In every industry, there are organizations so pervasive they constitute bellwethers for the entire market segment. In healthcare IT, that company is Meditech. With over 2,200 customers and almost $400 million in software revenues last year, the Westwood, Mass.-based organization’s opinions on national policy — especially the HITECH Act’s Meaningful Use NPRM — should be taken very seriously by D.C.’s policy wonks. Offering those opinions to healthsystemCIO.com editor Anthony Guerra this exclusive interview is President and COO Howard Messing. In the following discussion, Messing — who was recently promoted to CEO subject to a perfunctory confirmation vote — offers his thoughts on the aforementioned HITECH Act, meeting customer demands for the latest software and much more.
We know from past history that if we grow too fast the quality of what we do will suffer, and we’ll start hearing some complaints from our customers, so we really don’t let ourselves grow too fast. And the way we control that is simply by not promising to deliver things that we don’t think we can deliver …
I don’t think that, at least within the acute care market space, the use of information systems was as backwards as some people think, and as much in need of stimulation as, let’s say, the ambulatory and doctors’ office markets.
If you wanted me to give my biggest criticism, it’s that it is much too short of a timeframe. That’s what caused this big rush to buy systems, and I think it’s doable, but it would have been a lot better if this could be spread out over a three- or four-year time period rather than jumping into this so quickly.
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GUERRA: I thought a great place to start would be to talk about the state of the market. Obviously, HITECH passed with ARRA in February or January last year, but so many of the specifics of the act had to be worked out after its signing. A lot of people say the market has just taken awhile to heat up as things fall into place and become clearer. So how would you describe the effect you’ve seen on the market, and on your company, from the time the act was passed until today?
MESSING: First of all, thanks for this interview. I’m very pleased to be here. In terms of the market, the word I would use to describe it is “interesting.” In the wake of the financial crisis at the end of 2008 and the passage of the stimulus bill, we saw a period where people were confused and concerned and, frankly, nobody was doing anything to update their systems. So for the first half of 2009, demand was very, very low and many of these people were, of course, very skeptical about where things were going and the stimulus bill in general. And then, starting last summer, things turned around and the stimulus bill really has stimulated interest in this field. So things have taken off.
We had our largest booking quarter ever by quite a margin last quarter, and we’re expecting this quarter to be very large as well. I don’t want to use the word “blip,” but we don’t think this will continue forever. We’re seeing the result of those hospitals that are very interested in stepping up to the plate to get their ARRA money, but feel that they need to have either a change in systems or an upgrade in systems to accomplish that, or at least they want to move forward. Even if they could accomplish it with their existing systems, they don’t see the point in doing that if they had planned to upgrade anyway. So there’s certainly a lot of activity, and we’re excited about that.
GUERRA: I looked through your site quite thoroughly today and, first of all, for the readers, anybody who wants to see something just fascinating can look through the corporate timeline information you have on your site and some of those great old pictures. It’s very well put together, and it’s a great story.
MESSING: My kids don’t believe the hair I’ve got in some of those old pictures.
GUERRA: They’re great pictures with the machines underwater in Phoenix, so it’s definitely worth looking at for any enthusiast who follows this industry. One of the things that I noticed in there was a quote from Neil, “We will control our growth so that we effectively serve our existing customers.” Has the government-produced demand made that promise hard to keep?
MESSING: Well, I do think for the industry as a whole, yes, it’s going to be very difficult to handle, and it certainly is something that we’re watching. It’s one of those problems that I classify as a happy problem to have, but it is concerning. In our case, certainly, Neil’s philosophy is one that I continue to hold. We know from past history that if we grow too fast the quality of what we do will suffer, and we’ll start hearing some complaints from our customers, so we really don’t let ourselves grow too fast. And the way we control that is simply by not promising to deliver things that we don’t think we can deliver, by pushing out delivery dates, and we have continued to do that.
Luckily, because of that drop in demand in the beginning of last year, we entered this period with a lot of spare capacity, and we also have been hiring, but we know it takes anywhere from 6 -12 months for a new hire to have a really good impact, and frankly probably the better part of two years, before they’re fully up to speed. So what we have done, again, is really just control our implementation dates.
One of the things that we do here is before a contract is sent out to a prospective customer, or for an upgrade to an existing customer, the implementation group has to review it, and they have to sign off that they can meet the dates in that contract. It’s sometimes very frustrating for our salespeople, but we find it’s the best thing that we can do, and if we’re going to lose business because we can’t meet a particular customer’s need for dates, so be it. It’s not growth at any cost. I think one of the luxuries we have, not being a publicly traded company, is that we can take a much longer term view of ourselves.
So yes, it’s a challenge, and there’s a lot of intricate timing and scheduling going on, and there’s certainly salespeople and customers constantly talking with me and our implementation folks about what we can do, but we just simply won’t let ourselves grow any faster than we can while keeping the quality up.
GUERRA: I’ve heard wait times for new customers and upgrades can be as long as a year or 18 months. First off, is that true, and secondly, it sounds like you’re saying, “Listen, this is just the way it’s got to be. We’re not going to promise anything we can’t deliver. We’re going to take care of people as best we can within a realistic timeframe.” Am I getting that right?
MESSING: Yes, you’re getting that right, and it’s true, it is for upgrades as well as for new customers, particularly upgrades to our newest software. It’s a fairly large effort both on the customers’ side and our side to make that happen and, again, we don’t want to rush it.
GUERRA: Talk about that effort on both sides. Your mission statement contains the term “to provide software.” I know there’s a robust independent consulting community outside of your company that supports your products, but where does Meditech end and that community begin? What do you do and what don’t you do?
MESSING: First of all, we don’t just provide software. We also do provide the services surrounding that software that are needed to install it and implement it and maintain it. So certainly, there are a fairly large number of customers who do buy from us, install the system and work with it and don’t hire consultants to make that happen.
On the other hand, there are also many customers who find the need to do more than a simple implementation, and they generally hire consultants to make that happen or to fill in some of the roles that they might otherwise do internally. You know, one of the luxuries that Meditech has when we install a system is that all we’re doing is installing the system. Our customers have to run a hospital as well as get ready for the new system. So sometimes they need help just in filling those roles.
Basically, we come in, we tell them what our software does, we look at their current procedures and see how that fits in with what we’re doing, but if the hospital really wants to reengineer their procedures, that’s not something we tend to get into and, in that case, we certainly ask them to get a consultant who will work with them. As you said, there’s a big body of people out there who specialized in Meditech, many of them know us very well, so it’s usually fairly easy to get a qualified consultant to help.
GUERRA: I’ve also heard that those resources are wearing thin or becoming scarce in the industry, those independent consultants.
MESSING: Well, if that’s the case, I’m not really hearing it. I talk with some of the consultants on a fairly regular basis, and none of them has really reported that to me. I don’t know if there’s some specific areas where that’s happening. But I assume that the consultants are experiencing somewhat the same issues as we are. The business is booming for them as well, and the better consultants are making sure not to take business they can’t handle.
GUERRA: Right. I read that you’re bringing on 300 employees this year.
MESSING: That’s our plan, yes.
GUERRA: And how does that break down in terms of roles?
MESSING: Just in round numbers, and I’m not sure I can give you specifics, but in round numbers, I’d say that the biggest bulk of those are going to our implementation people, but there’s a significant number that are also going to development and to our maintenance and upgrade staff. I don’t want to say it’s a third, a third, and a third, it’s not that simple, but it’s not so far off from that.
GUERRA: Let’s talk a little bit about the Meaningful Use NPRM. What are your thoughts on it?
MESSING: I assume I’m like a lot of people who think there’s some very good things in it and some disappointments. Overall, I was very much a skeptic before this whole process began, and I’ve actually become convinced that it is going to accelerate the market. So in general, I’m very supportive of what has been done, although one is always skeptical of — well, I shouldn’t say everyone’s skeptical of government, although I am generally skeptical of government involvement. This is a case where perhaps it was timely, but I might have done it a little bit differently.
Meaningful Use, all by itself, is an interesting phrase and, certainly, that’s always been our goal. On the one hand, I don’t think that, at least within the acute care market space, the use of information systems was as backwards as some people think, and as much in need of stimulation as, let’s say, the ambulatory and doctors’ office markets. On the other hand, certainly, it had been a battle to do things like get doctors to accept systems and, certainly, that has changed and will continue to change as these regulations start to really come into effect.
GUERRA: Do you agree with CHIME and the AHA who says it’s too much too fast?
MESSING: Yes, I do. If you wanted me to give my biggest criticism, it’s that it is much too short of a timeframe. That’s what caused this big rush to buy systems, and I think it’s doable, but it would have been a lot better if this could be spread out over a three- or four-year time period rather than jumping into this so quickly. Having said that, many of our customers were already prepared to meet this, we’re on a good track to do that, should be able to pass it very easily and the others, with some effort, should also be able to make the date. But any kind of a delay would be welcome.
GUERRA: Are your salespeople telling you that potential customers want the systems put in to meet the deadlines, which may not be realistic?
MESSING: Some of that’s happening, but not much. Most of the customers and prospective customers are pretty sophisticated and know what’s going on but, yes, there’s a certain amount of education that we have to do. It is our responsibility. Certainly, we have a large number of customers who are asking us what these regulations mean, and we’ve put some people on the job of making sure not only that we understand it, but figuring out ways to communicate it to customers so that they don’t sign up for something they can’t do, or they at least know what they’re getting involved with. So that is happening. Certainly, we’re making every effort to make sure nobody is misled.
GUERRA: I would imagine there’s a temptation for every person selling products and services in this type of situation to come up with a fast-track plan to catch some more business. Do you think there’s some of that going on in the industry, and do you think there’s some danger around putting in these systems too quickly?
MESSING: Some of it is probably going on in the industry. To be honest, I don’t spend a whole lot of time worrying about how the other companies install their systems. I don’t pay too much attention. Certainly, it has been discussed here. We’ve discussed a number of things that we perhaps could do to meet the needs of some people to accelerate the process, and we basically decided that there’s no way we can do it more quickly and still maintain the quality, and even if we could get a customer to qualify for the initial funds (using a fast-track approach), it would create problems moving forward and ultimately they would not be interested, or would not be happy, with what they had done.
For example, there’s a lot of setup that has to do with entering tables and dictionaries to reflect your operation and what you’re trying to achieve. One thing that could be done is we could supply them with a set of those that was all canned and done before they actually had to do any work themselves. That would accelerate the process by several months. But the problem with that is it wouldn’t reflect their operation well, and they’d be struggling with that for a good long time afterwards. So we’ve decided not to do it and to discourage any of our customers from trying to take a fast-track approach.
GUERRA: Is it hard to do things like that which you know are right in the long run, but cost you easy money in the short term?
MESSING: Yes, it’s hard but again, not being a publicly traded company, I don’t have the same kinds of pressures to maximize my quarterly results and not worry as much about the future. I have a very supportive board that understands we’re in this for the long haul and to achieve long haul gains for us and our customers. So yes, it is sometimes hard, particularly when you’re looking at a salesman who is going to lose a sale and you don’t want to disappoint them, but we have to think about what’s right for the long term.
GUERRA: So they get the word back from the implementation group that the deal has been rejected. They must get frustrated.
MESSING: Right. And then they come to me and they see if there’s anything I can do, and sometimes there is. We’re like any other organization. Our implementation group may keep back one or two slots because they know I’m going to ask them, but sometimes I can’t help them either.
GUERRA: It’s like a table at a really nice restaurant — the maitre d’ is always saving one.
MESSING: That’s true. Well, giving me a $20 tip doesn’t work. (laughing)