From Kim D. Slocum, FHIMSS, President, KDS Consulting, LLC
(Continued from previous)
The team also identified that HIT is something of a sideline for the company (interesting query to the team: do you know how and why McKesson got into HIT in the first place?). The team also hit upon one of the absolutely key points of the HIT industry—that its fragmented. Their idea of using the firms size to become a consolidation player is excellent and may actually wind up happening in real life.
Not aware why they got into HIT, will have to look that up...
We would remind our classmates that cellular and broadband were once a sideline business for AT&T, and Amex is currently becoming a bank holding vs cc company...might be a better future in HIT than in distribution. Suspect they will continue in both. Yellow Roadway turned a trucking company into a logistics firm with a huge global footprint (YRC Worldwide). McKesson may be on that path.
From Kim D. Slocum, FHIMSS, President, KDS Consulting, LLC
(Continued from previous) I was also impressed that the team was aware of the high ratings that some of McKessons software products had earned (note to team: KLAS is pronounced as a word—class—rather than spelled out as letters). The team also had a good segmentation of the PHR situation and seemed to understand that these products dont appeal to all consumers at the same level.
From Kim D. Slocum, FHIMSS, President, KDS Consulting, LLC
(Continued from previous)
The team also gets good marks for understanding the linkage between HIT and EBM, its a critical point. Where I was a bit confused was on the degree to which the team realizes that McKessons HIT business is almost entirely focused on the hospital sector—the company has essentially no presence in ambulatory care.
From Kim D. Slocum, FHIMSS, President, KDS Consulting, LLC
(Continued )
Did the team also understand that many McKesson software products deal with the back office functions of health care in hospitals and thus would not qualify for funding under ARRA? I would suggest to the team that while it was accurate in its assessment of McKessons relatively weak standing with the government (thats a sector thats dominated by SAIC at present), this probably isnt McKessons biggest challenge.
We think those back office functions, known for incorporating lean management, etc provide a good revenue stream while decisions freeze/delay in other areas; also those products help address the #1 concern of CEOs: finances in this stressed time.
This is not to say that we are ignoring ARRA opportunities, the core of this war game exercise. Our point is that it may be slower to roll out than hoped, and we want to strategically add value to our clients so when it does roll out, we are on their minds.
Of note: we looked at ARRA funding opportunities beyond that most identify with HIT. There's "hidden" money in the FCC, Commerce, and USDA to specifically drive broadband buildout with an eye towards health care and education. Opportunities here for some of McKesson's products, and it fits with the recent Community Health Systems project. Not massive, but worth pursuing, and links to the rural vet health projects as well.
Re: SAIC--the firm everyone loves to hate, and GAO has been criticizing. There seems to be a move afoot to throw some contracts to others. We don't think we can displace SAIC (David vs Goliath) but perhaps, if we had a good fed partner, our rich applications could help win a bit of business. Our opportunity could lie with HRSA in products which advance EBM like Study Share/PACS. Govt programs with rural clinics and critical access hospitals could also benefit from our services.
From Kim D. Slocum, FHIMSS, President, KDS Consulting, LLC
(Continued from previous)
They might be better served to use the firms strong balance sheet to ensure a more robust presence in enterprise wide EMRs, (which do qualify for ARRA money) and in the physicians office/ambulatory care sector (where the firm is essentially absent today). I was also a bit fuzzy on how they planned to sell PHRs in market where the well-established consumer price point is free.
One of our slides had a bullet on leveraging the CHS sale. Not enough time to expand, and we should have. We see tremendous opportunity in the community clinic, critical access and ambulatory care sector. We're not fan of selling to the small physician--they are dying breed. We like the model where the hosp links HIT to the doc, with the doc making the min investment required by law. Docs will consolidate-bigger practices r mkt. U r right on PHR--we see limited mkt for us there. Continue.
More than anything, offering PHR (cheaply or even free) is just a way to get our name out to the specialty providers who might run the websites we would use. Not sure the end patient cares who the EMR people are, but could further brand awareness, sense of ubiquity etc. Not a high priority in any case.
Key elements of McKesson Insight include: focus on iCare, importance of integration, being the Gold Standard, HIT will wait for standards and reimbursement, weak on Govt relations
Key Future Strategy includes: out of chaos comes opportunity, Consumer PHR focus, focus on analytics - use of the data, integration with personal finance etc., broadband buildout, enhance gov't relations
Thank you. We very much agree govt relations are difficult and a long term process, which is why we hope to find an already entrenched partner as well as suggest McKesson add board expertise and management in this regard. We were surprised to see what little footprint they have in fed, our biggest surprise. Perhaps they are moving in this direction but not public yet. If not, others (Cerner) have done a quiet & good job in this regard, and could beat them. Too big a market to ignore. McK
From McK: Some of the comments following are listed in reply to (Microsoft?) on q's of How important do we think a global strategy is, and concerns we have with the length of our video. Their comment seems to have disappeared (did I do this while replying? sorry if so). Just a word of explaination for some of the postings herein.
Great, very deep and extensive analysis. Are you concerned with making the changes to your organization that will be needed in order to develop the relationship with the government? Also, are you concerned with spreading yourself too thin, going of into various new directions?
No concerned with spreading too thin at all. We are resource and cash rich, compared to some of our competitors.
We have an excellent management team. However, although the board is great we do see a bit of insularity in the board. Would like to see some broadening in their expertise as positions come open.
To become the industry leader in HIT we have to be broad, in many directions.
Also regarding our board: we are rich in telecom expertise, a natural link to telehealth applications and the partnerships being created with the broadband buildout. We're going to leverage that to enter this new market.
1. Since HIT currently makes up a small part of your revenue, it seems that your strategy to get into many areas of HIT is rather unfocused--wouldn't it be better to focus on excellence in a single area or few areas?
2. Besides a merger (which may not be likely to happen) what are your plans to overcome fragmentation?
1. We are already in many areas of HIT; have the most complete package we believe of any vendor. We are talking more about broadening our market (Place).
2. We are uniquely in a position to grow our business organically, compared to some, if a merger doesn't occur. However, it is highly likely mergers will occur.
More on mergers: EHR is in the go go days similar to cellular a decade ago. Many companies are run by original founder who is slow to give up control. Inevitably they will hit the wall on providing shareholder value in some way shape or form, forcing mergers and buy outs. McKesson is objective about this as we "bought" into the industry. We are likely to make rational decisions and continue to do things (merge if necessary) to provide shareholder value.
More on our revenue stream: our pharma related revenue stream is a bit threatened by what health care reform might do--we MUST develop new sources of revenue and build on this currently small % of our revenue to retain our strong financials and shareholder value.
1. Global is imperative because the US hospital market is shrinking JC's consulting arm and Cerner as well as others are active overseas. International market wants JC accreditation, they need HIT to do this, we are active there and will strategically increase our efforts.
2Apologies for torturing everyone with a long video (but wasn't the guy in the T shirt worth it?). We realize we may be penalized/kicked out for our excess. However, this was primarily a learning process for us,and we are willing to lose a game for the knowledge we 'won".
To counteract the revenue loss from shrinkage in US hospitals, we will become more active in those organizations where hospital leaders gather. A new trend has been for CofC and Economic Development boards to ask hospital CEOs to take leadership positions. We'll continue our work at HL7, HIMSS, and IOM where we tend to find the CIOs and more technical leaders of the marketplace.
Whoever remains as hospitals consolidate, we want to be seen as a value added partner.
With only 17% of the market we're not worried about this. The market is way too fragmented. Even if we merged with another dominant player it is unlikely we would have more than 25% of the market. if a major merger did occur (and it will), it will spur others to merge. We predict that six or seven major vendors will exist within ten to fifteen years, with many specialty niche application vendors. Look at other industries.
From Kim D. Slocum, FHIMSS, President, KDS Consulting, LLC
The team correctly identified that McKesson is a general health care supply firm (i.e. a wholesaler) rather than an HIT firm.
(Continued below)
DrAlemi 2 years ago
From Kim D. Slocum, FHIMSS, President, KDS Consulting, LLC
(Continued from previous)
The team also identified that HIT is something of a sideline for the company (interesting query to the team: do you know how and why McKesson got into HIT in the first place?). The team also hit upon one of the absolutely key points of the HIT industry—that its fragmented. Their idea of using the firms size to become a consolidation player is excellent and may actually wind up happening in real life.
DrAlemi 2 years ago
Not aware why they got into HIT, will have to look that up...
We would remind our classmates that cellular and broadband were once a sideline business for AT&T, and Amex is currently becoming a bank holding vs cc company...might be a better future in HIT than in distribution. Suspect they will continue in both. Yellow Roadway turned a trucking company into a logistics firm with a huge global footprint (YRC Worldwide). McKesson may be on that path.
HESY566 2 years ago
From Kim D. Slocum, FHIMSS, President, KDS Consulting, LLC
(Continued from previous) I was also impressed that the team was aware of the high ratings that some of McKessons software products had earned (note to team: KLAS is pronounced as a word—class—rather than spelled out as letters). The team also had a good segmentation of the PHR situation and seemed to understand that these products dont appeal to all consumers at the same level.
DrAlemi 2 years ago
From Kim D. Slocum, FHIMSS, President, KDS Consulting, LLC
(Continued from previous)
The team also gets good marks for understanding the linkage between HIT and EBM, its a critical point. Where I was a bit confused was on the degree to which the team realizes that McKessons HIT business is almost entirely focused on the hospital sector—the company has essentially no presence in ambulatory care.
DrAlemi 2 years ago
From Kim D. Slocum, FHIMSS, President, KDS Consulting, LLC
(Continued )
Did the team also understand that many McKesson software products deal with the back office functions of health care in hospitals and thus would not qualify for funding under ARRA? I would suggest to the team that while it was accurate in its assessment of McKessons relatively weak standing with the government (thats a sector thats dominated by SAIC at present), this probably isnt McKessons biggest challenge.
DrAlemi 2 years ago
We think those back office functions, known for incorporating lean management, etc provide a good revenue stream while decisions freeze/delay in other areas; also those products help address the #1 concern of CEOs: finances in this stressed time.
HESY566 2 years ago
Also, we are anxious to hear what you think McKesson's biggest challenge is!
HESY566 2 years ago
This is not to say that we are ignoring ARRA opportunities, the core of this war game exercise. Our point is that it may be slower to roll out than hoped, and we want to strategically add value to our clients so when it does roll out, we are on their minds.
HESY566 2 years ago
Of note: we looked at ARRA funding opportunities beyond that most identify with HIT. There's "hidden" money in the FCC, Commerce, and USDA to specifically drive broadband buildout with an eye towards health care and education. Opportunities here for some of McKesson's products, and it fits with the recent Community Health Systems project. Not massive, but worth pursuing, and links to the rural vet health projects as well.
HESY566 2 years ago
Re: SAIC--the firm everyone loves to hate, and GAO has been criticizing. There seems to be a move afoot to throw some contracts to others. We don't think we can displace SAIC (David vs Goliath) but perhaps, if we had a good fed partner, our rich applications could help win a bit of business. Our opportunity could lie with HRSA in products which advance EBM like Study Share/PACS. Govt programs with rural clinics and critical access hospitals could also benefit from our services.
HESY566 2 years ago
From Kim D. Slocum, FHIMSS, President, KDS Consulting, LLC
(Continued from previous)
They might be better served to use the firms strong balance sheet to ensure a more robust presence in enterprise wide EMRs, (which do qualify for ARRA money) and in the physicians office/ambulatory care sector (where the firm is essentially absent today). I was also a bit fuzzy on how they planned to sell PHRs in market where the well-established consumer price point is free.
DrAlemi 2 years ago
One of our slides had a bullet on leveraging the CHS sale. Not enough time to expand, and we should have. We see tremendous opportunity in the community clinic, critical access and ambulatory care sector. We're not fan of selling to the small physician--they are dying breed. We like the model where the hosp links HIT to the doc, with the doc making the min investment required by law. Docs will consolidate-bigger practices r mkt. U r right on PHR--we see limited mkt for us there. Continue.
HESY566 2 years ago
More than anything, offering PHR (cheaply or even free) is just a way to get our name out to the specialty providers who might run the websites we would use. Not sure the end patient cares who the EMR people are, but could further brand awareness, sense of ubiquity etc. Not a high priority in any case.
HESY566 2 years ago
Judge 1 Comments
Key elements of McKesson Insight include: focus on iCare, importance of integration, being the Gold Standard, HIT will wait for standards and reimbursement, weak on Govt relations
Key Future Strategy includes: out of chaos comes opportunity, Consumer PHR focus, focus on analytics - use of the data, integration with personal finance etc., broadband buildout, enhance gov't relations
Weakness - Govt relations can't be built in a day
rosenkranswa 2 years ago
Thank you. We very much agree govt relations are difficult and a long term process, which is why we hope to find an already entrenched partner as well as suggest McKesson add board expertise and management in this regard. We were surprised to see what little footprint they have in fed, our biggest surprise. Perhaps they are moving in this direction but not public yet. If not, others (Cerner) have done a quiet & good job in this regard, and could beat them. Too big a market to ignore. McK
HESY566 2 years ago
From McK: Some of the comments following are listed in reply to (Microsoft?) on q's of How important do we think a global strategy is, and concerns we have with the length of our video. Their comment seems to have disappeared (did I do this while replying? sorry if so). Just a word of explaination for some of the postings herein.
HESY566 2 years ago
From Kaiser:
Great, very deep and extensive analysis. Are you concerned with making the changes to your organization that will be needed in order to develop the relationship with the government? Also, are you concerned with spreading yourself too thin, going of into various new directions?
HESY566 2 years ago
No concerned with spreading too thin at all. We are resource and cash rich, compared to some of our competitors.
We have an excellent management team. However, although the board is great we do see a bit of insularity in the board. Would like to see some broadening in their expertise as positions come open.
To become the industry leader in HIT we have to be broad, in many directions.
HESY566 2 years ago
Also regarding our board: we are rich in telecom expertise, a natural link to telehealth applications and the partnerships being created with the broadband buildout. We're going to leverage that to enter this new market.
HESY566 2 years ago
We also consider adding a board member who has expertise in brokering big mergers.
We could have tortured everyone with an even much longer video to explain all this--aren't you glad we didn/t?
HESY566 2 years ago
From KP:
1. Since HIT currently makes up a small part of your revenue, it seems that your strategy to get into many areas of HIT is rather unfocused--wouldn't it be better to focus on excellence in a single area or few areas?
2. Besides a merger (which may not be likely to happen) what are your plans to overcome fragmentation?
HESY566 2 years ago
1. We are already in many areas of HIT; have the most complete package we believe of any vendor. We are talking more about broadening our market (Place).
2. We are uniquely in a position to grow our business organically, compared to some, if a merger doesn't occur. However, it is highly likely mergers will occur.
HESY566 2 years ago
More on mergers: EHR is in the go go days similar to cellular a decade ago. Many companies are run by original founder who is slow to give up control. Inevitably they will hit the wall on providing shareholder value in some way shape or form, forcing mergers and buy outs. McKesson is objective about this as we "bought" into the industry. We are likely to make rational decisions and continue to do things (merge if necessary) to provide shareholder value.
HESY566 2 years ago
More on our revenue stream: our pharma related revenue stream is a bit threatened by what health care reform might do--we MUST develop new sources of revenue and build on this currently small % of our revenue to retain our strong financials and shareholder value.
HESY566 2 years ago
From Microsoft:
Great analysis. We could not agree more that the market is fragmented and partnerships are vital. A couple of issues:
1. How important is your global emphasis in your current strategy for the EHR and PHR market?
2. Your presentation provided very detailed information but was 5 minutes over the time alloted by Alemi.
HESY566 2 years ago
1. Global is imperative because the US hospital market is shrinking JC's consulting arm and Cerner as well as others are active overseas. International market wants JC accreditation, they need HIT to do this, we are active there and will strategically increase our efforts.
HESY566 2 years ago
2Apologies for torturing everyone with a long video (but wasn't the guy in the T shirt worth it?). We realize we may be penalized/kicked out for our excess. However, this was primarily a learning process for us,and we are willing to lose a game for the knowledge we 'won".
HESY566 2 years ago
To counteract the revenue loss from shrinkage in US hospitals, we will become more active in those organizations where hospital leaders gather. A new trend has been for CofC and Economic Development boards to ask hospital CEOs to take leadership positions. We'll continue our work at HL7, HIMSS, and IOM where we tend to find the CIOs and more technical leaders of the marketplace.
Whoever remains as hospitals consolidate, we want to be seen as a value added partner.
HESY566 2 years ago
Allscripts:
McKesson may be in danger of an anti-trust suit. The market share they have acquired through acquisitions may be deemed monopolistic.
HESY566 2 years ago
With only 17% of the market we're not worried about this. The market is way too fragmented. Even if we merged with another dominant player it is unlikely we would have more than 25% of the market. if a major merger did occur (and it will), it will spur others to merge. We predict that six or seven major vendors will exist within ten to fifteen years, with many specialty niche application vendors. Look at other industries.
HESY566 2 years ago