We’ve had some questions on whether or not it is beneficial for providers and billing companies. The trend that’s been going on over probably now close to 15 years, where practice management. Software companies have acquired billing companies and billing companies have built their software.

Billing Software

I think over quite a few decades; we saw billing companies who built their own software. That was long, long, long trend systems. They were built in green screens. Things like that, even in the mid-2000s, were still around.

I think software companies’ trend to acquire billing companies picked up speed and became a significant force. In the marketplace, in the late 2000s as Athenahealth rose to prominence. Athena became not only a force of the market. It became very valued.

If you look at it from the standpoint of “Is it a good idea for software companies to acquire billing companies?”, they certainly thought so in terms of what was beneficial to their stock price, what was beneficial to their assets in terms of the valuation of the equity of the company.

We saw companies like GE, AdvancedMD, and virtually everybody who was a software provider of practice management software NextGen. They were all buying billing companies at that time.

If I were a billing company, I don’t know that I would want to buy software from a direct competitor. Even if there are assurances that the data is separate and there’s non-disclosure, the reality is there’s just no way to do that. There’s plenty of benefits. We know because we’re in this business. There is plenty of benefits to having access to data, even if it’s metadata.

Even if they somehow have a Chinese wall and know what value those things have, even if there is somehow a Chinese wall, they are still driving an enormous amount of value from access to the billing companies’ data. In general, I think that’s a real downside. It would probably keep me if I were a billing company from buying software from somebody who was a direct competitor.

Integrated billing software and services

From a provider standpoint, is it beneficial to the provider to have a company that’s integrated and services? The companies that we’re building software, I think, often didn’t understand billing well because they’d never done it. It would be almost like doctors not being involved in designing implants. I think they would be pretty critical to do it. Again, presumably, they got input and things like that, but often. We saw a significant disconnect between the workflow and the product and what was a need from a billing standpoint.

I think there are great benefits to companies performing service themselves. So they have a much more intimate knowledge of what it means to do billing and, therefore, a better ability to build better practice management and billing software.

In general, I think that’s a positive part.

The real downside, I think, for everybody, and this is something to be careful of and watch out for, is we have seen a lot of companies that offer software and service.

I should back up, actually, just in terms of one of the key things that drove that valuation. I mean, Athena’s stock price was through the roof. It was utterly whacko. I mean, it was not only extraordinary times earnings, but it was many, many times revenue. I think that drove a lot of those acquisitions. They felt it was necessary from a valuation standpoint.

If you are buying software from a practice management company or practice management EMR company. They are touting how amazing their billing capabilities are with their software… Another whole episode would be about, “Do they say that it runs itself?” It doesn’t run itself.

What can the software do?

If they make extraordinary claims in terms of what the software can do and you’re going to bill in-house, and you’re committed to billing in-house. The software doesn’t perform to your level of expectation or even perform. To perhaps the expectations they created in the sales cycle. It is effortless for them to fall back and say, “Ah! That’s just because your processes aren’t good. You should outsource the billing and let us do it to get good results.”

That, I think, is a little bit dangerous in part because it can create situations, and we’ve seen these, where there’s a little bit of a bait and switch where they say, “Oh, it’s going to perform incredible magical wonders for you when you install the software.” The reality is they’re essentially trying to get the socket in there for their software. And then get the billing service as the add-on.

The moral of the story then is, if you are looking at buying software from a vendor that does both software and service. Be very careful about the distinction between his capabilities as the software and the service company and whether or not they have a vested interest in trying to get you to outsource your business. Talk to clients of theirs who have been using software for years and years and make sure that they’re not feeling pressure to outsource that business.

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