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Don't count Matt Hawkins among the large group of Gulf Coast executives in despair over the federal health care overhaul.
Hawkins actually embraces the law — especially the part that will insure roughly 30 million more people — because his business sells medical office management software. The company, Tampa-based Vitera Healthcare Solutions, is one of the largest medical software firms in the country, with 80,000 doctors on its client list.
“Since we serve so many health care providers, this represents a tremendous opportunity for us,” says Hawkins, CEO of Vitera. “We feel a great sense of responsibility to help office-based practices use our software effectively, efficiently and profitably, so they can handle the increase in patients that Obamacare allows for.”
The private equity firm behind Vitera, San Francisco-based Vista Equity Partners, backed up that responsibility this year with a $25 million investment. That's in addition to the $320 million Vista paid in September for Sage Healthcare, which it renamed Vitera. Vista, with co-founders who worked at Goldman Sachs and Bain Capital, acquired Sage from The Sage Group plc, a British business software conglomerate.
Vista's investment, say Vitera executives, is proof of the company's desire to grab significant market share in what many health care experts say is the industry's next frontier: electronic medical records. One recent report, for example, predicts the industry will nearly double sales in five years, from $4.6 billion in 2011 to $8 billion by 2016.
“The industry is certainly changing,” says Susan Coles, founder and president of Sarasota-based Sudaco Physician Solutions, a 30-employee physician billing firm. “More and more doctors are changing to electronic health records.”
The $25 million in capital at Vitera will be used for a variety of transformative tasks. The list includes hiring and training 200 new employees; spending at least $10 million on internal software and sales systems; and building a doctors' office-style laboratory for prospective clients.
“We're in brand-build mode,” says Hawkins. “We are trying to establish our core identity.”
An early and noteworthy move in that regard, which attracted a modicum of negative publicity, was when Vitera laid off about 120 employees — all inherited with the Sage acquisition. But the company has since hired 150 new employees, including 40 in customer service. Hawkins says Vitera, now with 500 employees in Tampa, will probably hire 50 more people this year.
Hawkins says little about the reason behind the February layoffs, only that the company made some difficult personnel decisions after it bought Sage. “We want to be the company that's easy to do business with,” says Hawkins. “Our theory is that simplicity matters.”
Hawkins adds that Vitera is “very careful” in whom it hires, even considering the speed with which it has brought on new people. “We literally have so many positions we are hiring for that sometimes I worry we can't hire enough people fast enough,” Hawkins says. “We look for people who have proven track records of success.”
Meeting demand
Success, at least in terms of sales, has come slower at Vitera than new hires. Revenues have been flat in the nine months since Vista bought Sage, though Hawkins says operating income has increased. Hawkins declines to elaborate on specific revenue figures.
The operating efficiency, says Hawkins, comes partially courtesy of a stable of about a dozen new executives who have helped ease the Sage-to-Vitera transition. The revamped management team includes a new senior vice president of sales, a new senior vice president of product management and a new vice president of client support. “These are people who get it,” says Hawkins.
The challenges to grow in the market, however, remain deep. For one, some of the company's core products have suffered from lack of marketing, says Judy Hanover, a health care industry analyst with Framingham, Mass.-based IDC Health Insights. Hanover, the firm's research director, adds that while the Sage acquisition looked good on paper in September, nearly a year later the benefits remain uncertain for Vista.
“The jury is still out,” Hanover says. “Right now there is still a lot of (customer) confusion.”
Hawkins will address these challenges first internally, then externally. For example, the $10 million the firm spent on internal software and sales systems was a key first step toward making things more efficient, and the company hopes, less confusing. The investment includes an extensive partnership with salesforce.com, a cloud computing customer management portal. “We were relying on eight or nine systems to get one or two functions done,” Hawkins says.
Hawkins also wants to improve morale. Executives are developing an incentive plan for customer service employees, for instance. Hawkins, meanwhile, has championed Wacky Shirt Friday, where even the chief executive dons a gaudy Hawaiian shirt.
Getting paid
Vitera executives also plan to reconfigure a portion of the headquarters they lease in Tampa, near the International Plaza mall. On an external basis Hawkins envisions turning some of the space into a mock doctors office that can be a testing laboratory, where physicians can see in-person how the software works. Hawkins also says he would like Vitera to hold user's conferences for doctors in Tampa.
Nearly 50% of Vitera's clients are primary care physicians — a group that could see a surge in patients under the federal health care overhaul. The other side of the business is specialty physicians, a cluster that includes pediatricians, cardiologists, and obstetricians.
Vitera says it processes 33 million transactions and 1.8 million e-prescriptions every month for that client base, which encompasses 80,000 physicians in more than 11,000 practices. Hawkins nonetheless says the firm sees potential growth in “ensuring every doctor uses electronic health records.” To meet that demand, the firm plans to grow its sales account management team nationwide by more than 40%.
Moreover, Vitera, like many competitors, is developing smartphone apps and cloud-based products, so doctors could write prescriptions or monitor a patient's chart on multiple devices.
The idea, says Hawkins, is to create products that work, and work easily. One Vitera software program has a tracking tool that allows doctors to see a claim in the process of being paid, like people can do with the delivery of FedEx packages. “One of the things we pay attention to,” Hawkins says, “is helping more of our clients get paid faster.”
Low volume
Hawkins and Vista Equity Partners, the private equity firm behind Vitera, come with stellar pedigrees.
Vista has more than $5 billion in capital spread out through a few dozen companies, mostly in health care technology, software and the financial industry. Vista has offices in San Francisco, Chicago, and Austin, and executives say they intend to maintain its low-volume niche of buying only a few companies a year.
Business partners Robert Smith and Brian Sheth, who were both previously executives with the prominent mergers and acquisitions group at Goldman Sachs, founded Vista in 2000. Sheth, now president at Vista, also worked at Bain Capital, where he assisted on leverage buyout deals in the technology sector.
Hawkins, too, has starry companies on his resume. A Salt Lake City native, he ran the technology division at Henry Schein Practice Solutions, a health care software industry leader. He earned an M.B.A. from Harvard, and he worked for McKinsey & Co., a management consulting firm. Hawkins was also CEO of SirsiDynix, a library industry software firm that Vista acquired in 2006.
Hawkins, with an undergraduate degree in finance from Brigham Young University, says he was drawn to work in health care because it's an industry undergoing a technology reboot. “There are a lot of great things happening in health care,” Hawkins says. “We were thrilled to get this business.”
Big Buzz
It's gold rush time for hundreds of companies nationwide that sell software and services that help doctors make the electronic medical records transition.
The industry is poised to surpass $8 billion in total sales by 2016, up from $4.6 billion in 2011, according to a recent report from Toronto-based Millennium Research Group. The Centers for Disease Control and Prevention says more than 50% of medical practices nationwide have adopted some form of electronic records, up from 38% in 2008.
It's not only technology that has driven the surge. The federal government has goosed the industry, too, through a system of incentives — and potential fines — to encourage the transition. The incentives are up to $18,000, while if the switch isn't made, federal law calls for financial penalties, including a decrease in Medicare reimbursements.
Nationwide, the industry is a mix of small companies and behemoths, like GE Healthcare, Allscripts and Tampa-based Vitera Healthcare Solutions. Three Gulf Coast companies with specific industry niches are capitalizing on the frenzy. Those companies are:
• Fair Warning: The St. Petersburg-based company, founded in 2005, created a software package that protects medical practices and hospitals against patient privacy breaches when making the paper-to-digital switch. Founder and CEO Kurt Long says being first to market with this specific product has been valuable.
The company has doubled revenues and customers every year since it was founded, Long says. It now has 60 employees, with 10 open positions. It has sales offices in London and Paris, and clients in 44 states and seven countries. “We've sustained a very high growth rate,” says Long, “even in the past few years.”
• Medical Resource Association: The firm consults with doctors offices on the dizzying amount of options on what software to buy to aid the transition. Founded in 1998, the firm recently moved into a 5,000-square-foot office in downtown Sarasota, where it plans to host more seminars for doctors. Sales are up at least 35% this year, says President and CEO Kristen Beury.
• Sudaco Physician Solutions: The Sarasota-based physician billing and electronic health records company has hired about 10 people over the last two years, and now has more than 30 employees. Founder and President Susan Coles says sales are up 10% to 15% annually.
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