H.I.S.-tory

by Vince Ciotti

© 2013 by H.I.S. Professionals, LLC, all rights reserved.

Episode #112:

McKessonPart 1

First Among Today’s HIS Vendors• We complete the HIS-tory of today’s vendors with

McKesson, whose 2012 “Provider Technology” annual revenue of $3.2B puts them a solid #1:

1. $3.2B = McKesson, née HBOC = Walt Huff, Bruce Barrington, & Dick Owens 2. $2.6B = Cerner, still run by Neal Patterson, co-founded by Cliff Illig & Paul Gorup3. $1.8B (est) = Siemens, née SMS: Jim Macaleer, Harvey Wilson & Clyde Hyde4. $1.5B = Epic. Gee, I have to wonder, just who was it who founded them? 5. $1.4B = Allscripts, née Eclipsys, also founded by Harvey Wilson of SMS.6. $850M (est) - GE Healthcare, née IDX/PHAMIS: created by Malcolm Gleser7. $597M = Meditech, still run after all these years by Antonino Papallardo8. $375M = NextGen: née Quality Systems Inc. founded by Sheldon Razin9. $183M = CPSI, founded by M. Kenny Muscat & Denny P. Wilkins10. $156M = HMS (Healthcare Management Systems), Tom Givens & John Doss 11. $150M = Keane, parent giant by John Keane, but HIS div. built by Ray Paris 12. $106M = QuadraMed, née Compucare, founded by Sheldon Dorenfest13. $75M (est) = Healthland, formerly Dairyland, founded by Steve Klick

Fitting Finale• It’s only right that this last episode on today’s vendors will easily

be the longest and most complicated, as McKesson’s roots in terms of companies & products are incredibly deep and wide:– 1833 – yes, an amazing 180 years ago John McKesson and

Charles Olcott founded the company in New York City to import and sell therapeutic drugs and chemicals wholesale.

– 1963 – 50 years ago, Walt Huff started his HIT career when he became CFO for the Sisters of the Third Order of St Francis in Peoria, then went to McAuto before forming HBO.

– 1999 – in the biggest acquisition in HIS-tory, McKesson bought HBOC for a staggering $14B, creating a combined firm with $23B in annual revenue, before the scandal…

– 2003 – McKesson/HBOC forges ahead of Siemens for #1 place in HIS vendor annual revenue, leading the pack since.

Many Thanks• Amazingly, there are still a number of HIS veterans still working at

McKesson all these years later, and I must give thanks to several of them who put me in touch with the original founder of HBO:– Jim Pesce – who enlightened us in earlier HIS-tories

on GE, McAuto and Micro Healthsystems, and now heads McKesson’s Enterprise Products Division.

– Mark Sweeney – an HBOC veteran still working at McKesson who put me in touch with his old friend:

– Larry Gerdes – who first arranged financing from his bank for HBO’s start-up in Peoria IL, then joined them in 1977 as their CFO. Larry introduced me to:

– Walt Huff, da man in this HIS-tory who took time off from his busy schedule still working with Larry at Gerdes-Huff Investments to tell his fascinating tale.

Muchas Gracias!!

A Long Story…• Don’t know if I’ll top Proust’s 4,211 pages for “Remembrance of

Things Past,” but this tale will take a lot of episodes as it covers so many people, companies and products McKesson/HBOC acquired over the years - almost a mini-review of HIS-tory!

• A high-level outline of the episodes over the coming weeks:– Walt Huff’s early days at OSF in Peoria writing their “CRASH”

shared financial system with another HIS-tory hero: Urban Gerber, which was acquired by McAuto and renamed “HFC”

– Walt’s two partners who dared to leave McAuto in 1973 to write a data-collection system on a Four Phase mini:

• Bruce Barrington – who headed system development• Dick Owens – sadly departed, who led installations

– Hooking up later with Urban and Bill Brehm to add their IFAS financial system on a DEC mini to MEDPRO’s clinicals.

HBO’s Merger Mania• It will come as no surprise to industry veterans to learn that much

of HBO & McKesson’s growth was due to countless acquisitions:• HBO “minor” (relatively

speaking) acquisitions:- 1981 = MDC (Korpman)- 1984 = Mediflex (MediPac)- 1985 = Amherst (Trendstar)- 1994 = Serving Software- 1995 = ALS (LIS)- 1995 = Pegasus (SMR)- 1996 = CyCare (MD Billing)- 1997 = Amisys, Enterprise,

HPR, National Health Enc.- 1998 = Imnet (imaging)

• HBO major acquisitions (each the result of many mergers):- 1994 = IBAX, itself created

from 3 HIS pioneers:- JS Data- Dynamic Control - Stonybrook Systems

- 1995 First Data Corp. (AMEX) and comprised of:- Systems Assoc. (Saint)- McAuto (HFC, HDC,

PCS, LabCom, et al)

McKesson’s Merger Mania• With its multi-billion dollar drug revenue, McKesson continued

HBO’s strategy of growth through acquisitions into the 2000s:- 1999 = HBOC itself, leading to the

subsequent scandal that preceded Enron by two full years, showing how our HIS industry leads the way in groundbreaking developments…

- 2000 = HCSI (Pharmacy)- 2002 = ALI (PACS)- 2007 = Per Se (many systems per se)- 2007 = Practice Partners (MD Billing)- 2012 = MED3000 (healthcare

management & technology) and Medventive (risk management)

- 2013 = HIS-Talk (just kidding…)

But First…• Before we start this complex HIS-tory of HBO & McKesson, several

HIS-Talk viewers offered help identifying more of Bill Child’s picture quiz from Computers in Healthcare that ran last week:– Dave Pomerance, co-founder of Dynamic Control Corporation:

• Hi Vince, I must tell you I have certainly been enjoying your trip down memory lane. I will volunteer that I am L on your page 13 photos. Hope you are well, and enjoy your Sunday.

– Susan K Newbold, Director, Nursing Informatics Boot Camp:

• “Slide 12 Bill Child’s Challenge: picture H= Steven A Huseing, former Executive Director, International Medical Informatics Association, picture O = Shirley Hughes. On slide 13 of Bill Child’s Challenge: J = Carolyne K Davis, PhD, RN, former Ernst & Young, former HCFA Administrator”

But Wait, There’s More…- Bruce Brandes, currently EVP at Valence Health:

• “Vince – on your last slide, picture E is Tom Pirelli, co-founder and CEO of Enterprise Systems (ESI), a materials management and surgery software company based in Wheeling IL, which is now the resource management group of McKesson . Tom and his co-founder Dave Carlson were former American Hospital Supply guys, and huge Star Trek fans, thus the "all aboard the Enterprise" announcement every time you walked into the front door of the office! Tom was replaced as CEO in 1995 by Glen Tulman (his first healthcare CEO gig), followed by an IPO in 1996 and sale to HBOC in 1997.I joined in 1993 from IBM, had the best time with some of the smartest, most fun people with which I've ever had the pleasure to work. Any Director of Purchasing or Surgical Services will tell you stories of the legendary user group meetings (I am sure someone has pictures of Joe Carey (former AllScripts COO) which he would prefer not ever resurface…- Bruce”

Only 4 Left!Thanks to Craig Schlusberg

from Aspen Advisors: “Hi Vince, I’m thoroughly enjoying H.I.S-tory. Letter C on slide 13 could be my former boss and mentor Everett Hines, maybe from his days at Columbia Presbyterian prior to C&L. Not sure, but it might be worth checking with him. Regards,- Craig”

Chuck Barlow G. Weinberg E. Hynes J. Whitehead

Tom Pirelli Mike Brown

Rich Helpie Carolyne Davis Jim Macaleer D. Pomerance

Ralph Korpman Marion Ball

Updated Portraits

• So here’s how things stand identifying these faces in Bill Childs challenge from an article in his from Computers in Healthcare magazine from the late 1980s.

• I would sure appreciate hearing from anyone out there who recognizes the remainder, for which I’ll gladly spilt the $250 US Savings Bond from Bill!

Mark Gross

Art Randall Frank Russo Steve Macaleer

Peter Marsh Ford Phillips Shirley Hughes

Steve Huseing

Updated Vendor C-Suite Timeline- Susan Rivers, Content Analyst, Encore Health Resources added

more to the ever-growing vendor C-Suite timeline:• “Vince

– Regarding history for Technicon / TDS Healthcare Systems – it’s very nice to read and remember back as I was an employee in the 1980’s and was there during the time that Ian Hicks, William Seabrook, and John Whitehead were Presidents. I noticed a couple things that I wanted to provide you with some updates on. Chuck Tapella’s last name is misspelled in Bill’s posting. It should be Tapella, not ‘Tepella.’ Also, on the timeline, you are showing William Seabrook after John Whitehead. Actually, he came in right after Ian Hicks; and John Whitehead became president after William Seabrook. Hope this is helpful to you.- Susan”

Final(?) Vendor C-Suite Timeline- If you want the detailed file in Excel, or have more input on

founders and number twos, email me at vciotti@hispros.com: