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Executives Talk Tech Trends

June 1, 1998
by Jeffrey Elliott
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Has your business strategy changed in light of your competitors’?
Nothing our competitors have done really impacts the focus of our strategy. We’re cognizant of the many changes--clearly the acquisitions, but our strategy continues to be one of a very strong focus on the health provider marketplace. The area of greatest differentiation between us and our competitors is the way we’re focusing on the importance of what we call solutions--offering a number of services along with our technologies and applications.


IDXRichard Tarrant
President
& CEO
IDX

REVENUES
’97: $251.4 million
’96: $206.9 million
Percent change: 22

NET INCOME*
’97: $8 million
’96: $16.7 million
Percent change: (52)

BASIC EARNINGS PER SHARE*
’97: .31¢
’96: .66¢
Percent change: (53)

*Reflects $20 million in charges related to the acquisition of Phamis.

Note: Figures restated to reflect the 1997 acquisition of Phamis, accounted for as a pooling of interests.

What factors influenced IDX’s performance in 1997?
We are having a lot of success selling to the very high end of the market--places with as many as 10,000 users. In general, the healthcare IS market is just a great market to be in. Spending is increasing dramatically, larger portions of operating budgets are being spent on information systems and capital budgets are increasing for healthcare providers in terms of recognizing the value of acquiring financial and other information systems.

What are your plans for growing the business?
We’re just going to keep on growing internally at a pretty high rate and continue to look for acquisitions like Phamis, which we completed last year. We have some possibilities in the pipeline right now that we’re looking at. A combination of internal growth and growth by acquisition should have a substantial impact on our size over the next several years.

What segment of your business do you see providing the most return in five years?
Clinical systems, particularly ambulatory clinical systems, will start kicking in for us. Also, large integrated delivery networks looking to combine financial and clinical systems under one vendor will be a good source of return, and organizations that want to use fewer vendors and are willing to replace their older systems.

How is IDX approaching the international market?
We acquired an initial customer in London with the Phamis acquisition. We are continuing to install at this site; however, we are not going to continue selling in the U.K. until we get this particular hospital up and running successfully. Our international strategy is one of cautiousness--making sure we get this one done right, making sure our customer is happy, then deciding how aggressively we want to market there.

1997 healthcare IT stocks, in general, have recovered from a turbulent run on Wall Street in 1996. Are investors warming up to the industry as a solid place for their money?
I think the industry is once again starting to be well received on Wall Street. The number of analysts covering IDX has gone from six a year ago to about 20 now. That tells me there is a lot of interest, certainly in IDX, but also in the industry. I don’t think anyone blew up last year, as opposed to ’96 when a number of companies were hit hard.


CernerNeal Patterson
Chairman
& CEO
Cerner

REVENUES
’97: $245.1 million
’96 $189.1 million
Percent change: 29

NET INCOME
’97 $15.1 million
’96 $8.3 million
Percent change: 82

BASIC EARNINGS PER SHARE
’97 .46¢
’96 .25¢
Percent change: 84

What factors influenced Cerner’s performance in 1997?
In 1996, we basically reinvented ourselves by completely automating the clinical process. We went to the drawing board and redesigned our architecture around the continuum of care. That caused 1996 operations to slow down. However, in 1997 we made HNA Millennium available and finished the year with more than 40 major HNA Millennium applications converted at alpha sites. Our 1997 report clearly showed that we had a very good year--profits were up 84 percent.

Is there an advantage to building a multi-faceted system, as Cerner has done, as opposed to acquiring technologies and integrating them?
The advantage is huge. We have a data model that defines the relationship between a patient and a provider which represents all of the entities, objects and events that are going to take place inside the scope of our applications. We basically positioned it to be a platform from which to manage health, from your home all the way to the ICU. All of our applications contain this singular data model. As a result there are no interfaces in our system--it’s all one. If I had bought all of the applications I would have to move the data from each application to a common data model or pass the data back and forth through an interface. Any systems person will tell you that interfaces are the most difficult and complex part of what they manage.

What do your customers say they are looking for that hasn’t been delivered by IS?
Return. Until providers have the courage to eliminate all paper, specifically the medical record, they will never get a return on investment. Granted, there are all kinds of legal issues to be resolved, but there are a few provider organizations that have already had the courage to go paperless.

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