An Exclusive Interview with Glen Tullman, Chairman and CEO of Allscripts

Not every anonymous blogger is lucky enough to get an e-mail out of the blue asking if they'd like to interview Glen Tullman, Chairman and CEO of Allscripts. I was, and I did.

You'd be hard-pressed to find a healthcare technology company hotter than Allscripts. They are strong in the hyper-growth ambulatory EMR market, are well-capitalized, and superbly managed. Their recent acquisition of A4 Health Systems shocked many people who expected Allscripts to be the one acquired, possibly by GE or another big HIT player.

Thanks to Glen for spending some time with me.


What's new with Allscripts?

I think what most people are talking about today is the A4 acquisition or, as we like to think of it, our merger. I’ve referred to it as a perfect acquisition because it was very complementary with very little overlap. They have an entrepreneurial culture, are highly driven, and are high energy. Our teams have blended together very well. That has gone extremely well and, essentially, the integration of our companies is complete. That’s very positive and there’s a lot of talk about that.

Most people think of us as a clinical software company, but we look at ourselves, and others are beginning to understand, that our business is not just software, but information and connectivity. The next generation is who and how many people you can connect to, and also presenting real-time information at the point of care.

We’re accelerating our investment in content. Think of Google. When a physician goes to diagnose or prescribe and has all the information and questions appear in real time -- that’s the vision of where we’re going. Our Version 11 is a substantial step in that direction.


What strengths did A4 have that made them attractive?

A4 had a great set of clients, of which 90% are in the less-than-10 physician space. That’s an area that Allscripts frankly didn’t have a lot of presence in. They had practice management, and while we have  a very vibrant partnership with IDX, IDX is dominant in physician groups of 25 and above. IDX has a more limited presence in the mid-market, where we were competing with others with a more integrated EHR and PM. We knew that we had to be able to offer an integrated solution for both the mid-market and low end. A4 gave us that with their HealthMatics product line.


What will you do with A4’s hospital products for ED and care management?

Those products are very strategic for us. Physicians say they need a discharge summary so they can see what happened in the hospital. When their patient has been in the ER, they need to know what happened since 80% of patients who go to the ER see a primary care physician within five days. Canopy’s discharge and care management and ED product both fit perfectly in our vision of connecting.

Sharp Healthcare was already using the ED product, so they came to us and wanted to expand its use hospitals to urgent care centers. We talked to them about what we might improve or change about the product to make sure the ambulatory care physician is connected to everything he or she needs. Those products were icing on the cake.


Are physicians looking for a complete EMR and practice management offering and can Allscripts provide that?

When we talk about physicians, we talk about four groups. Groups of 25 and above may be part of an IDN or academic medical center. The mid-market is multispecialty practices of 10-24 physicians. You have the groups of less than 10. Finally, you have specialty practices. Each group has some unique need.

At the high end, I don’t think it’s essential to have an integrated offering. Folks who have practice management - and the bulk of them in that market have IDX – want us to show them that we work with IDX. They want reference sites and they want to see how we can install it rapidly. Customers like Healthcare Partners and Sharp were installed on time and they’re happy across board. Some of the people following the market, including analysts, said it would test whether Allscripts could handle large sites and so many of them at the same time.

As you move into the mid-market, integration becomes more of a requirement. We offer either Touchworks EHR with IDX, or separately Touchworks with both EHR and practice management. Touchworks Practice Management is the HealthMatics system that has been integrated into Touchworks.

At the lower end are the less-than-10 physician practices. If you’re a two-physician shop, you want one vendor who has all the solutions. That business has developed more quickly than we assumed and was one reason we had to move quickly to make sure we had a solution that worked.

Specialty practices prefer integrated, but for most, they want to make sure the EHR works perfectly for their specialty. They’re less concerned with practice management because they don’t interact with a PM system. Most physicians don’t have a lot to do with PM – it’s used by different people. The EHR system drives the decision.

An example that interests me particularly is in diabetes. I support juvenile diabetes work and am very proud and excited about that. We’ve launched a group that's focused on making our templates for diabetes the best in the world. Endocrinologists will tell you we could get more focused on this problem and do a lot of good.


Now that Allscripts is big enough in the technology area, is it time to unload the medication distribution division?

We have said two things. It’s not a strategic business unit in the sense that it’s not fundamental to our core business plan. On the other hand, it’s profitable, produces cash, and continues to operate. It’s run by a very capable president of that division, so there’s no reason to divest. On a percentage basis, it continues to be a smaller part of our business. We aren’t looking to divest it today, but in some respects we’ll grow out of it, not because it’s getting smaller, but because were growing so much faster in other areas.


Assuming the ambulatory EMR market gets as hot as predicted, a lot of customers will be buying for the first time over a short time period. What are the opportunities and threats to vendors if that happens?

The opportunities are substantial and I believe the growth will happen. You have to be ready when it comes with a value proposition, results, and reference sites. You must have the ability to scale up.We’re hiring ahead of the curve to be ready.

Of risks, implementation and deployment people are in increasing demand. If every competitor has 20% more sales than they expected, there will be a high demand for people to install. Dealing with physicians is different. They’re smart and they value their time. They don’t have a lot of patience for someone who’s learning. Topnotch implementation and deployment capability is the biggest risk.

Systems that don’t focus on security represent a broader industry risk. I think we’re investing more than anyone in the industry to ensure that our systems are secure. The new standards for e-prescribing and electronic health records will be helpful.

One of the risks is internal and controllable – the number of deployment people. The other is less manageable, but the industry can invest and follow best security practices.

There are two areas of vulnerability. One is the smaller system that doesn’t have the resources to invest in security. The second is a few ASPs. When you have an ASP, you’re more vulnerable than a closed system. Those two models represent a little more risk to the industry.


eClinicalWorks did surprisingly well in the recent Massachusetts EMR bake-off and eMDs is a similar company apparently doing well. Can you beat them, especially in small practices, or do you have to buy them before someone else does?

The success of Allscripts does not depend on beating competitors. Our success is dependent on executing, and that’s something we control internally. This market is big enough to support every competitor out there.

My focus is that we are delivering quality, executing, and keeping reference sites happy. That should be the focus of the CEO instead of looking outward of how I can beat somebody.

I don’t think the Massachusetts example means a whole lot. Most of the physician groups were very small, and at the time the competition took place, we didn’t have an offering. When you look at the larger groups, you’ll find a different result. I think out of the entire group there were only a few that had more than 10 physicians and we didn’t have much of a presence in that market. For us to compete would be like asking why Mercedes doesn’t win in the small car market - they don’t have an offering. If A4 were there, I think it would have been different and will be in the future. You’ve hit on one reason for the acquisition. We expect Allscripts to be a leader in all four segments of the market I mentioned.


What will be the end result for eClinical Works? Will they be acquired?

It’s hard to speculate. I don’t know enough about them. They’ve enjoyed some success and I’ve heard that up until our acquisition of A4 they weren’t in our competitive landscape because they don’t compete in the larger sectors. Now they’re clearly in our competitive matrix because of our presence in the smaller market.

This is the third public company that I’ve run and I’m fortunate to have more than 100 folks who worked for me in other companies. We have a strong core of people who aren’t looking to sell out and make a bunch of money. We’d like to spend time here and make a difference. I don’t know the goals of those other companies’ managment, but to the extent they are successful, profitable, and growing, they’ll probably have the opportunity to be acquired. Consolidation is occurring. For customers, the question is how long will the company and management be around.


What role does Impact MD play in the Allscripts product line?

Impact MD is a product from Advanced Imaging Concepts that we acquired. It was a brilliant developer, designer, and CEO named Jeff Amrein. He ran the company and built the product. A few years ago, when we looked into the need to have document imaging and management as part of a fully-baked EMR product, everyone said it was the best product. We looked at competitors and everyone was using it. We bought the company, which put us in the interesting position of getting checks from NextGen [laughs]. Then, we integrated AIC into Touchworks. We also sell Impact MD as a standalone product since some practices want to go paperless by first scanning in paper, but aren’t fully ready for an EMR. It’s a great asset. Jeff stayed on and continues to play a very key role in the organization.

I feel very lucky and fortunate that we do a great job at Allscripts in retaining the smartest and best people when we do an acquisition. Jeff’s a perfect example of that and he’s been awesome.


What’s the status of the GE relationship?

We’re in a very good relationship, in essence born of the fact that we need each other. In the high-end Flowcast market, the reality is, what do people want to see? Reference sites like themselves who are successful. We have almost one in five IDX customers and, as a part of that, we have a tremendous number of great reference sites. The easiest thing for GE/IDX to do to be successful is to work with us and jointly market our collective products that work together so well. You’ve seen lately how we work closely together in partnering deals. We’ll be presenting at the GE/IDX user conference and will have a booth there. In the smaller markets, we’ll compete against their Centricity offering with our Touchworks EMR/PM. At some point, they’re likely to decide whether to go with the old Millbrook system or Groupcast. Right now they’re offering both. In that mid-market, we’re happy to work together if a Groupcast prospect is interest, otherwise we’ll compete. Customers make that decision.


What do you think will happen with Emdeon’s practice management division?

They’ve announced that they’re going to sell their practice management and I think it will be interesting to see who ends up with it. It’s a great asset. They have a tremendous number of physicians who use their PM system. Their penetration for EMRs is much smaller. I’ll be interested to see what happens.


Would someone buy it just for the customer base?

It depends on who buys it and whether they already have EMR, PM, or both. The customer base is golden, like IDX at the high end.


What companies do you think are ripe for acquisition?

There are a lot of companies in the field who are interested in being acquired. Given our cash and stock position, we get approached regularly by people who’d like us to buy them. We don’t think we need to buy anything to be successful, but we’ve made it clear that we would make acquisitions that we feel would be opportunistic for the company. Our focus would likely be in the areas of increasing customer base or alternate distribution, maybe a EMR product that might give us a lead in the specialty.


What about oncology?

We’re very interested in that area. I think there are a number of good providers that are there, kind of smaller providers. Again, the real challenge is how do you serve the specialist and how do you stay connected to the overall EHR? That’s the big challenge.


Will Google Health and other healthcare search tools be important? Will Allscripts be involved?

I think that will be a very fundamental part of the architecture going forward. We’re the largest outside investor in Medem, which provides personal health records and was formed by the AMA and 46 other societies. Google, Intuit, Microsoft, and Intel, all will bring consumers to play a much more dramatic role.

We’re moving more and more to where healthcare is becoming consumerized. You’ll want control over your own records, want them to be portable, and want them to be interoperable. We want to be a leader in interoperability. All of our systems are driving and leading that. For connectivity, we want to talk to everyone and everything so users can access whatever information they need. These companies will have an important role.

I think you’ll see new players as well, such as credit card providers. Already if you have AMEX Platinum you can get a monthly statement that highlights lab and drug expenses. If you think about using your credit card as a way to pay for health expenditures, you’ve created a tracking and billing system that may mean you don’t need a practice management system in many respects. You have new entrants like Wal-Mart and K-Mart.


What will be the role of Allscripts if that happens?
 
We’re either in discussions or supplying the software for a number of the new entrants into the industry. We see their entry as very positive. You’ll see some dislocation from a practice standpoint. If you think of a primary care physician and Wal-Mart and Walgreens are skimming off some portion of the well-care visits and some of the bread and butter visits, that’s one part of the practice. Then, if you think about companies like Whole Health or CHC building health centers within large employers, they’re going to skim off some portion of the visits that would go to a typical practice today. We’re working closely with a variety of those providers today under various sets of circumstances.


Who do you admire in the industry?

I admire our key employees and the people on the front lines. I admire physicians, who are given an impossible task, an enormous amount of information, huge cost pressures, and a day job of making patients better. Their job is complex now that patients are armed with better information. Physicians don’t have the same access or time as patients to do research. We have to make physicians smarter with information tools. I also admire our employees.


Do you read HIStalk?

I haven’t been reading it, but I was on the site today. I had heard about you previously when some competitors made comments about us. I try to stay singularly focused on clients and our execution. We have folks keeping us informed about web sites and other sites with information or comments. A lot of people I know think HIStalk gets it right with straight talk about the industry, including one or two investors that I asked. HIStalk’s reputation is good and smart people told me I should do the interview, even though I don’t have time to do many of those requested.