Why have I been a skeptic? As some of you know, I started the healthcare vertical market for Microsoft back in the early-mid 90’s. After joining MSFT a couple years earlier to help get the company into the enterprise software business, I was asked to take on that role since I’d worked in Accenture’s healthcare practice so I was the only one around who knew anything about healthcare. The extent of the direction I was given was “go get healthcare apps written on top of Windows NT”. It was a fun/crazy time working with some great people like Bill Anderson, Bill Snyder, Dan Bourgoin, Karen Anderson, Graham Clark, and some other fun/interesting folks. While we had great success getting market leaders to port their apps to NT and getting startups to develop new applications on top of NT and BackOffice, it was frustrating to see the glacial pace that the market would adopt the new applications particularly if they were from a young company. I remember one of the first weeks I was in the new healthcare job I went to the biggest healthcare I.T. show – HIMSS. It was as though I’d stepped back a few years in time. Vendors were proud of their “Windows Application” because they had a blue bar at the top of a black/green 3270 terminal screen. At the time, even on the desktop Windows was on only 10% of the Intel desktops even though other vertical markets it was anywhere from a low of 35% to most being in the 50-70% range (this was 1993 and Windows 3.1 had been out for awhile and Windows 3.0 had been there for quite awhile). While I didn’t care about MSFT’s desktop business (my focus was on server software), it was an indication of what I was up against.
Why was healthcare so far behind the times? There are many factors but there are a few that bubbled to the top…
- While healthcare was on the cutting edge on medical technology, it was very risk averse on the information technology side of things. There was a great fear factor of failed I.T. projects and they often emphasized that these applications weren’t mission critical, they were life critical. Even though Windows NT was quite stable even in its v 1.0 (though it was called Windows NT 3.1), it had the bear the burden of its DOS-based cousin’s sins of instability.
- Healthcare typically only spent about 1-2% of its overall budget on I.T. whereas other industries were 5-9% due in part to the previous bulletpoint. One reason was they didn't feel I.T. could provide competitive advantage. For that matter, many hospitals didn't even think about competition as they were quasi-monopolies.
- Because healthcare had long operated as a cost-plus business heavily influenced by government reimbursement, there was little focus on efficiency and excellence on the business side. A byproduct was that most of the best/brightest minds in business/I.T. weren’t drawn to healthcare. This was further exacerbated by the fact that healthcare has been fragmented and there are very few Fortune 500 companies outside of health insurance which isn’t dealing with the clinical side of the business.
At the time Fred wrote this post, I had just begun digging back into the space starting to look at emerging opportunities -- so far, I've only come across one that looks interesting. Now I know that one of the places I’ll consider if I have a client that needs institutional funding in the healthcare/medical arena, Fred’s firm would be one that I’d consider.