Last month, Medical Director (MD) laid off 14 staff who were variously doing integrations, e-referrals, patient engagement, major contracts and software development, according to sources.
There is a lot of rumour around MD and its cloud-based product, Helix, but not a lot of hard information, probably because the company is owned by private equity. But if the leaks are to be believed, the company is struggling internally with the transition to its Helix product and how that is interfacing with the core market of GP practices.
Staff turnover at the company over the last year has been regular, and high. One past employee who spoke to The Medical Republic said Helix had failed and probably needed to be started again from scratch.
A major company that MD supplies told TMR last year that Helix wasn’t up to the requirements that had been promised resulting in tension with MD. One of MD’s own employees confirmed directly with TMR last year that Helix was not working well.
MD isn’t the only cloud player with rejection issues. All the major emerging cloud vendors have stories of major new installations being rejected after a period of time. But most instances of new trials failing don’t revolve around core functionality, but rather the integration with other systems and user interface issues. It’s a big change for the coal face doctor who has been using their desktop brand for many years now.
But whether Helix works well or not may not be MD’s biggest issue.
I am on the board of a cloud-based patient management system start-up called MediRecords (MR).
MR was started many years ago on what seemed at the time to be a very tangible assumption that doctors would move to the cloud, much like other businesses have moved to the cloud on accounting systems such as Xero. And when this happened, the connectivity utility of such a cloud system would make it the hub of so many transactions and data nationwide and it would become hugely valuable.
Frankly, this assumption was way off the mark.
There are a lot of factors at work which make cloud PMS a different scenario. For example, most doctor practices are on a five-year financial cycle with their old desk bound PMS systems. Or, they are part of a corporate.
When you count the practices that are left in any one year as a potential cloud PMS client, you are working with only somewhere under 12% of the market. Of that 12%, most aren’t ready for the cloud for various reasons, including:
• A cloud system means a lot of change in how you practise. Nobody likes change.
• A cloud system will almost always mean you have a new user interface which will be very different to the one a doctor has used now for up to 25 years. If you recall any horror UI changes by major firms such as Microsoft or Apple, you will realise that this is one of the biggest issues a group will face in changing over.
• Most practice managers or IT practice support contractors to practices either do not get the economics of a cloud PMS, or they feel threatened by it. Hardly anyone does a proper like-for-like comparison of the cost of getting cloud versus staying with a local server, desktop solution. They usually just look at the subscription price. Which is rookie mistake. With cloud, the subscription price is everything. With older desktop systems on top of the software subscription you have to pay for computers, software patching, maintenance, servers, routers, networking, and a whole host of other things. Cloud, if you can manage all the other hassles it brings, is far more efficient and less expensive.
• Data migration is huge hassle. Some cloud providers help, but it is always hard. And it can be expensive.
But probably the biggest issue with cloud is integration with all the services that currently work with your existing system. The issue is, in nearly all circumstances, many of the required integrations in old deskbound products, are “hacks”. And some of those hacks can’t be easily reproduced when you put a cloud system in.
Why? Because some of those systems (eg, PEN CS, which is required by most PHNs to be on your PMS, because they want your data), do not have cloud functionality. They are too old.
Cloud adoption for doctors, by the nature of the market, has to be very chicken and egg.
Nearly all the services that talk to a doctor PMS and are integrated with the existing desktop majors, do not have an API strategy because they haven’t needed one. API stands for application programming interface. In terms of cloud-based systems, an API is the way a system will talk to a core application. It costs time and money to build a decent API. Cloud systems do not have enough users yet for all these connecting services to go to the effort.
But how does cloud PMS ever get a lot of users if integrating it with all those services is so hard?
This problem will sort itself out. But very slowly.
The problem did not occur with Xero because its growth came from greenfield users. The old market for accounting software was accountants. Xero was targeting small business owners directly. It didn’t need to wait for integration services to pave the way. Xero worked stand alone.
Another issue is medical cloud startups may have significantly underestimated brand loyalty.
Most doctors have been with their brand – usually Genie, Best Practice (BP), or MD – for many years. And all these companies have, in one way or another, engendered some loyalty for their product service and functionality over the years.
BP might be the best at this game.
It’s founder and owner, Dr Frank Pyefinch (who also originally started MD), seems to have a good feel for the pulse of his customer base. Part of this is because he is doctor himself, so he knows what irks doctors. Part of it is that he loves what he does. He built the first major PMS in Australia nearly 25 years ago. He’s immersed in it. He’s focussed. It’s hard to compete with that if you’re MD, owned by private equity, with all the complexity and politics that brings, or a start-up, with no track record at all.
Dr Pyefinch is also a reasonably business savvy. If you are a BP customer, you probably trust BP to do the right thing based on how you’ve been treated over the years.
That isn’t to say MD doesn’t have brand loyalty as well. It was the first system in the market and it has been a steady and important presence ever since.
That BP is the last to build a cloud system might once have been thought of as crazy. But as the enigmatic Dr Pyefinch once stated to me, the cloud is going to take a lot longer than people think, and he is going to take his time and build it right. That statement has turned out to something of a prophecy.
MD rushed Helix to market. Part of why it did that was possibly because MR, a new, cloud only start-up, got to market first. MD might have panicked. But MD was also building Helix for Healius (previously Primary Health Care), and there may also have been a timetable on that which pushed it to market early.
Past employees of MD have suggested that a lot of Helix’s functionality issues can be traced back to the origin of product, which, they say, was not as a purpose-built cloud system for all GPs, but as a system specifically built for use by Primary’s bulk-billing clinics, which was a hybrid cloud system.
But even if Helix works a treat, maybe the market currently just isn’t there for it.
Certainly the experience of MR suggests that adoption is slow and fickle. If MR relied on GPs adopting cloud to its original plans, I doubt it would still be in business.
So what does the condition of the MD business mean for cloud PMS in Australia?
If you talk to Clinic-to-Cloud (CTC) boss Rafic Habib you wouldn’t think there was any issue with cloud adoption. His business started a few years ago with a premise that cloud would offer functionality that would be adopted by doctors naturally as they recognised its distinct advantages. This is a similar premise the MR and the Helix product rollouts.
The other premise of CTC, however, was that it would be a “Genie-killer”. Genie wholly owned the specialist PMS market when CTC started. That a competitor of some size would emerge felt inevitable. That it is a cloud-only player is the interesting dynamic. Genie remains the market leader, but CTC seems to have put a good dent in Genie’s dominance in the past few years.
That hasn’t occurred in the GP market.
Mr Habib says his business is growing fast because doctors are recognising the advantages that cloud can bring. He claims he is growing very fast.
But he is also very quick to tell me that the word “cloud” can be very confusing.
“You shouldn’t talk about ‘cloud’ to your customers”, he said. “You should even take the technology out of the discussion you’re having with a customer or potential customer, if it enters it. You should start and end at ‘what is the best solution for you?’ at what your doctor needs to do now, and likely into the future. What works for them, and what will do that?”
If he’s correct, it might mean MD’s major problem is that Helix, as MD’s former employees and customers have been telling us, doesn’t work well enough yet. For the uptake of cloud overall, the issue for MD might be both product-based, and market-based.
Cloud for doctors is a lot more complex than most people think and it’s going to take a bit more time.
MD looks like it is in a very difficult position from a market perspective. We asked MD’s owners, Affinity Equity Partners, to answer some questions on the business, but the request was declined.
Most industry analysts will tell you that BP has taken the lead in market share over MD in the GP market. MD vehemently denies this suggestion.
More than a year ago, BP dropped its prices quite a bit. This might have been a play by the company to scoop up share from disaffected MD customers as preparation for the future, when BP does have a cloud solution. If this is a deliberate strategy on BP’s part, it would go like this:
Cloud is eventually going to work for doctors because of the functionality it ultimately will have but, it’s going to take a few years.
The major competitor is going all out on cloud now. Let’s take advantage of that distraction and just offer its customers a cheaper solution that works right now.
And then they become our customers. Ready to go to the cloud in a few years.
MD looks like it is caught between a rock and a very hard place.
Its owners bought it for $155 million. If MD is shedding whole departments, it is either shedding costs to sell, or it is trying to reset itself in a new direction. Either way, it is difficult to see anyone paying those dollars for the business as things stand today. In which case it has to trade its way out of its current dilemma.
But if cloud for doctors is going to take a lot longer than people think, that’s not going to work. MD will need to win some bigger enterprise contracts such ase MR did with Queensland Health.
Apparently MD has been pursuing a Department of Defence contract for a new PMS. Enterprise contracts like this might be one way out. But it might also be distracting.
In the meantime, in what has been described as a “health distribution Game of Thrones”, there are people with a lot of money and plans who are intent on seeing the vision of cloud PMS value being realised.
There is talk, for instance, of Genie, which is backed by a huge fund manager and private equity group, IFM, circling BP. Genie is the clear market leader in the specialist market. It is spending a lot on cloud development, so it doesn’t lose that lead to CTC. But Genie has bigger aspirations. It wants to be in the GP market too. So does CTC.
What better way to do that than buy the footprint and reputation that BP has?
A flaw in this plan is that BP is 30% owned by Sonic. But that might be a good thing. Maybe IFM will buy 30% too, and together, Sonic, Dr Pyefinch, and IFM (Genie) can rule all of Westeros.
Failing this, maybe IFM could make Affinity an offer it can’t refuse.
Another possibility is one of the big overseas vendors buys into BP or MD for a footprint into what is a reasonably computerised primary health care sector. It might also be the way to land the defence contract.
That there is so much interest in all the PMS players, and that the all have some cloud plan, suggests that cloud PMS and the whole connectivity and distribution game is only going through teething problems at present.
There is some analogy in what is going on here with newspapers and the internet. For years newspaper publishers were either in denial or just being stupid about what the internet, especially via social media platforms, might do to their business model.
The relevance for cloud PMS is that eventually all the major existing vendors will need a good cloud presence somehow. If they get the timing wrong, as the newspaper proprietors did, they risk being overtaken by cloud-only competitors such as CTC or MR.
Another interesting lesson possibly from this analogy is that all the newspaper proprietors all thought they could build their own future digital assets. And they all mostly failed.
Being an incumbent in digital transformation can be a very tricky proposition. A key issue is you have an existing cash-positive customer base that loves your old product. And if you make a new one that eats your old one, you get all sorts of issues with your cashflow, and with your customers.
Timing is key. MD’s bad start to the year has much to do with its cloud strategy timing. MD went too early with a product that, by all accounts, wasn’t ready.
But you can hardly blame them. It looked a lot like perfect timing a year or so ago.
So what is the timing? It’s very hard to tell. But we do know one thing. Like in Game of Thrones, the wall of legacy will be breached one day. And the cloud will come in numbers, with the network effect that this will bring to whomever is winning.
Presumably it will be a force for good, though.