An Exclusive Interview with Keith Hagen, QuadraMed President and CEO

Keith Hagen has been CEO of QuadraMed since September. His background includes time at Compucare, one of several QuadraMed acquisitions in the 1990s. You understand, I'm sure, that he runs a publicly traded company and therefore wisely leans toward a measured response instead of the freewheeling, "did I really say that?" kind of pithy quote that you and I both love. Hey, he's a pro and just doing his job. I was thinking about the preparation it must take to go on record as a CEO with the SEC, competitors, investors, and analysts hanging on every word. That must take some composure.

Anyway, I like the company, their technology, and their products (I've been a customer, so I can say that.) I appreciate Keith's time and I wish QuadraMed the best. I'm sure Keith would appreciate your dropping by to hello at HIMSS (take him an "I Am Mr. HIStalk" button if you think of it) and maybe taking a look at what's new.


You worked for CompuCare until the company sold out to QuadraMed. Is it good to be back, or is it like coming back at all?

I was gone for six years and it’s great to be back. There are so many different aspects to the business now with the product lines, the great people we have, and the great customers that I’ve known for a lot of years. It’s nice to be working with an executive team that I’ve had success with in the past who knows the industry. I’m thrilled to be back.

What's changed?

I left in January 2000. QuadraMed purchased Compucare in 1999. There’s a lot of business now that wasn’t Compucare. A lot of the business has been sold or purchased since then. We’ve now got a wide variety of products. Not just Affinity, but Quantim, TempusOne, lab, radiology, pharmacy, and MPI, We have a much bigger footprint. We have products in about 1600 hospitals, which is about 25% of the market. It’s a fuller service business than the Compucare that I left.

QuadraMed seems to have the technology and the KLAS ratings that people want. Why isn’t Affinity selling better than it is?

We sold a lot of Affinity product in 2005. It’s true that we didn’t have a new-name account, but from a vertical point of view, we sold additional modules to organizations like Westerly, who had revenue cycle management and purchased our clinical suite. That’s like a brand new sale, but they just happened to already have revenue cycle management, so we counted them as a vertical sale. We have maintenance renewals, where people are continuing to invest in the product. We have 65 Affinity implementation projects going right now, at 40 different sites. We’ve been our own worst enemy in setting up this perception that we’re not selling.

The KLAS report describes life after the demo. Once all the glitz and glimmer is over, what’s it like during implementation and support? Would you buy from this vendor again? That’s why I’m so proud of our KLAS reports because it shows the value that customers get from our systems.

We’ve looked at why we have trouble signing new-name accounts. One issue is that we have very good and very aggressive competitors in the HIS space. There are certainly sales forces out there that are not afraid of negative selling, which they do against us. They can’t knock our product, our service, or our KLAS ratings, so the only thing they can grab onto is our overly complex financial report. It takes a lot to drill through our financial reports to find the truth because you have so many one-time events that have happened.

We see that on the Affinity side, but not in other places. With our Quantim product, we’ve signed six contracts in the $1-2 million range. People are investing in QuadraMed, but our competitors have done a great job in creating FUD – fear, uncertainty, and doubt – in the sales process. We have a very strong balance sheet, $34 million in the bank, and are a solid, stable company. We’re emerging from the issues we’ve had and I look forward to competing with a very strong income statement that’s as strong as our balance sheet today.

We have no marketing, no messaging, no brand awareness. The market only knows us by what our competitors say about us. We’ll invest in that area in 2006 well above what we’ve done in the past.

What do you see as the biggest competitive threats to QuadraMed?

They are the things we’ve talked about. We have strong products and great KLAS ratings. Our threats come from positioning of our products, brand awareness, and getting our message out that we’re financially stable, very much in business, and very much here to serve our customers.

Some folks have said that Larry English’s job was to stabilize the company, but because of the company’s problems, he stayed on too long when the company really needed a more aggressive innovator. Is that fair?

I think Larry did a great job leading the company when the company needed him. I come to QuadraMed with a very different background, style, and approach. My goal is to make QuadraMed relevant again in the healthcare market. Everything that I’m doing is looking forward and driving the business forward.

We’re focusing on putting together a clear strategic plan. We’ve not done a good job making it clear to everybody in the market and even in the company “why QuadraMed,” how we’re different. And why someone would buy from us instead of our competitors. The message will be clear, concise, and well communicated.

Is QuadraMed’s executive turnover positive in any way?

What we’ve got today is an outstanding leadership team with many years of healthcare IT experience. We’re all client advocates, we’re all very focused on growth. If you look at our team, we’ve got Jim Klein, nearly eight years as VP and research director at Gartner. Jim Milligan is an absolutely outstanding sales leader with 20-plus years of experience. Steven Russell has an outstanding background to drive our strategic planning process and get our message out. I’ve got 22 years of healthcare IT.

It’s a team that knows the market and the products. We’re also all here in the Reston office, the first time in many years that the executive team is in the same building working together. We joke about the Blues Brothers movie – we’re getting the band back together and moving the organization forward.

With staff turnover and office closures, do you have enough experienced people to keep up the R&D and support that the market expects?

We absolutely do. We have people and resources to accomplish our mission. Look at what we put out in 2005 – prescription writing, account workflow, biller worklist, enhancements to Quantim, MPI. We’ve put out a rich set of features and functions. We’ve got a long list for 2006, both financial and clinical. We’re putting out good releases and have more than enough resources to accomplish what we need to accomplish.

Is more restructuring needed?

It’s always tough to manage staffing levels. We’re certainly focused on being a profitable company and making sure that we’ve got a strategy and the resources to grow our top line. We’re always going to invest in the areas that are strategically important to us and make sure that we’re a profitable company.

Do you think GE’s acquisition of IDX was a good idea?

I think it was wise. IDX is strong in the large medical teaching facilities. It’s not surprising that GE would look to someone with a presence in those large organizations.

Some people compare QuadraMed to MEDITECH - similar technology, customer size sweet spot, and a rich history. Do you see the resemblance?

There are similarities. We tend to try to be in the hospital size that would be at the top of the MEDITECH range. Half our base is hospitals under 200 beds. We have one product that scales from USC Medical Center, one of the largest medical centers in the country, all the way down to 100 beds. We scale higher and have a different implementation methodology that works better in larger organizations. We have a much more consultative approach where MEDITECH is a more of a "one size fits all” model.

What do you see as QuadraMed’s strengths in products and services going forward?

The big strengths are industry leading products that can work standalone: TempusOne, MPI, Quantim. They’re strong as individual products. We also have strength bringing them together as an enterprise offering as Affinity and integration to put them together. Scalability is a big strength of the product. Our proven ability to deliver long-lasting value is a strength.

Our revenue cycle management product is viewed as a top product in ratings and in talking to customers with their very low AR days using our product. On the Quantim side, we’re the only vendor with a full suite of products that mirror the AHIMA eHIM model that defines how to run an HIM organization in a large healthcare setting. TempusOne is certainly a leading scheduling product.

What steps have you taken to get value from the PharmPro, Détente Systems, and Tempus product acquisitions?

It’s an area we haven’t done enough in. We’ll focus foward on maximizing value from those acquisitions. We’ve done things with TempusOne, tying it into MPI so you can use our MPI Spy product with TempusOne. As of January 1, we’ve rebranded it as QuadraMed TempusOne to get awareness out to CIOs who love the TempusOne products that it’s part of the QuadraMed family and has been for nearly two years. We have other products providing the same level of service and value and would like them to consider us for their short lists.

We’ve consolidated all sales under Jim Milligan and products under Jim Klein. That will drive integration of product and cross-selling into the customer base. Radiology is going in now at Gillette in Minneapolis. That includes PACS integration through our partnership with Cedara.

We’ve been cross-selling PharmPro into the Affinity customer base. CPOE and closed loop are things we’re looking at as we finalize our strategic plans, but no final decisions have been made.

It’s a hot healthcare IT market. How do you get QuadraMed back into it as a major player, particularly in the clinical area?

We’re working with Pam Arlotto of Maestro Strategies to help us refine our strategy and value proposition. You’ll start to see the results from that in the middle of March. At HIMSS, you’ll see us continuing our theme of "Powering the path to paperless," which we first launched with Quantim at AHIMA as paperless HIM. We’re helping customers attain an EHR model at a reasonable level of investment.

Consensus is that QuadraMed wants to start selling again and then hope to be acquired, which seems in line with your background of having worked at two HIT companies at the time they were taken over. Comments?

I’m aware of those perceptions, given my background. But to put it in perspective, it’s all about creating shareholder value. Compucare was a private company. In order to get shareholder value, the business had to be sold. Sunquest was a public company, but the founder controlled almost 80% of all the shares, so it was almost a pseudo-public company. To get shareholder value, the business had to be sold.

QuadraMed is a real public company with a lot of shares spread out in a lot of hands. So, getting shareholder value from this company means having a business that people want to invest in. As more people invest, the share price goes up and you’ve created shareholder value without having to sell the business. My focus is on building a strong and profitable company that meets the needs of our customers and builds value for shareholders.

Is it cool having your first CEO job in a publicly traded company?

It’s cool. It’s a two-edged sword. It’s great because you get visibility, but also tough because you get visibility. The rules and regulations are significant. But I really enjoy it.

It takes a broad knowledge on a lot of topics. What I’ve tried to do through my career is build that broad knowledge, get involved in various aspects of the business, whether it was part of my day job or not. You go through your career checking boxes and gaining experience in all these areas – finance, management, sales, leadership – and then you work to position yourself to be considered. Its like selling software – you have to get on the short list enough times to be successful. I had a great opportunity to run Misys Transaction Services and what I learned there positioned me for the role I have today.

Can QuadraMed succeed over the long term without being acquired?

Certainly.

What would you tell customers and investors that would convince them that to place their trust in QuadraMed?

That’s an interesting question. It’s two different groups and message. On the investor side, we’ve got strong products and happy customers. We’re in a very good market. We have market share. We have a clear trending toward profitability. We generate cash from operations. Our stock is undervalued compared to other stocks in our market, at least in my opinion.

On the customer side, we have the strong KLAS ratings, which are a definition of life after the demo. We have a long history of serving our customers. We have a strong balance sheet and a large customer base. We have strong sales with Affinity verticals, Quantim, TempusOne, and MPI. We have products that can provide value.

Let’s say I’m watching QuadraMed closely for the next year. What signs should I look for that tell me that Keith Hagen is going a great job as CEO?

The first thing is profitability. Having our income statement look as good and as clean as our balance sheet. Having the market know what QuadraMed stands for and how we differentiate ourselves. An increase in our sales bookings.

Who do you admire most in the industry?

This is absolutely the truth, not any showboating. I truly admire those people running hospitals and IDNs that are working hard to have a profitable business while delivering quality care. What could be more important and noble than taking care of sick and injured people? Certainly more them than people running software companies.

Do you read HIStalk?

I do. But most importantly, my wife reads it. She’ll call me on a regular basis to tell me what’s on HIStalk. No matter what I might think I’ve accomplished in my career, in my wife’s eyes, my greatest accomplishment will be being interviewed on HIStalk.