2017 HIS Vendor ReviewPart 3: Mid-Range Vendors

© 2017 by H.I.S. Professionals, LLC, all rights reserved.

By Vince Ciotti & Elise AmesHIS Professionals, LLC

athenahealth Meditech eClinicalWorks

Mid-Range Vendors• After last week’s review of the top 4 vendors by revenue, we

now delve into the details of 3 vendors in the middle of the HIS market with about $.5B to $1.B in annual revenue each:

• These vendors generally target small to mid-size community hospitals from 25-bed CAH up to ≈300 beds in size, although it’s unlikely they’d ever turn down a larger AMC or IDN prospect!

• This episode covers their:- Annual revenue: for 2016 and previous

years as far back as we could find. - Product lines and client base by bed size- M & As and other recent developments- Candid assessment of future prospects

• Ranked # 5 in terms of 2016 revenue is athenahealth, a leading player in the physician practice market for decades before buying their way into the HIS space with the acquisition of RazorInsights in 2015. Their growth to over $1B is shown below:

• Razor had ≈20 CAH clients and ≈$2M in revenue.

• athena was founded way back in 1997 and these HI$-torical revenue #s show their impressive $ growth over the past decade:

#5:

athena Products & Packaging• Founder Jonathan Bush (yes, he’s related to them) must be

given credit for an ingenious pricing approach that has led to their enormous success in the physician practice market:– Instead of the large up-front capital fees for hardware and

software license fees that most vendors charge,– athena charges a % of cash collections; less up-front

capital, a very attractive proposition to small, cash-strapped physician practices.

• Other stats:- 87K physician practice clients- 14K ONC EMR attestations- 5,300 FTEs- 97 “athenaOne” HIS clients

claimed in 2017, mostly small CAH and under 100 beds

“athenaOne” HIS

• athena’s HIS system was originally created by RazorInsights:– Formed in 2010 by 3 ex-McKesson gurus, Razor’s “One” HIS was a

single DB, real-time “cloud” system with self-developed clinicals including a full EMR: CPOE, alerts, nursing documentation, etc.

– After athena acquired One in 2015, they quickly signed four pilot hospitals for a new version integrated with athena’s physician practice systems, both clinical (EMR) and practice management (RCM).

• Another major coup was signing Toledo Medical Center, a 250-bed AMC and pilot for a vastly up-scaled “One” HIS.

• To further this up-scaling, athena signed a deal with BIDMC for intellectual rights to their “WebOMR” for large facilities.

• So our prognosis (forgive the pun Prognosis Innovations!) for athena is very bullish in the small CAH market, but their cash collection model will be a tough sale to large AMCs & IDNs...

• Ranked # 6 in terms of 2016 revenue is Medical Information Technology, 47 years since their humble beginnings in 1969. They entered the HIS market in the mid ‘70s with an LIS, gradually expanded to a full HIS in the ‘80s. Revenue last year was $462M.

• Notice the two drops in their impressive revenue growth over 3 decades: post Y2K and then the past four years:

#6:

• Actually many HIS vendors experienced the same dips due to:– Y2K – after the mad buying rush to replace “legacy” system pre-2000 for

the date change crisis, hospitals then stopped buying for several years.– MU - ARRA stimulus program did the same thing to a number of small &

mid-sized vendors, stirring huge sales in 2009 to 2012, then far less after:

Two Meditech Revenue Dips

Y2K

MU

• Meditech actually has 3 distinct HIS products & client bases:– Magic – first developed in the 1970s as Meditech’s version of

MUMPS, there were over 700 hospitals using it during it’s heyday (aka “MIIS”), probably down to ≈600 today...

– “Client/Server” - the quotes are from their contract, as it’s merely a Windows front-end to MAGIC – a vastly-improved GUI, but hardly a true C/S like McKesson’s Paragon. C/S sold very well during the 90s, with ≈500 clients, since dropping.

– Release 6.x – aka Focus and MAT (Meditech Advanced Technology), this is the latest & greatest iteration product.

Three Meditechs

• Still a proprietary data base, but far more modern than Magic or C/S, it is more of an “Append” data base than B-trieve like the older technologies, and easily the most feature-rich, with ≈400 sites & growing.

• If Meditech were publically held, we’d recommend the stock:– They should do well among the mid-sized Siemens clients on

Invision and Medseries4, as well as the many Healthland clients on Classic, Centriq & AHN.

Meditech Prospects

- Plus they have about 1,000 clients currently on Magic & C/S to sell Release 6 to, with nary an RFP…

• Another recent major development that should help sales:– They now offer an integrated physician system within Release

6 with Practice Management (Reg, Sched, & BL) and an EHR.– With many pilots live and scores of sales, this should help

them compete with Epic, Allscripts, athenahealth, eCW, etc.– Recent large wins include Appalachian Health (KY), Citrus

Valley (CA), Deborah Heart (NJ) and Mount Nittany (PA).

• Another new entrant into the HIS market is physician practice giant eClinicalWorks, with $437M in annual revenue in 2016. Founded in 1999 in Westborough, Mass., eCW targeted small to mid-size practices of under 50 MDs, on their cloud-based “10e.”

• We added them to our list this year after they announced their “10i” HIS, fully integrated with their "10e” MD system.

#7:

• eCW’s “10i” pilot is Tideland Health in SC, a 300-bed IDN with 3 hospitals and 40 clinics, scheduled to go live in early 2018, along with a dozen other pilot hospitals.

- They also claim 60 hospitals in India use their system, but with quite a different environment.

- They have a huge footprint with MDs per this graph showing their lead in the “independent” physician practice market, where they claim ≈15K clients.

- If they deliver 10i as promised, they could become a major competitor in the HIS market…

eClinicalWorks

HIS-tory of “Crossovers” • What can we learn from the HIS-tory of other “crossover”

vendors who tried to jump from MD practices to HIS systems?– IDX was the leader in physician practices back in the ‘90s,

and acquired PHAMIS, a pioneering EMR, in 1997. Re-named as CareCast, and then Centricity, IDX sold well and then was acquired by GE in 2005. GE could not compete well in the HIS market, with only≈10 clients left today.

– Allscripts was also a major physician practice giant, acquiring Eclipsys’s “Sunrise” HIS/EMR in 2011 and selling reasonably well to hospitals since, with ≈100 HIS clients.

– NextGen was, and still is, a leader in the MD practice niche, acquiring Opus’ EMR and Sphere’s financials for their HIS entry. Tried hard to sell to mainly small hospitals but with few sales, selling to QuadraMed just last year.

• Which of these paths will athena & eCW take? Stay tuned…

Next Week• Our final episode next week covers the remaining four HIS

vendors, with “only” $100M to $250M in annual revenue:– Their client bases consists mostly of small, under 100 bed

community hospitals, including CAH (Critical Access Hospitals), of which there are over 1,000 in the US: • CPSI (Evident) – CAH leader before acquiring Healthland• NTT Data (Keane) – now dwarfed by $3B Dell acquisition• Harris Healthcare (QuadraMed) – with many acquisitions• Medhost (HMS) – EDIS leader with many chain HIS clients

– Following that episode, we’ll review MD practice vendors.

• With the HIS industry being so complex, we must have screwed something up, so if you’d like, have your attorneys contact: - vciotti@hispros.com eames

@hispros.com 505.466.4958

413.329.6925