Podcast interview with Practice Fusion CEO, Ryan Howard (transcript)

This is a transcript of my recent podcast interview with Ryan Howard, CEO of Practice Fusion –provider of a free web-based electronic health record (EHR).

David Williams: This is David Williams, co-founder of MedPharma Partners and author of the Health Business Blog.  I’m speaking today with Ryan Howard,  CEO of Practice Fusion.  Ryan, thank you for you time today.

Ryan Howard: Thank you for your time David.  I appreciate it.

David: Ryan what is Practice Fusion?

Ryan: Practice Fusion is an electronic health record, which is provided to Physicians at no cost for licensing, hosting, support, and training of the application.  Right now we’re the fastest growing physician practice community in the country.

David: Now I’m not shocked that you’ve growing fast because Practice Fusion is offered for free.  So I’m wondering: what’s the company’s revenue model?

Ryan: The product is provided to physicians fully subsidized.  It’s not a “take now, pay later” or get half of the product now and then pay for the rest of it.  Every feature that’s included with the product in any capacity is offered at no cost, so it’s truly free.  It’s offered with support, training, and hosting.  It’s the only totally free model on the market.

Our revenue model works in a few different ways.  We monetize transactions from our partners. We do some lead generation. So if the doctors are looking for a billing service, for example, we have a billing service that they can use and we receive revenues from that.  We do some advertising to the physicians: different health care services, insurance companies, device manufactures and pharmaceuticals as well.

David: How does Practice Fusion compare to other electronic medical records that are out there?  Both commercial products that people are charging for and then another type of product that is sometimes considered “free,” –I’m thinking of open source.

Ryan: Practice Fusion competes with most major systems in the marketplace.  It’s fully-featured.  It has everything from front office scheduling to patient management to full-charting templating, prescription writing, lab management, the entire gamut of services.  From a major competitor standpoint, we compete with them relatively well, especially over the next few months where we’ll be extending our products to include Quest Lab integration and e-prescribing.

From our perspective, the usability of the product is far superior to pretty much any product on the market.  That is because we are using Flash on the front end so that the user has an extremely elegant interface that’s running in the browser.  It’s not a clunky, old school MUMPS interface or clunky web pages like a lot of the others are using.  So the user experience is extremely elegant and very, very intuitive, employing some of the latest technologies.  We have web service based products.  So that’s how we compare to our competitors.

On the open-source side we get a lot of questions but the truth is we are operating at no cost.  People think that open-source is free. I tend to disagree quite a bit because while the license for the software might be free, you still need to manage that software.  So if I acquire VISTA I still need hardware, software, database, and network connectivity to run them in my office.  So there is definitely a cost there of purchasing and managing that equipment.  There is also a cost for a consultant to come and influence that technology and tailor it to my practice.  Open source is not cheap or free.

Beyond that, my feeling is that the benefit of having open source in health care –where a lot of doctors have a pretty standardized work flow using SOAP methodology…  A lot of doctors don’t want to be writing customer code and maintaining custom code in their office. I think the benefit of open source is overstated to some extent.

I think there is huge value to having an open system. Imagine a Facebook-like or a Salesforce-like platform where you have a group of constituents (in this case physicians) all running on the same platform.  If they want they can plug into another service, for example a billing service or a prescription reminder service, or any product that you can imagine that needs data from their charts.  Or if they want they can plug into another health care group.

So say one community wants to plug into Kaiser, for example and share records between Kaiser and a RHIO, there is no platform out there today that does this well because most platforms are closed.  So one thing we’re working on very aggressively is becoming one of the first open platforms.  So you can imagine it like a Facebook and obviously there is tremendous security and permissions surrounding this, but we’ll have other partners come and plug into our system.

As a user of Practice Fusion you can select the partners that you want to plug into and share your data with.  For example if you see a billing service on our platform that you like, you’ll be able to integrate with them in real time without doing any real work because that integration will be done by a Practice Fusion partner one time, previously.  As a user you can simply opt into that service, kind of like you do in Facebook, and the data will be shared automatically.

David: There is a lot of discussion about “meaningful use” coming out of the stimulus package.  One of the aspects of that is certification; possibly CCHIT certification.  I’m just wondering if Practice Fusion is CCHIT certified or if you have plans to become so?

Ryan:  CCHIT is not part of HITECH yet so to answer your question directly about the stimulus plan, we definitely are looking forward to the HITECH road map and we are fully committed to being HITECH certified. There has been no decision made that the certification will be CCHIT. There is potential that we will be CCHIT certified.  We haven’t to date because from our perspective, the real benefit of being CCHIT certified is in the past you could get some subsidies for purchasing a CCHIT-certified system.  Since we are free it was kind of a moot point.  Beyond that our personal feeling on CCHIT is there are a lot of vendors on the CCHIT board.  We feel CCHIT has put themselves in a major position of conflict of interest because of the members that they have on their board.

HITECH is something that is on our radar.  It’s our top priority and my personal guarantee is that we will be one of the first companies certified.

David: A lot of times when physicians are considering the purchase of an electronic medical record, they ask about whether there are templates for specialties.  I understand you have somewhat of a different approach to templates. Can you talk about that?

Ryan:  Within our product we have a vast template library.  We are servicing over 25 specialties today.  Templates are created by everyone from our Chief Medical Office to our Physician Advisory Board to our end users.  It’s one of the things that’s unique about the product.  The product is not only free and web-based, but we have a process called Live in Five.  If you go to our website and register, you can actually start using the products within five minutes.

There is a lot of managing happening behind the scenes.  For example, we will upload all of your patient demographics. If you have a billing system, for example, we’ll upload all of that data within a day.  In addition what happens is that when you log in you specify your specialty and the system automatically pulls the templates that are specific to your specialty.

So let’s say for example that you are an oncologist. We have oncology templates that will automatically be positioned for your office.  Again these have been made by an expert panel and tailored by the community and they evolve on a constant basis.  Those are checked out from the master library. What you can do is then take them – if you don’t like any of them you can add your own templates on the fly.  Our product allows you to build your template rapidly.  What we’ve seen from our benchmarks it’s obviously much faster than typing and faster and less error-prone than even dictation and transcription.  So it works well.

Then there are custom templates where you can tailor our templates to your workflow.  If the templates you want need to have specific values in there like the patient has a blood sugar level of X, when you’re adding that data or selecting that template the system will prompt you for any variable that you want to put in there.

So the short answer is that we have a large group of templates that are extremely flexible compared to most templates out there.  The library evolves all of the time.

David: Are there data privacy and security issues that are specific to your platform or product?

Ryan: I wouldn’t think they are specific to our product compared to any other ASP-based vendor.  Do you want to be more specific?

David: Well I know when the product first came out there was some discussion about whether, for example, Google was going to be able to see peoples’ information.  I understand that’s not the case, but it seems like you may have drawn more interest on that topic than some other companies.

Ryan: Data privacy and security is our first and foremost priority of the company.  We just brought on a new Chief Security Officer.  He is one of the founders of Esurance; his name is Chuck Wallace.  We have also worked with one of the best health care attorneys in the country to put a lot of our policy and regulatory compliance in place.  My feeling is we are probably the best data center in the world.  From a technology standpoint our level of service is dramatically higher than any small physician could have within their office.  We are behind Cisco firewalls.  So the level of service is extremely high.

How we use the data is a great question.  There are a couple of issues around this. There is integrity and there is perception.  If you are a doctor on my system and you find out that I was selling your data, not only would you probably drop off the system, a lot of other doctors would too.  My point is you haven’t heard this because it has never happened.  Not only is security one of our highest priorities, the integrity of the system and the integrity of the business is also such a high priority.  We never sell patient information that is identifiable.  I’m sure anyone dealing with physicians gets asked to purchase listings for every doctor.  We never do that as well.  That’s why the physicians are really happy.

There is some very discrete advertising in the product, but it’s nothing that is intrusive.  If you sign up for the product you’re not going to start getting spam the day after.  We never list anything like that.  It’s beyond just technical security.  It’s our reputation that’s on the line and we realize that so that’s really priority one for us.

David: Ryan, does Practice Fusion have a patient portal or personal health record functionality?

Ryan: That’s in the hopper right now.  It’s one of our higher priorities, so I would anticipate that by the end of the summer.  We would tend to build things that relate.  We’re working on Patient Fusion and you will see the launch of Patient Fusion.  It will start off with some rudimentary functionality such as the patients’ ability to request prescription refills or the patients’ ability to request appointments and things like that.  It will evolve to seeing lab results and corresponding with the doctor.

It’s something that we are actively working on now.  We have a lot of the design done and we’re excited to be launching it soon.  It’s one of the overall benefits of having a fully web-based, SAAS model.  We can do this much more rapidly than most of the competitors.

David: How many physicians are using Practice Fusion now?

Ryan: We just broke 15,000 users.

David: Congratulations.  Over what time period has that occurred?

Ryan: That’s been over the last about 16 months now.  So the growth has been very, very good.  The company itself is in a great financial position now.  We have some very large, significant announcements coming over the next couple of months that should be really game-changing for us and assist with that uptake. We will have direct marking starting in the next 30 days or so.  We have been very, very happy with our growth.  It’s been done really from a grass roots standpoint so we’re looking forward to breaking into the market.  We understand that our pace and our velocity has been much more than all of our major competitors so we’re looking forward to spreading our wings and touting that at the end of 2009.

David: You have a very interesting revenue model for the company.  I’m wondering whether you think the revenue model for other electronic medical records companies is likely to evolve over time.

Ryan: Anyone with an established business model will have major difficulties adjusting their model to go free.  Our technology stack is uniquely adapted to accommodate this model: Live in Five, the fact that it’s web-based.  The vast majority of our competitors have client/server based technologies.  Some of them have ASP based technologies.  True SAAS is quite a bit different than that and that’s what we have.  There is a technology stack issue, there is a revenue model issue, so the vast majority, if not all of our competitors’ have large professional services teams. They probably see half their revenues from installations, from maintenance etc.  So if you look at eClinicalWorks we have about the same number of doctors, but they have 800 employees. So obviously our revenue models are dramatically different.  The economics of our model are extremely different as well.

For an entrenched solution provider to really switch to our model would cannibalize their business model, technology model.  I think it would also cannibalize their customer base.  If you just dropped $20,000 on a solution plus you’re paying 10% a year maintenance and all of a sudden the next day someone starts giving away that same product, if you’re a vendor that’s going to be a big problem.  I really don’t anticipate a lot of larger guys really coming into our space.

David: I’ve been speaking today with Ryan Howard.  He is the Chairman and CEO of Practice Fusion.  Ryan, thank you very much.

Ryan: Thank you David.  I appreciate it.

May 13, 2009

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