A conversation with Practice Fusion CEO Ryan Howard (transcript)

This is the transcript of my recent podcast interview with Practice Fusion CEO Ryan Howard.

David Williams: This is David E. 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, how are you today?

Ryan Howard: I’m good. How are you David?

Williams: Good.  Well we’re into 2010 now.  It’s been a few months since we spoke.  Tell me what milestones you’ve been hitting over the last few months and what some of your plans are for the coming quarter.

Howard: Our last quarter was excellent.  We were very excited about how we ended up the year.  We delivered on our partnership with Salesforce.com and we now have a fully integrated personal health record that resides on the Salesforce platform.  The benefit of this is that patients can log into the system and see all their medical history in real time.  So everything from diagnoses to medications to lab data.

One of the reasons this is even more exciting now is that since the meaningful use criteria have been released we have realized that a handful of the criteria are based on patients’ access to information. The Practice Fusion page, which is called Patient Fusion inherently addresses these certification criteria.  So we’re excited about that.  Now we have a fully integrated platform so doctors can sign up for the system get it running and also extend this to their patients, all for free, all in the same day.

In December we closed a round of funding with Morgenthaler Ventures.  We’re very excited about that as well.  They are one of the ideal partners for Practice Fusion on the financing side.  They were one of the original funders of Apple and are just a top tier firm in the valley.  Gary Little and Rebecca Lynn are on our board. They are both very exceptional individuals and are major contributors thus far.  So we’re excited about that relationship. We’re excited to have the financing and capital in place to really fill the company out and also to continue to deliver an exceptional service and experience to our customers.

Beyond that, we released e-prescribing today. We’re now connected to 50,000 pharmacies in the U.S.  It’s a real time connectivity.  All the major guys: CVS, Walgreen’s, Longs.  When a doctor enters a patient’s prescription, the prescription will arrive at the pharmacy before the patient even gets there.  On top of that we just launched clinical decision support as well.

The interest is overwhelming.  It totally bogs us down in a good way.  It’s a great problem to have. We hit our 25,000 user milestone, which is a major milestone for the company, and we continue to validate the model.  We’re making progress.  The growth of the company has been pretty phenomenal.  We’re hiring about four to five people a week so it’s getting more and more exciting each day.

Beyond that, we’re looking forward to fulfilling the criteria for meaningful use and becoming certified. That’s obviously a major priority of the company and we feel that we’re in a position to do so more than any other product out there.  We’re one of the only full web-based solutions out there and a lot of the criteria will obviously thrive and work much better in a fully web based model: communicating to patients over the web, connectivity to labs and connectivity to the pharmacies. There is no one else out there that has a fully web based platform that’s as extendable as ours. I think as far as our size goes, the fact that we’re not just an 800 pound gorilla is a good thing in this situation.  We are much more agile than most of the companies out there and we’ve already started addressing all the issues that we need to become certified.

We have a feature called Chart Share that we’ve had in beta testing for some time. It will allow a doctor to share a patient’s chart with any other physician in the country in real time.  The receiving party will be fully validated, so it solves the problem of interoperability. It’s something we’ve had in mind since day one and it’s really going to be a flagship feature.

Williams: You mentioned early on in this discussion that with meaningful use your personal health record was going to give you some advantage.  First, I haven’t heard that much talk about the personal health record within meaningful use and also why it is that you would have an advantage relative to other companies in fulfilling that criterion?

Howard: Meaningful use consists of about 25 individual features or feature sets that each product must have in order to become compliant. It doesn’t specifically discuss the implementation, so it doesn’t specifically say personal health record but it does say the ability for a patient to access their medical history and the ability for patients to get notifications, to see lab data, medications, diagnoses. These are all specifically spelled out in the criteria and obviously the PHR is an excellent way to achieve that.

The patient interaction is about 20 percent of the overall criteria. PHR is probably the best way and the only way the market knows how to accomplish that. As far as our personal health record I think we have a fundamental advantage in our overall model, with our web-based solution. You notice competitors’ guarantees don’t include their older products. The reason is that with a locally installed product, it’s very hard to get it to connect all the pharmacies, to connect all the labs, to extend that product that’s installed in an office to the web so your patients can see the data.

Is it possible?  Sure. But the effort needed to accomplish that would probably cost ten times as much as a new solution.  A web-based solution that has a personal health record integrated into it is just far superior.  It mainly comes down to exposure on the web, the ability to access it from anywhere.  So these are just some of the reasons why we feel we have a clear advantage.

Williams: It’s great that you’ve hit the 25,000 user mark. But just to play devil’s advocate for a minute, since the system is free, I could image that even maybe a large share of the 25,000 are just dabbling with the service as opposed to really committing to it.  Do you have a sense of that or how do you think about the different gradations of commitment?

Howard: Absolutely.  The vast majority of our users are very active in the system. Beyond that, our model is aligned with the doctor.  Let’s say Allscripts and eClinicalWorks goes and sells the doctor a piece of software.  Once the doctor signs for that software, Allscripts charges $30,000. What are Allscripts’ incentives to get the doctor to use it?  There is none.

So a high percentage of their software actually becomes shelfware.  That’s what they call it.  The doctors pay $20,000 or $30,000 or $40,000 for the software and maybe he even pays a consultant to install it, but he never uses it.  Where we’re totally different is that in our model, if you call in and you register  the product, we validate that you’re a doctor and once we have, you have an assigned account manager. This account manager is yours for the lifetime of the patient.  He walks you through our value proposition, he walks you through our training, being able to e-prescribe for you.  He asks you which labs you’re using.  He enables that.  He enables the personal health record if you want.  So it’s all your choice, but he handles the entire process and you also have proactive support.

Anytime we see you not using the product we reach out to you.  We explain every feature to you individually.  We can train you as much as you want, all at no cost.  The company itself and our revenue model are totally aligned with the doctor. Our account managers are dedicated to you as well.

So our non-user rate is far less than most of our other competitors, but beyond that we proactively reach out to them once or twice a week or so to make sure they don’t have any problems.  If you look at eClinicalWorks, their bottom lines are much better, their margins are much better if you they don’t support you.  So they’re better off taking two days to get back to you whereas our support time is less than an hour, for example.  So again, we’re just in line with the doctor and the vast majority of our community is active. But again, it’s something that we constantly work on because getting the user active is aligned with our model and it’s not for anyone else.

Williams: You alluded to your revenue model, but also talked a lot about things being free.  So how do the funds flow in your model?

Howard: The mass of our model is advertising. Within the product physicians opt into the free model.  There is nothing disabled.  Just to be clear, it’s a free model where you sign up and you get some pieces of the product but not others.

There is an ad-supported version of the product and then there is an ad-free version of the product.  You see exact same product, one just has ads and one doesn’t.  So the user can be up and running on the ad version for free on the same day with no cost whatsoever. No cost for licensing, training, support, hosting. That’s really the main revenue model.

If an ad user is using the product, we derive revenue from everyone ranging from consultants that are looking to get in front of doctors to device manufacturers to pharmaceuticals.  It’s just highly targeted.  As we do this the company’s integrity and reputation are always held to a very high standard.  We do everything from background checks when an employee comes in to security audits internally.

We never sell physician information.  We never list match with pharmaceuticals.  We never give that information up to anyone.  My point is: when we advertise, it’s done in a discreet, no pop ups manner. It’s also done in a way where it’s very private.  You don’t see any complaints about us on the web.  Security and privacy are our top two priorities.

Kaiser had a breach last night.  It was just released last night in the news that tens of thousands of numbers of patients were breached.  So it gives you a baseline to measure.  Again that’s one of our main priorities and also how we run the model.

Williams: Ryan, any other news to share with listeners at this point?

Howard: That’s about it. Anyone who’s interested in the product we would always like to come in and visit with the account managers.  If you sign up, there is no obligation to use the product.  If you’re interested in it, you can be up and using e-prescribing on the same day.  The product is exceptional. Again, we’re one of the fastest growing companies in the country for a reason. We invite everyone to come and check it out.

Williams: I’ve been speaking today with Ryan Howard, CEO of Practice Fusion.  Ryan, thanks so much.

Howard: Great.  Thank you David.  Take care.

January 21, 2010

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