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40 Years of Health IT

October 27, 2009
by Vince Ciotti
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Looking back at 1969, a year that marked the birth of three major health IT vendors

On Nov. 7, 2009, more than 100 HIT veterans will assemble in King of Prussia, Pa., to celebrate the 40th reunion of the founding of one of the HIT industry giants: Shared Medical Systems (SMS), which today is part of Siemens. Certainly 1969 was a watershed year in our industry, marked by the founding of Meditech, SMS and another vendor that will be featured next month. Here's the HIS-tory of SMS' main product, early days and key players.

SHAS: BM dominated the hardware market in the 1960s with its 360 line of mainframes, which sold so well that the company started to run out of large hospitals to buy the million-dollar behemoths. The Armonk, N.Y.-based company decided to write a program for small and mid-size hospitals to share a 360: the “Shared Hospital Accounting System” (SHAS), offering:

  • Complete suite of financial systems - Census, Inpatient and Outpatient Billing, Accounts Receivable, Bad Debt and General Ledger.

  • Online inquiries into billing and AR balances - unheard of in this era of tape drive and batch processing. The output was only a green-bar paper printout on a 1052 terminal, but it blew CFOs' minds during demos.

  • Teleprocessing - via leased 1200 baud phone lines, with online Transmission Control and Error (TCE) reports to balance the batches of keypunch cards.

  • Flexibility - through profile options (e.g.: record 6, field 4 = late charge delay), master files (Charge, Doctor, etc.) and even report formats (“build” your own GL financials).

It sounds comical today, but 1,056 card readers one column at a time (you could hear the individual clicks), transmitting to the mainframe, which spat back a TCE with errors detected. Hospitals had 029 keypunch machines, racks of keypunch cards, and reams of coding sheets for correcting errors. This Rube-Goldberg approach actually worked, and SHAS became a runaway success, with hundreds of hospitals and many Blue Cross plans using it around the country. The price? Free! IBM gave SHAS away to “stimulate” 360 sales.

MS founders: IBM's Philadelphia office had three amazingly talented individuals with the vision that SHAS could power a national network of hospitals:

  • Jim Macaleer, a.k.a. “Big Jim,” founder and president, who started with IBM as a systems engineer (implementation consultant in today-speak).

  • Harvey Wilson, co-founder and senior vice president, who single-handedly sold more systems to more hospitals than anyone else in HIS-tory.

  • Clyde Hyde, an M.D. with an amazing vision that shared processing could be applied to patient care, starting in his field: EKGs.

First Days: Early in 1969, Jim, Harvey and Clyde convinced a venture capital firm on Wall Street to lend them $5M to buy a 360 and hire a team to sell, install and support SHAS under the moniker of SMS. They rented office space in suburban Conshohocken, Pa., in a strip mall at the corner of Ross and Royal Roads, next to a dry cleaner. Things were tough in those early days:

  • “Shared” Desks - just like the warm beds in submarines, we early employees shared desks for those few days spent in the office and not at a hospital.

  • June 30, 1970 - SMS almost ceased operations during a major system change that expanded the single digit for a hospital's code, to grow beyond 36 clients. The resulting crashes and recoveries took heroic techies 18 hours a day for weeks to right the ship.

  • Poverty - Big Jim, famous for pinching pennies, barely turned the company from red ink to black, just as the $5M was running out.

Legacy: MS went public in the mid 1970s, growing and splitting its stock to handsomely reward early investors and employees, whom Jim and Harvey generously rewarded with stock options.

SMS grew to be the number one vendor on Healthcare Informatics “Top 100” list for more than 20 years, eventually being sold to Siemens in 2000 for $2 billion! A long climb from a $5 million start-up…

Healthcare Informatics 2009 November;26(11):40