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We’ve had some questions on whether or not it is beneficial for providers and billing companies. The trend has been going on for nearly 15 years, where practice management software companies have acquired billing companies, and billing companies have built their software.

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

Following in the footsteps of Athenahealth

I think the trend for software companies 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 helpful 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 buy software from a direct competitor. 

Where’s the data?

There may be assurances that the data is all kept separate, and there’s non-disclosure over there. Nonetheless, the reality is there’s just no way to do that. There are many benefits. We know because we’re in this business. There are many benefits to having access to data, even if it’s metadata.

Even if they somehow have a Chinese wall and we know what value those things have, even if there is somehow a Chinese wall, they are still driving an enormous amount of value from having 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 a direct competitor.

Note the disconnect

From a provider standpoint, is it beneficial to the provider to have an integrated software and services company? The companies that we’re building software, I think, frequently 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, we presumably got input and things like that. However, frequently, we saw a significant disconnect between the workflow and the product. We also noticed the disconnect between what was needed from a billing standpoint.

How value is created

I think there are significant benefits to software 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 that we have seen many 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.

Will the software meet your expectations?

Back to the point about the danger associated with having software and service. If you buy software from a practice management software company or practice management EMR company, they are touting how unique 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.

If they make extraordinary claims in terms of what the software can do, 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 commit 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.”

The suggested solution doesn’t always fit the bill

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. Still, 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.