage the technology as opposed to a one or two doc practice who doesn’t really want to deal with all the technology. That doctor just wants to run their practice. And so, clearly, there’s been a major shift in focus and a major shift in spending that’s moved it to ambulatory. That said, there are pieces of ARRA that relate directly to hospitals, and so we’ll see CPOE in hospitals continue to be focused on.
GUERRA: Some CIOs are interested in essentially becoming a vendor or a consultant of services, but some are not. We see both sides. What’s your take?
TULLMAN: Well, I think (1), it depends on your strategy, but we know that most hospitals live off referrals from their surrounding non-affiliated physicians. Now, if a hospital gets 100 percent of its referrals from its employed physicians, or (2) if it has a monopoly in the area it exists, those strategies might be different. But for most hospitals who are in a competitive environment, they would like to be much more closely tied to their non-affiliated physicians; they’d like to be easier to do business with.
So from that perspective, those hospitals are saying, “Hey, this is a great way to be easy to do business with; to allow hospitals who refer to us to look at the progress of their patient electronically, to check on their patients similarly if you show up in an emergency room; to make sure that all the information from their physician is available real time, which is a patient safety issue.” So from all of those perspectives, now we see that happening.
GUERRA: What do IPAs want from hospitals? How do CIOs balance the practices desire for integration with their desire to maintain independence?
TULLMAN: Well, I think you hit on a very important point. That is the trade off. Now, all these systems should allow – and I know all of the Allscripts systems allow – physicians to do a referral to any hospital. It is electronically enabled, and more and more of these systems are interoperable. So for example, the Allscripts system will be interoperable with the Eclipsys system, the Allscripts system is interoperable with the Cerner system in many locations. So we are seeing healthcare get connected.
If we look at the North Shore Long Island Jewish contract in particular, they said, “Number one, we will pay 85 percent of the cost of your system, and then you get to keep the federal stimulus money. But we’ll pay 85 percent of the cost if you follow our tier guides. If not, we’ll pay 50 percent of the cost.”
We’re also seeing many programs that say to physicians, “You can either use a system that the hospital hosts, or the hospital will help to subsidize a system that you buy – a client/server system that you maintain at your own practice.” The only thing generally being required is that these systems have to be able to submit data and communicate; because that’s where a lot of the value is added.
Many of the smarter or more sophisticated programs take into account that some physicians are going to say, “Listen, I don’t want the hospital to either have my information or to control my information system.”
But some physicians say, “I don’t care. I’m happy to have the hospital host my system or provide it; especially if they’re going to pay for it.” Others say, “I want control of my information. I’m going to add separate servers, and either I will pay for it or they can pay for it; but I have to have full control of it.” I think the more sophisticated programs take account of both groups of physicians.
GUERRA: Long Island Jewish is only offering the Allscripts EHR; they’re not giving a choice.
TULLMAN: That’s correct.
GUERRA: We see different ways of structuring that. Some people offer one, some people offer two or three, and some leave it more open-ended. Of course, there’s integration issues that come with providing a wide selection, but I suppose that’s the trade off.
TULLMAN: Yes, that’s exactly it. I mean, what they have said is they looked around and wanted to make sure the system they provided had the capabilities to do care management. They want to be able to give their physicians the latest care management, the latest best practices. Many of the smaller vendor systems out there, or the less expensive systems, don’t have those capabilities.
So what they said is, “We are happy to invest our own money. Now you can keep the government money, but we’re going to put our own money in so we have to know that the system we’re putting in (1) can communicate, (2) is going to be around long term.” They wanted a safe choice.
Michael Dowling (North Shore LIJ CEO), I love the guy. Why? Because when asked by the New York Times, “How do you know that $40,000 is the right amount? What if you can give them only $10,000?”
He said, “You know, we think it’s enough money to get them to change their behavior, but I don’t know if it’s exactly the right amount. What I do know is we have to improve patient care, and we’re willing to invest in it.”
To me, that’s exactly the kind of statement that a CEO of a health system ought to make. He should say, “We’re willing to invest these dollars to improve care.” He’s saying. “If I give my physicians better information on diseases, on clinical trials, on how much things cost; I trust they’re going to make good decisions. I actually trust them.” What a novel concept.
GUERRA: I can’t imagine there are many systems that have that kind of financial ability to do what North Shore LIJ has done.
TULLMAN: Does every system need to give that amount of funding to every physician? Well you’ve seen North Shore did, for example, they’re giving 85 percent to certain physicians, 50 percent to others. What we would suggest is that every system needs to figure out what their objectives are, what they’re targeting, what physician groups they want to work with, and what they need to do. We see systems making enormous investments in all kinds of different IT initiatives but this is, in our view, the most important because this connects them to their customer and to their patients. Even if a system doesn’t have a lot of money, they do have the federal funding, and that is driving much of the interest here. There’s no question about it.
What I don’t think makes sense is you’ve heard there are a number of health systems that have been trumpeted, even by the president, that aren’t representative of the rest of the market. They’ve spent enormous amounts of money. For example, Kaiser, they own all the physicians, they own the managed-care company, and they’re a virtual monopoly where they operate. So the fact that they spend $1 billion is not representative of healthcare. But North Shore is in a competitive market, and the amounts they’re spending for the size of the system are not that significant.
