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Chapter 11. Views from the Edge—Conversa... > Executive Interview #5: Healthcare S...

Executive Interview #5: Healthcare Services

SoftAid Medical Management Systems (manage.MD)


Founder, CEO, & President: Jose Valero

Vice President: Jim Clark


A leading e-health company, SoftAid delivers office management applications to healthcare providers nationwide. The company was founded in 1992 and now has over 250 clients. SoftAid is one of the first firms todeliver Internet-based applications that help providers improve efficiencies by automating error-prone data entry processes, improving documentation and eliminating redundant patient care.

Plant:Gentlemen, perhaps you could tell me about your company and how the Internet has impacted your strategic thinking.
Clark:We started as a software company about 9 years ago as a medical billing software vendor writing custom applications for healthcare. We have evolved from the DOS-based world to the Windows-based world as a software company, and we saw the Internet as the new revolution in application deployment. And a couple of years ago we decided to move in that direction.
 In the past we had looked at the Internet and thought of ways of getting involved, apart from the software, in the healthcare side, and we discussed starting our own ISP and other different ways that we could get involved in the Internet. It has always remained upon our minds.
Valero:We always looked for opportunities that would be available and realistic within our financing model.
 We saw the Internet as a means of leveraging our knowledge base and differentiating ourselves in a crowded market for billing systems. The Internet strongly suits itself to the healthcare industry. As the data in healthcare is locked behind walls of proprietary systems, the systems are very disparate and do not facilitate the interchange of data, so that, we felt, lent itself to an Internet solution. One of the offerings we saw evolving was data and system hosting through the Internet for healthcare organizations. This lowers their total cost of ownership, decreasing the maintenance burden. As we can update our software instantly, we can keep the software at one location instead of at many locations across the nation. Plus we can simply offer the doctor a simple way to log on and have all the functionality he needs, and all he needs on the other side is a modem and a connection to the Internet. So he does not have to have a very powerful machine.
 In the application service provider model, our goal is to come into a client and allow them to use our software, our services, and our hosting facilities for no more than they pay for support for their legacy system. We can do that by the efficiencies that we gain from the maintenance and support of our Internet product. We have already developed the product and customers purchase the licenses. The marginal cost for distribution is nominal when it is sitting on our servers.
Plant:What do you consider were your core strategic strengths that you felt could be leveraged as you moved in that direction?
Valero:We had a vertical application that was in very high demand within a niche industry, so we had a niche application within a niche industry that was growing fast. So our core was our experience and the product that we had developed over the years. Also keep in mind that our industry-specific knowledge together with a true understanding of what our market required and where the inefficiencies lie within our market enabled us to understand how we could use the Internet to eradicate those inefficiencies.
Plant:You come from a healthcare background, but, being in an entrepreneurial mode as a youthful, private company, what was the motivator and driver behind your move into the Internet space?
Clark:The healthcare industry has traditionally lagged behind other industries in terms of its redemption of technology, so it was fortunate for us to be in the healthcare technology industry and to see what was occurring early. We have continuously followed the Internet and its technologies from the very outset. So when we began planning our Internet strategy in 1997 for Internet-based healthcare systems, we were extremely early and there were no other organizations in the space. Patient confidentiality of records, privacy, and the security issues were a prohibitive factor. So we were able to see what was going on in other industries and see how that was going to affect us in healthcare. As entrepreneurs, we are always looking for new applications and new ways of reducing inefficiencies and looking for new ways of capitalizing upon that.
Valero:At the same time we continued to develop our current product. What is happening is that healthcare is slowly adopting these ideas, using the Internet to save time and money, and we are seeing some competition in the field come with one or two applications, but we are entering the market with a holistic approach. We are looking past all the current problems and have attempted to gain a vision of what it is going to look like 2 plus years out; with the speed of technological advance, 2 years is a long time.
Plant:How do you feel going forward regarding governmental and regulatory issues? What will be the impact upon the healthcare industry?
Valero:For us, it affects us in one major way: that is the electronic billing of claims and that the government, through HCFA—the Health Care Finance Administration—they regulate a lot of these issues relating to transmitting the electronic data and the format, etc., and they are moving towards the Internet also, but not at a fast pace, so it has really not affected us in that sense. We are somewhat ahead of the game through the experience we have gained in our previous products, when it comes to government regulations. However, they are going to follow suit and are heading in the same direction.
Clark:The government influence is a wonderful thing for software vendors in healthcare because it antiquates those systems very quickly so they have to have a good relationship with a technology vendor. They can't just run off and develop a proprietary system that will live forever. It has been good for us, the government influence; we have to move with the technology, obviously. It is even more important with things like HIPA [Health Insurance Portability and Accountability Act] which is a Congress mandate which deals with how the Internet is used in healthcare, so as vendors we have to meet those guidelines and have it work for us.
Plant:With this background, perhaps you could share with us some of your insights as to the challenges faced going forward by e-commerce strategists, both within your industry and in general.
Clark:As far as implementation goes, there is an adoption curve, and healthcare has traditionally been a laggard with respect to the adoption of technology. So we have those barriers to entry to overcome. Healthcare spends in general about half of the amount other industries spend on information technology—7% as compared to 14%. So it's a challenge there. So, having said that, the Internet and healthcare are converging rapidly, and there are a lot of firms coming out, some very well funded—a lot of players from other industries entering the space because they see the opportunities. It's a $250–400 billion industry, depending upon which market study you read. So there are a lot of inefficiencies to address, and our biggest impediment to going forward is not going to be the adoption of the technology but the competition as it comes in. There are a lot of strategic alliances being formed, and one of the keys for us to our long-term growth is the ability to form long-term alliances and develop a product that is going to last.
Valero:That may also help us, however, because at the moment only 5% of the doctors are interested in an Internet-based solution, and that is growing rapidly. But having some of the larger players in the market tout this technology will also assist in the move to an Internet-type solution. There are also some barriers that we have to get past, such as physicians' concern with security. You can imagine that security is an issue that we have dealt with in the past from a technology perspective, but there is an educational learning curve to be passed through by the user base.
Plant:As businessmen what are the major challenges? Is it a human resource issue? Is it a regulatory issue? Is it an issue of keeping up with the technology or a standardization of technology issue? What, as an entrepreneur, as a private company, do you still face?
Clark:From the positioning and marketing perspective, it is vitally important to position and present your product to the target market correctly, decide upon how the customers are going to adapt this technology. And again it is a very small percentage of the market that is ready for this technology. It is finding the right positioning of the product by partnering with the right vendors to get the product in front of the right eyes.
Plant:So the partnering role and the fact that you can focus upon a narrow marketspace at the moment is a benefit to you in the sense of cutting through the competition?
Valero:Exactly; that is going to make it a little more efficient to work through those large numbers.
Plant:Do you feel that, for start-ups in general, one of the challenges is to find the right partners and move forward with them?
Valero:Yes, absolutely.
Plant:What other areas are challenging organizations developing e-commerce strategies?
Clark:One issue is human resources. The talent pool is so tight—it is very difficult to find the right talent.
 From a technology perspective, what is interesting about coming to market with an Internet-based product against an industry of legacy systems is that the Internet products are in their infancy stage. That goes from the infrastructure, the bandwidth issues, the applications, and how robust they are. In terms of actually using them in a day-to-day setting, a Web-based application will have some limitations to it against, say, a Windows-based application or a UNIX application, but that will change as the bandwidth changes. That's also an impediment that we have to address and time will work that out.
Valero:Clearly the strengths we have built up come from the challenges entrepreneurs face in the Internet marketspace: Time to market is key, continual adaptation to the technology, meeting the customer's needs, providing a better mechanism for performing a task than the customer already has, and preempting regulatory issues. These strengths have allowed us to position ourselves effectively in the Internet space, to grow our market share, and to develop as a major force in the online medical management systems arena.
Plant:Thank you for sharing your insights.



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