Valuations for Health IT Companies

I know that Mark simply cannot resist a good debate about anything to do with investments, venture capitalists, or merger and  acquisitions.  So, I immediately thought of Mark when I came across a report on the acquisition of HealthGrades by Vestar Capital Partners. HealthGrades is a publicly traded healthcare ratings organization.

According the report, Vestar has offered a 32% premium over HealthGrade’s 30-day average closing stock price.   Purchase price is $294M.  HealthGrade’s revenue for 2009 was $53M, with a reported net income of $7.1.   For the most recent quarter, HealthGrade’s revenue was $15.6M while their net income was $3.2M.

It appears that Vestar is prepared to pay approximately 5.5X last year’s revenue.  Mark, what do you think of the valuation?  Do you think that we’ll see similar valuations for other health IT vendors?

Mike

Obama Demonstrates eHealth Leadership

The Standish Group is a US-based company that  examines the why IT project fail across a variety of industries.  One of the key success factors that Standish has consistently identified in its annual reports is “Executive Management Support”.  I was reminded of this success factor when I came across a video of US President Barack Obama demonstrating how to use “HealthCare.gov”, a website that shows healthcare coverage options under the new US healthcare reform legislation.

President Obama has consistently shown his belief in the power of IT to improve a wide variety of government services, including healthcare.  I contend that the high level of interest and investment in healthcare IT in the US is a direct result of the president’s support.  Many of the presentations I have heard from high ranking US officials such as the Secretary of Health and Human Services and the National Coordinator for Health Information Technology refer to the president’s interest in and commitment to health IT.  I cannot imagine a better example of “Executive Management Support”.

Mike

Health IT Garners Investment Interest

My fellow blogger Mark Douglas used to work with an investment bank and has, over the past few years,  shared many interesting (and sometimes shocking) insights on how investors evaluate companies.  Now, whenever I see an article related to investment in health IT firms, I wonder how Mark interprets the article.

According to an article in Information Week, investors are showing increased interest in medical software and information services companies with the level of investment increasing nearly 100% year over year.  Of the $157M invested by venture capital firms:

• $77M for clinical decision support
• $37M for health administration software
• $15M for drug discovery and bioinformatics
• $13M for medical imaging

According to Jessica Canning, global research director for Dow Jones VentureSource, “the important part is that investors are really focusing on conveying more information about health care to patients and within the hospital organization itself.”

So, Mark, what is your take on the increased investment in healthcare IT?

Mike

Forced Consensus

Many years ago I worked for a small systems integrator.  One year the company president decided to bring in an outside facilitator for our annual business planning retreat.  The facilitator knew the president quite well and was very adept at reading body language.  After a rather heated debate that resulted in the management team conceding to the will of the president, the facilitator went around the room asking people why they agreed with the president’s position.  After much poking and prodding,  the facilitator got several people to admit that they frequently “caved in” to the president’s will. Needless to say, the president was quite upset and claimed that he worked hard to seek consensus.  One of the management team who was rather outspoken shot back that what he got was a “forced consensus”.

I was reminded of this story while reading an RFP from an Ontario hospital for a “full review of the work environment at the campus in its relationship with the hospital administration”.  According to the RFP (NOTE: I have opted to remove the name of the hospital to avoid further inflaming any discord):

“[Hospital X] formed in 1998 by “directive” of the Ontario Health Services Restructuring Commission and included the amalgamation of [X] previously independent hospitals ….. As a mandated amalgamation, over its 12 years [Hospital X] has experienced variable levels of work environment barriers from internal and external stakeholders and communities associated with the legacy hospitals to support the hospital network. Efforts to change, make improvements, standardize care and implement best practices have, at times, been met with considerable resistance …. Despite some positive steps and improvements, this atmosphere remains between the campus physicians, staff and community, and the LHC management team …. The purpose of this review is to identify the root cause(s) and contributing factors of the work environment and a path forward to resolve these challenges.”

This situation clearly shows how people who have not embraced a forced change can subvert and sabotage any change initiative.  Even when efforts are made to build consensus, the result can be a “forced consensus” in which people appear to agree to a particular course of action because they feel they have no other choice.   As we attempt to digitize our healthcare system while simultaneously trying to contain costs, I think it is more important than ever to be as open and transparent as possible with all stakeholders and to engage as many people as possible in developing strategies, action plans, etc.

Mike

Open Process Drives Changes to Meaningful Use Criteria

According to a recent article in Health Data Management:

“The final meaningful use rule has many changes and clarifications in its 864 pages, testimony to the degree to which federal officials listened to stakeholders following publication of the proposed rule”.

According to another article that I read last week (I don’t have a reference handy), there were on the order of 2,000 submissions offering feedback and making suggestions for changes.  As I have discussed in previous blog posts, the Office of the National Coordinator (ONC) worked hard to engage stakeholders and to make the process by which the proposed rule was discussed as transparent as possible.  It appears that this approach was successful but I’d be interested in hearing what others think.  What aspects of the ONC approach worked best?  Are there lessons learned for other jurisdictions?

Mike

Spending priorities

I have been spending the last few days thinking about the relatively meager amount of money the Feds, and to some extent the Provinces, have historically allocated to eHealth technologies. I’ve always wondered why these governments, who say that runaway healthcare spending is one of their top priorities, spend on average between 1%-3% of operating healthcare budgets on eHealth. This spending level doesn’t seem to change much regardless of the flavor of the political parties in power.

When a federal government is willing to spend $16B on fighter jets, but only around $2B on Infoway I have to start wondering about priorities. Is eHealth just to hard a concept to sell to the Canadian public, or is it something else?

Mark

Patient Mentors – A Novel Approach to Patient Engagement

My friend and colleague Dr. Kevin Leonard has, for the past few years, been passionately advocating greater patient involvement in their care along with greater electronic access to their personal health information.   While Kevin’s Patient Destiny initiative seemingly focuses on what he calls “One Patient, One Record”, I think that the essence of Patient Destiny has to do with transforming our healthcare system through greater patient engagement in all aspects of healthcare delivery, from policy through to medical practice.

Patient engagement can take many forms.  This morning, I read about what seems to a novel approach to patient engagement.  The Health Mentors Program at Dalhousie University in Halifax, Nova Scotia, provides an opportunity for approximately 550 first-year students from a variety of healthcare programs to gain a better understanding of the daily challenges of living with a chronic condition from adult volunteers.   Students enrolled in the program meet with the patient mentors four times per year and hear first hand from these mentors about their experiences navigating the health system.

Dr. Laurie Collins, faculty director for the Health Mentors Program, notes that the volunteers are eager to get involved:

“People with chronic illness don’t really get the care they’d like – in many cases they’re frustrated and dissatisfied … They really feel they’re contributing to the development of a better health care system.”

Mike

How to Promote Digitized Healthcare

Yesterday I watched a media conference at which the US Dept of Health and Human Services (HHS) announced the final rules associated with “meaningful use”.  Each of the five speakers used personal stories to illustrate the importance of electronic health records, starting with the HHS Secretary who related her experiences taking a friend to the emergency department and ending with an impassioned plea for patient access to their personal health information by a widow who literally fought with the healthcare system to get care for her dying husband.  Three of the presenters were medical doctors who are now in positions of significant authority and had experienced the transition from paper to electronic records firsthand.

What struck me most about the media conference was that while each presenter’s arguments stood on their own merit, they all fit together in way that the whole was greater than the sum of the parts.   There were clearly common themes that tied the presentations together, both in terms of the words that they used and the techniques they used to convey their message.  One of the best collection of related presentations / speeches that I have witnessed in quite some time.

I encourage anyone who in some way or other is trying to convince others about the value of digitizing our healthcare system to watch the HHS presentation.   It offers a good example of how the value of electronic records can be explained in simple terms and will leave you wondering how anyone might consider not moving forward aggressively to digitize our healthcare system.

Mike

Need for Physician IT Leaders

I am listening live to a media conference at which the US Dept of Health and Human Services is announcing the final “meaningful use” standards.   Two of the leaders speaking at this conference are  the new director of the Centers for Medicare & Medicaid Services (CMS), Dr. Donald Berwick, and the National Coordinator for Health Information Technology, Dr. David Blumenthal.  Both men are medical doctors and both spoke to the benefits of electronic health records based on their own personal experience. Joining them was the US surgeon general, Dr. Regina Benjamin, who also spoke to her experience using electronic health records.

As I have argued in past blog posts, I think that we need physicians in very senior leadership positions in Canadian eHealth organizations such as Infoway and eHealth Ontario.  As Dr. Blumenthal demonstrated at the eHealth 2010 conference in Vancouver and again today at the HHS media conference, a physician who has made the transition from paper to electronic systems has tremendous credibility when they speak about the benefits and challenges associated with this transition.    I urge Canadian eHealth organizations to listen to a recording of today’s HHS media conference to hear for themselves how the compelling personal anecdotes of three high profile US healthcare leaders were used to highlight the benefits of electronic health records.

Mike

UPDATE:  You can catch a replay of the media conference here.

Public Awareness – A Timely Investment

After reading my blog post on Canada Health Infoway’s planned public advocacy campaign, Michael Power, a respected colleague and cherished friend tweeted a comment that I felt I could not adequately address in a 140 character reply.  In what I now fear might have a knee-jerk reaction to defend my opinion, I challenged Michael, a lawyer by profession (which means that he argues for a living), to a public debate conducted on our respective blogs.  As my mother always warned me, be careful for what you wish for, you might actually get it!

In his blog post response, my esteemed colleague attempts portrays spending on a public awareness campaign as a waste of money.  He cleverly attempts to put words in the Auditor General’s mouth by musing whether the she would “consider such a campaign (with television advertising) a good ‘value-for-money’ exercise” and argues that “benefits should be self-evident because hundreds of millions have already been expended over the last decade”.

In this era of financial restraint and a recent history of eHealth scandals, Mr. Power’s arguments are, on the surface, quite compelling.  Indeed, my initial reaction to Infoway’s plans was very similar Mr. Power’s reaction.  However, upon further reflection, I have come to the conclusion that time is right for the type of public awareness campaign that Infoway envisions.  If we are going to spend limited public dollars on digitizing our healthcare system, we (those of us advocating continued investment in healthcare IT) owe it to the public to explain why we feel such an investment makes sense and offer a compelling vision for how a digitized healthcare system will improve healthcare outcomes.

According to the federal Auditor General’s report that Michael Power referred to  in his blog post, Canada Health Infoway was created to “lead the national development of electronic health record“, with the stated goal to “ensure that, by 2010, every province and territory and the populations they serve will benefit from new health information systems that will help transform their health care system“.

As a national leader, Infoway should ( a word that my wife frequently reminds me to use with great care) take a leading role in raising awareness among the main beneficiaries of a digitized healthcare system – the citizens who ultimately pay for and make use of the services that our healthcare system provides.  While Mr. Powers contends that “public reports” be restricted to Infoway’s web site and annual reports, I assert that the Auditor General’s recommendation that “the Corporation should further explain in its public reports what is meant by having an electronic health record available to authorized health care professionals” can be interpreted in a broader sense to include a variety of communication tools including advertising and social media. Public reporting need not be limited to an annual report that few people will read.

A recent report by the eHealth Initiative -  an independent, non-profit organization whose mission is to drive improvement in the quality, safety, and efficiency of healthcare through information and information technology – states that two-thirds of stakeholders reviewing the progress in health information technology and health information exchange initiatives in the U.S. believe that “outreach to consumers about the value of EHRs and HIE is not effective“. While similar data is not available for the Canadian market, I believe that the situation is likely the same in Canada. Doing more of the same, a course of action that Mr. Power seems to recommend, will not achieve different results and is, in my view, an ineffective use of limited resources.

Canada Health Infoway’s public awareness campaign is designed to explain the benefits of a digitized healthcare system in terms that everyone can understand through media to which most people are exposed. Sorry, Michael, but I don’t think that many people are going to go out of their way to visit the Infoway web site or take the time to read the Infoway annual report.  More importantly, perhaps, I don’t think that we should expect them to do so.

Without using terms like “electronic health record” or “drug information system” or “Picture Archiving and Communication Systems”, the Infoway public awareness campaign uses simple vignettes that powerfully convey how a digitized healthcare system will make personal health information readily available when and where it is needed.  Equally important, this campaign dramatically portrays the limitations of the current paper-based systems and the corresponding impact on patient safety that these limitations impose.

Educating the public on the benefits of a digitized healthcare systems is, in my view, clearly part Infoway’s mandate and is one mechanism that Infoway can use to drive greater interest in and significant adoption of various electronic healthcare systems.  Unlike Mr. Power, I do not believe that the benefits are “self-evident”.  How can the public be expected to understand what many of never seen before?  Only when the public believes that timely and complete information is an integral part of the diagnosis and treatment process will they support (and perhaps even demand) continued investment in healthcare IT.

The Infoway public awareness campaign simply yet dramatically illustrates how lack of information can delay or even impede vital healthcare interventions.   The various elements of the campaign will, I believe, leave people wondering why the same technology that they see used in other industries isn’t readily available to the professionals in whose hands they place their health and, in some cases, their lives.   If the Infoway campaign can get Canadians to take a greater interest in the manner in which healthcare is delivered in this country and get them thinking about the challenges of delivering care with information recorded on pieces of paper, it will have delivered considerable value for the money invested in this campaign.

Mike

PS – After this blog post was initially published Infoway sent the following data point from their most recent public opinion survey:

Infoway Public Opinion Chart