“H.I.S.-tory” by Vince Ciotti

© 2011 H.I.S. Professionals, LLC, all rights reserved

Episode # 60:

HMSPart 2

2nd of today’s “Baker’s Dozen!”• Thanks to co-founder John Doss, last week we

started off the second HIS-tory of today’s HIS vendors: Healthcare Management Systems- $3.2B = McKesson, née HBOC = Walt Huff, Bruce Barrington, & David Owens - $2.2B = Cerner, still run by Neal Patterson, co-founded with Cliff Illig- $1.7B (est) = Siemens, née SMS: Jim Macaleer, Harvey Wilson & Clyde Hyde- $1.4B = Allscripts, née Eclipsys, also founded by Harvey Wilson of SMS.- $1.2B = Epic. Gee, I have to wonder, just who was it who founded them? - $900M (est) - GE Healthcare, née IDX/PHAMIS: created by Malcolm Gleser- $545M = Meditech, still run after all these years by Antonino Papallardo- $353M = NextGen: new Opus & old Sphere financials by Florian Weiland - $174M = CPSI (Computer Products & Services Inc), founded by David Dye - $170M = QuadraMed, née Compucare, founded by Sheldon Dorenfest- $160M = Keane, parent giant by John Keane, but HIS div. built by Ray Paris - $110M = HMS (Healthcare Management Systems), Tom Givens & John Doss- $70M (est) = Healthland, formerly Dairyland, founded by Steve Klick

Another HIS-tory Hero!• Our story starts with the co-founder of

HMS way back in Orwell’s year: 1984 – Tom Givens – who just took time

out from his busy golf, er, work schedule (he runs a golf club in his spare time!) to relate this tale of how he co-founded HMS along with John Doss way back in 1984.

– Tom was a CPA and served as Controller at a manufacturing firm.

– He was interested in computers, but there were no classes then!

– He got a call one day from a client American Medical Centers (AMC), that had acquired 4-5 hospitals.

How Their Hardware Platform Picked Them!• It seems AMC had bought IBM System 32 minis

for their hospitals, had them installed for about 6 months, but none were being used at all!

• AMC hired Tom to straighten things out, get software installed, and put the minis to work.

• One of the first pieces of software Tom had to customize was a corporate reporting system for the complex inter-company fund transfers in GL

• AMC sold out to another chain and wanted Tom to move to Indianapolis, far from his Nashville home. Tom declined, but took the funds he had earned to start a DP firm, sharing an office with his old High School buddy, John Doss, whom we met in Part 1.

Fascinating Chain of Events• In 1984, Tom & John made their first sale, concentrating on the

many hospital chains headquartered in Nashville, starting with Community Health Systems (CHS), formed by some ex-AMC folks.

• Seem weird for an HIS vendor to start out with chains? Check the background of the three leading shared systems back in the 70s:– Shared Medical Systems (SMS) got it toehold nationally through

a deal with American Medicorps, Inc, (AAM), who put SHAS into scores of hospitals in Florida, Texas, California, etc., in the 70s.

- McAuto had an exclusive deal with Hospital Affiliates International (HAI), with HFC in their their 100+ sites automating HAI’s M.O.R.s (Monthly Operating Reports).

- GE’s MediNet automated all of HCA’s 100+ hospitals through a shared set of financial apps, that HCA still runs to this very day!

Both Chains & HMS Grew• Chains not only comprised a large part of HMS’

early sales in the 80s & 90s, they grew rapidly through mergers/acquisitions themselves

• Two of HMS’ early chain clients bought other chains with competing HIS systems installed:– One with HBO’s Star and one on Meditech

• At first, Tom & John feared they’d lose out to these larger systems, but their system of corporate reports on cash & statistics won out!

• Chains also account for HMS’ dominant role in the small hospital market: as HCA, AMI, AAM, HAI, Tenet, etc., all learned, the most efficient hospitals are in the “sweet spot” of 100 to 300 beds, the usual bed size for most chains today!

Just Who Helped Who??• Since AMC and CHS steered HMS to IBM minis,

HMS soon became an official business partner of IBM, starting on the smaller System 32 and 34s

• IBM actually tried to encourage Tom to shift vertical markets to construction, but HMS’ healthcare sales soon impressed Armonk too!

• HMS grew rapidly, both through sales to hospital chains like CHS, as well as in partnership with IBM to standalone community hospitals who were flocking to System 3X minis, just like so many other IBM “VARs” (Value Added Resellers) who starred in previous HIS-tories:- Dynamic Control, JS Data, HCS (NJ), First Coast, IHC, LeBlanc, etc.

• Why such a preponderance of HIS systems written in RPG and running on IBM minis back in the 1980s? Just take a look at the table on the next page to see just how dominant IBM was over their competitors during the minicomputer revolution back in those halcyon days:

IBM’s Hardware DominanceHere’s a table from Sheldon Dorenfest’s “Guide” in 1988, showing how IBM garnered an amazing 40% of the hardware market in 1986 & 1987

Of Course We Moderns…• Now, of course we modern IT sophisticates would never allow

such a near-monopoly in our vastly more sophisticated industry.• Especially in this era of user-friendly E.H.R.s and P.H.R.s (Personal

Health Records), where consumer-orientation is paramount...• Now that Apple’s iPads totally dominate PDAs (1.3rd of all MDs

already!), and millions of consumers are finally learning just how easy it is to open up an app in the Mac OS, navigate the web, etc.

• There’s just no chance that any hospital today would dare force their MDs and RNs to put up with Microsoft’s far more clunky Windows OS with it’s “too many clicks” approach to everything.

• Why, take a look at the table on the next page to see just how many of America’s ≈5,000 hospitals have switched their devices from Microsoft’s Windows/Office, to Apple’s Mac PCs & iPads.– At an average bed size of 168 beds (per AHA), and ≈500 PCs per facility

(Average of 2-3 devices per bed), that makes a total of over 2.5M PCs:

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Stay Tuned For More Next Week…• Next week, we’ll finish the HMS saga, this time bringing the story

right up to 2012, featuring an amazing growth to over 600 hospital clients and an annual revenue figure of over $100M.

• A far cry from the 4 FTEs Tom & John started out with in 1984!• We’ll also follow the evolution of their product line from primarily

financial systems into the clinical apps for RNs & MDs, including the recent acquisition of one of the leading ED specialty vendors…

• Of course, there were some changes in ownership structure, and another VC (venture capital) firm (besides Francisco Partners) buying into our burgeoning HIS/E.H.R. industry…

• So please, send in any pictures or stories you might have of HMS amazing ride for the final chapter!