In real estate, it’s all about location, location, location, they say. In healthcare IT, you might say it’s about integration, integration, integration. Allscripts CEO Glen Tullman is keenly aware of how critical product integration is, he says, and he’s working on it. It’s the difficulties with integration that seem to have led to the EHR company’s recent troubles – at least it’s what Allscripts customers and analysts mention most often. Then came April 25 and the ousting of Allscripts’ board chairman, which triggered three board members to quit in protest, the departure of its CFO (for reasons unrelated, according to the company) and a dismal quarterly report, all of which led to stock price plunging 44 percent.
Allscripts CEO Glen Tullman discusses the challenges that face the company, plans for recovery and its future in the market.
Q. Can you make Allscripts whole and thriving again? How? How long will it take? What’s your vision?
A. Yes, I believe we can. Many companies would love to have our positioning, our products, our marketshare and our earnings and cash flow. But to be clear, we can execute better than we have, and we will. We have the right leadership team in place and have made the investments to enable us to lead the industry. And we have the best client base in the industry. Relative to timeline, we are making improvements right now.
Our main areas of focus are product delivery and client experience. We are investing $190 million in 2012 in improving performance, integration and innovation with a number of major releases and improvements in motion. Relative to improving product performance, we have established test labs to eliminate past integration challenges, especially third-party products and the new apps being built for our open platform.
Additionally, Wand, our native iPad app for our Enterprise and Professional EHRs, was recently launched and has been positively received in the market. Our iPad application for our Sunrise Acute offering is already on the market. Wand is another example of the innovation that Allscripts is known for.
Over the course of the year, we have added more than 400 frontline support personnel to our team, many of whom are now just coming on line. And, we continue to upgrade our hosting capabilities through a new data center as well as improved monitoring capabilities to better serve our current customers and future prospects. Additionally, at the beginning of the first quarter we launched a major reorganization, bringing together our sales and services teams into a single organization. This is absolutely the right move for our clients, providing them a single point of contact and a team that is not just accountable for selling, but delivering.
Q. Why the so-called poison pill, or shareholders rights approach?
A. This is a common approach when companies believe their stock is undervalued. We are committed to act in the best interests of our stockholders and our clients, which is why we increased the size of our current plan from $200 million to $400 million. We adopted the shareholder rights plan to protect against efforts to obtain control of Allscripts that are inconsistent with the best interests of the company, our clients and our stockholders. As described in a recent article in The Street, “The decision to enact a poison pill by Allscripts, though, also places the company in the camp of target market properties that are deciding to gut it out rather than sell out…”
More of the interview on the next pages.
Q. It’s been reported that there was a “standoff between you and Board Chairman Phil Pead. What was the crux of the disagreement? Why was he terminated?
A. As reported by the Company, Phil’s service as chairman of the board, a director and officer of the company terminated on April 25, 2012, after the board engaged in extensive deliberations regarding the leadership of the Company. We wish Phil well and thank him for his contribution to the company. My focus today is all about our clients, how we help them improve healthcare, and ensuring we execute against our priorities. Our vision of a connected community of health is driven by leveraging the largest ambulatory base in the industry, the most used and usable products, our open architecture, and the apps it enables, all provided very cost-effectively.
Q. What do you view as the greatest challenge to recovery?
A. Last quarter we added more than 300 new clients and made solid progress with many of our existing products. From a client perspective, we have to deliver on robust integration and focus on our client experience with our offerings given the number of upgrades and new installs we have. That’s one reason we hired more new employees in development, services and support. These are the right investments and they will pay off for our clients and our shareholders.
Q. What are the issues with product integration? Allscripts/Eclipsys integration?
A. ADX 1.0 [software that integrates Allscripts’ acute and ambulatory technologies] was released some time ago and met the technical requirements, but it didn’t meet our clients’ needs. So we worked side by side with our clients to rebuild the product using Agile rapid prototyping techniques to ensure it was what our clients wanted and needed. ADX 1.5 will go into Beta at clients within 60 days and is scheduled for release at the end of September 2012. The client feedback and early testing has been excellent.
Q. Some of your customers have given you kudos for leadership, but one of your largest shareholders asked for your resignation citing problems with execution and leadership. How do you see it?
A. In my 15 years as CEO, I’ve learned that the best way to build long-term value is to deliver for our clients – they have always been and will always be my primary focus. I am incredibly close with many of our clients and spend most of my time with them, so their support is very much appreciated. Relative to shareholders, we strive to maintain a constructive dialogue with them and continue to be very focused on generating shareholder value. Once again, the best way to do that is to deliver for our clients.
Q. Should Allscripts customers be concerned about support for their EHRs going forward?
A. Our clients have seen and will continue to see improved support and continued investment in products, processes and people. A big part of our focus over the last year has been upgrading our clients to help them achieve meaningful use. To put this in perspective, we have the largest client base in the industry, and no competitor had to touch more clients in such a short time. Given that many of our clients are smaller practices, the challenges have been not just about upgrading software but also include hardware connectivity and workflow.
For some of our clients, this was the first upgrade or change in years. We have worked through those challenges, making significant investments, including, as I mentioned before, adding more frontline support personnel to our team. Additionally, we have initiatives in each product line where we are seeing progress across key metrics and have initiated an “end-to-end” client experience program, bringing together all of the groups that touch a client.
As John Bosco, the CIO of North Shore Long Island Jewish, shared in an email to his team, “I see many positive changes going on within the company that are more focused on long-term success.” Clearly, I agree and that’s where we will continue to focus.
More on next page.
Q. In hindsight, what do you wish you had done differently?
A. Allscripts finished 2011 with the best results in our history: profit up 23 percent, bookings up 17 percent and free cash flow exceeding $160 million for the first time in our history. We’re proud of what our team accomplished. That said, our own internal plans were higher and we could have executed more effectively, especially along the lines of software development as it relates to product integration. This is a critical area where we need additional traction and it is now heading in the right direction, led by our head of solutions development, Cliff Meltzer, who joined us last year. Cliff has the right background, having spent many years at Apple, Cisco and IBM where he focused on user experience, connectivity and large data set analytics – perfect for where healthcare is headed today and where our products need to be. Our next version of integration (ADX 1.5), developed with client input using Agile rapid prototyping, will be delivered for early validation to the first clients within 60 days. We’re always focused on getting better and have a set of clear priorities to ensure our focus going forward.
Q. What about the claims in the class action lawsuit? (That the company made materially false and misleading statements in regards to its progress in assimilating both Allscripts’ and Eclipsys’ disparate systems and its ability to translate its fragmented product lines into revenue).
A. While I can’t discuss any pending lawsuit, I can tell you that lawsuits are common in public companies when the stock drops for any reason. We are still reviewing the claims made, so it’s premature to discuss. I can tell you that Allscripts intends to defend itself vigorously.
Q. Finally, amid these challenges, what in your view is the best thing going for Allscripts? The strengths?
A. If you ask our clients, they will say a few things: first, they love our people, who are the best and most talented in the industry. They form the basis of the long-term relationships we enjoy with our clients. Second, they love our products. Sunrise, an example, is known as the best clinical software in the acute space, bar none. And our software has higher utilization than any other software – that’s a fact and it’s much more usable. Two great examples are CPOE and ePrescribing.
We have had challenges in a number of areas and have plans in motion to address them. The key is that we are positioned for the future, where the market is heading. Our software is open architecture, based on new development languages, affordable, and geared to the changing requirements in the market where connectivity, information, and analytics are the core components of any functioning health system.
With clients in every setting in the market, including private practices, hospitals, post-acute care facilities, and at home, we can improve the lives of patients, communities and our clients by creating open systems that connect hospitals, physicians, nurses, caregivers, homecare facilities and patients to enable truly coordinated care – that’s what drives us and resonates with our clients.