16 February 2018

The insidious cost of old technology

KnowCents Technology

When I first became CEO of a big publishing company, I used to take pride in hanging on to our IT infrastructure for far longer than we depreciated that equipment in our accounts.

I thought at the time: “They’re computers right … what’s the use in updating just to get ones with new chips and smarter screens?” It was a rookie management error. Saving pennies in capital costs, but throwing away pounds in productivity, and in our potential for innovation.

By the time I left this big company to start a small one of my own, I was a technology convert. Not a nut. Just a convert. You have to be careful. You can’t go blindly at it. But if you do your homework, understand what you need and make sensible investment, the pay-off is generally very good.

In this new company, which we started just a few years ago, we had decided that cloud-based technologies were mature enough for us to attempt to put as many of our business systems on the cloud as we could.

We sat down and did our homework and we were surprised.

Xero could do all our accounting. We could hook Xero to a publishing management system to do all our advertising booking, sales team management, and production and client services, our events could be ticketed and planned all on Eventbrite, our awards could be done on Ewards, our subscriptions handled through Moonclerk with credit card payments handled via Stripe, and we could back up everything we did easily on Dropbox.

That meant that our staff, and us as managers, could work anywhere, and at anytime could access any system, to look at any report, up to date and live, and work from anywhere.

Journalists could be anywhere, our accounting could be done at any time by anyone we authorised, our banking and payroll was all seamless.

We did all this in a surprisingly short amount of time. I still remember being shocked at how quickly and easily we established these systems and how they all just seemed to hook together, somewhere up there in the cloud.

We had that new business up and running, with two publications we had acquired from our old company, complete with all our sales and customer data, within a couple of weeks.

The savings in our first year, just from going to these new systems, and doing a couple of other clever things, like not installing a phone system and using our own mobiles, was above $400,000. That delightful surprise was enough for us as a group to do something that would change our lives, launch The Medical Republic. We did have other backing, but this got us over the line on quite a big decision. One very important aspect of the change was that most of these savings were ongoing.

My conversion to cloud technology was also apparent in my earlier decision to be a first round investor – albeit a small one – in the cloud-based patient management start up MediRecords.

That was more than four years ago, and while groups such as Xero were starting to get some traction by that time, the idea of cloud systems in primary care to revolutionise connectivity, was then, just an idea. But it seemed a pretty obvious one.

When MediRecords officially launched in May 2016 it was the first fully functional cloud based patient management system on the market. And it showed. With no one else on a cloud system and the majors like Medical Director not having a product ready,  you suspect the timing was slightly out. GPs are cautious by nature. Although MediRecords was a fully functional cloud system capable of replacing a Best Practice of a Medical Director desktop installation, even less than two years ago, there was a significant degree of scepticism around the utility of a cloud-based PMS.

But the rate of change was escalating. Within a very short period, the cloud version of Genie was launched for the specialist sector, and Clinic-to-Cloud appeared as a cloud-only competitor of Genie in the specialist sector.

The most significant portent of change, however, was the introduction by the market behemoth, MedicalDirector, of its cloud software offering, Helix. Ironically for the market majors, it was their endorsement of the technology via their own product announcements that did much to allay fears over the future of cloud-based PMS technology.

Initially, MedicalDirector rushed the announcement of Helix to the market, probably to get their foot firmly in the door of any adventurous early adopters, before the likes of MediRecords could snaffle them up. It was quite a while before Helix actually was in market as a working cloud-based offering. But it certainly is today. Primary Health Care is currently rolling out Helix through its Campsie Centre in NSW, and the intention is to roll it through the entire Primary network.

That decision by Primary is a very deliberate part of a strategy of laying a connectivity and mobility platform that will “future-proof” the business. Primary CEO Malcolm Parmenter has a vision that sees doctors moving downwards and upwards out of the consulting room. Downwards, means all the way onto their patients’ mobiles for services such as teleconsulting, online prescribing, script collection, repeats and referrals. It also will allow the doctors to be more mobile in servicing chronic care, all the way into the patients’ home and at all hours.

Upwards, Dr Parmenter sees Primary doctors in a spectrum that may reach up to specialised “emergency and day procedure centres”. Such centres will do a lot of work currently done by hospitals. And the doctors will be able to move between the spectrum of services offered.

That is quite a vision. And clearly connectivity between doctors, between doctors and their allied associates, and most importantly between patients and doctors, will be a key. So will mobility. None of it can likely be acheived without a cloud based PMS network.

But look under the covers of such a strategy and there is a far more basic objective for a group such as Primary – massive cost savings. Once the cloud is rolled out to all 1000 or so Primary GPs, the savings are likely going to be in the tens of millions each year,  just in the basic costs of hardware installation, maintenance and updates alone.

It will take time to change, however. There is a lot of old infrastructure to be depreciated still in these businesses.

IPN, through Sonic, owns about 30% of the Best Practice group which is the other major player in GP patient management systems.

Best Practice is owned and run by a very cagey and committed group of operators, headed by founder, Dr Frank Pyefinch. It seems unlikely that Dr Pyefinch, who founded MedicalDirector and is seen as the father of GP clinical information systems in Australia, will let anyone get too much of a lead.

Best Practice is promising a cloud system in the near future called Titanium. But will IPN be able to wait that long if direct competitor Primary is already rolling out the technology via Helix?

If either of these groups had a true cloud network in place, when they acquired a new surgery or set one up, they wouldn’t need to come with trucks and install new servers, computers and wiring, to ensure the new group could talk to them. They would simply need their doctors to have devices that could access the internet, and their surgery to have a good internet connection.

And while Best Practice appears to be in the rear of the field on this new and potentially profession-changing technology, in his typical style Dr Pyefinch aided by his marketing savvy partner Lorraine, and a close knit tech team, has potentially played a very smart hand in the Australian PMS market.

About a year ago, Best Practice significantly lowered its prices against the desktop version of Medical Director. The effect of that was a very rapid market share grab of doctors desktops by the Best Practice brand. It is likely that Best Practice is now the leader in the market by actual GP licenses. And by grabbing a lot of desktops in a short period of time, Dr Pyefinch will know that he has likely locked those desktops away from any potential cloud-based product competitors. Once you buy a desktop system, it is usually going to be a minimum of three years before you consider any swap of system or technology. You have to get a return on your initital investment. All of this gives Best Practice time to watch the other cloud products and develop their own, for their locked in customers, in good time. Being first, or even second, isn’t always the advantage it seems with new technology.

But the Best Practice strategy isn’t just about locking up their clients to give them more time to build their cloud solution. The group is currently rolling out their patient application which talks to their PMS, and apparently, it’s a doosey. It is rich feature based, including things like a telehealth module (I’m told), appointments, and a host of other seamless functions, and it’s very easy to use.

This opens up another interesting front in the whole PMS market. And it pushes a product like Best Practice firmly into the distribution market that Health Engine currently dominates.

Imagine in a perfect world if every Best Practice practice introduced the Best Practice patient app seamlessly and quickly. How many patients would Best Practice suddenly own in terms of patient information distribution? On the back of an envelope, I’m guessing a long way over the one million or so that Health Engine claims they have today as active users. Game on? What is more important in the short term – mobility of doctors and cost, or owning distribution to patients. If I had to pick one to get a hold of first, it would be the latter.

So Best Practice may have made a very strategic and important decision to focus first on locking in their patients, not a bad idea given that the changeover to the cloud will naturally be slow at the beginning as practices wait until the end of their equipment and financing life cycles on their desktop systems.

MediRecords, of course, comes with its own patient app, appointments built in, some open APIs  for easier talking to allied health, and a kiosk system even,  if you want one. It’s got it all. But it does not have the market share of Medical Director or Best Practice.

Definitely, the larger practices and corporates are going to need to go cloud-based if they are going to change their productivity profiles  quickly for the better as primary care goes mobile downwards into homes and after hours, and upwards into emergency and day procedure centres, and, has to talk seamlessly to allied health.

IPN may put some pressure on the Best Practice team to get a wriggle on with a cloud version. Certainly a few large and small corporates are very interested in future-proofing their business via the MediRecords suite. It’s ready more or less today with everything that is cloud, so its naturally attractive to the bigger providers today. Of the two dominant market leaders, Best Practice and Medical Director,  will be interesting to see who has the advantage over the coming two years. The one that went cloud first, or the one that went patient app first?

Another interesting question might be for Dr Marcus Tan, who has guided Health Engine to a dominant and rapidly expanding vision of owning distribution to patients via the app that started with just appointments for patients but is rapidly moving to multi-utility? Currently Health Engine talks to the Best Practice and Medical Director systems. But what happens when they have their own patient apps given their huge market share. As things stand today, they own distribution to GPs electronically. GPs are the most important gatekeepers of patients. With the right patient app, Health Engine might start to lose its hold.

If you mapped the uptake so far of cloud systems among GPs, then my estimate is that we are still at the flat beginning part of an exponential curve. But the numbers are starting to rise. I don’t have the numbers for actual Helix installations but I do for MediRecords, and my guess is we have something well north of 500 GPs on cloud systems already. That’s out of a potential user population of more than 22,000.

But if Helix is being rolled out through Primary, and MediRecords is being piloted in other corporates, then we aren’t that far away from a technology inflection – that steep part of a technology tipping point adoption curve.

Of course, I may well say that, being an investor in this technology (I own fully 0.03% of the MediRrecords shares).

But who out there thinks that this technology isn’t completely obvious for healthcare?

The CEO of MedicalDirector, Matthew Bardsley, thinks it’s the future and it’s a very significant marker that he has committed this business to providing a cloud offering.

Changing MedicalDirector from a company that provides a desktop, local-server driven product, with all the issues of updating, cost, data security, and so on, to a providing a cloud version, is going to be interesting to watch. The two systems are so very different in how they run, in how they’re installed, and how they maintained, that it’s really like having a start up with a new technology eat your old company.

The biggest issue to MedicalDirector will be the cost of running a cloud system versus an older system. One is cheaper by a factor of more than four to operate as a surgery, and significantly cheaper for a company such as MedicalDirector to maintain on behalf of its customers.

That changeover of costing models is going to be a bit like a highwire balancing act. But that is MedicalDirector’s issue not your issue. Your issue is when and how to look at and engage with this new technology?

As much as I’m championing it, and MedicalDirector champions it, it still has its issues, especially around the idea that to maximise returns you have to look at how you currently practise and contemplate some changes. And that will be the subject of some articles to come in future editions.