Author Archives: Steve - Page 4

Overseas Reading

There was quite a flutter of conversation this year at RSNA over having Indian radiologists pre-read  studies and having those findings delivered to a US radiologist. Dalai has a post about it. In general almost everyone that I have talked to is completely opposed to overseas reading from radiologists. It will not shock some of my readers to learn that I am not.

So when I was a researcher we conducted numerous reader studies under controlled conditions. For those of you not familiar when researching the impact of new technologies or methodologies on the accuracy of radiologist findings we display carefully selected cases in a controlled manner. There is a specific task such as identify the cervical spine fractures. There is a set of normal cases with no pathology included in the dataset. The process is extremely onerous and tedious. However you get quantifiable data on the radiologists accuracy. So what’s good accuracy? I would say above 80% and the radiologist is quite good. Very few people will cross the 90% barrier.

Now to determine what a good US radiologists accuracy should be obviously you would need a much larger study. But lets for the sake of argument say that the average radiologist is correct 75% of the time. What if an Indian radiologist could show that he was also correct 75% of the time. Why should he not be allowed to read?

A potentially much more valuable but much, much harder to obtain metric would be tying the findings and recommendations of a radiologist to patient outcomes. This is much harder to prove since patient care is a very complicated animal with many players all of whom get to make decisions that may conflict with one another. I just feel that I have to mention this since this would be a truer measure of quality than simply accuracy.

So where does that leave us? Will this happen? No. It would not matter if the Indian radiologist was right 90% of the time over a large number of studies. The ACR would simply say that they were not US trained and could not be as good as American radiologists. As an across the board statement that is most probably true. However I do consider it to be unprovable since I don’t know where the data would come from. If someone else wants to contest that view please do so.

It turns out that it is easy to say that the Indian radiologist would do a bad job. It sounds true to main street America. And more importantly it helps people feel good, which it turns out is more important than being right.

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Why scalability should concern you when you are small

Scalability is a topic often ignored by small companies. We will get to it later. We don’t have enough traffic. We don’t have the time or resources. Well that’s all well and good until something happens. Maybe that something is you becoming successful. Now your service is in demand. Your database is being pounded. Adding web servers isn’t a problem but getting them data is. Your database server thrashes in agony. And then you get upset. How could this happen? We bought big beefy machines from Dell. We paid a lot of money for them.

Engineering scalability does matter. You don’t need to have all the hardware you need to stay up when TechCrunch links to you. I would even say just having your developers model what they would do is good thing. Then at least you have a plan that has been tested. You know what you will do as traffic increases. People who know me have heard me talk about playbooks. I don’t always advocate doing exactly what your playbook says but I strongly recommend having one since it gives you a place to start. Think of it like a business plan. You won’t follow your business plan exactly but it gives you a place to start.

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Update on Emageon

I blogged about Emageon recently. Their third quarter was less than stellar. I continue to believe that the mid sized PACS companies will have a difficult time in todays market. They have very little to differentiate them from the major players other than they are smaller. I reiterate that I do believe that the quants are wrong and the fact that these companies have departed from the mean is a sign of a difficult market for them, not because the stock is undervalued. Anyone else have thoughts on this?

Check out the institutional holdings for Emageon.

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Microsoft is serious about healthcare

So after the HealthVault launch everyone could be comfortable that Microsoft was serious about healthcare. In case you still were not convinced they just made another acquisition. Buying software that focuses on the developing world is extremely smart. Some countries have exploding middle classes that are going to want to consume healthcare. Don’t be surprised to see Microsoft entering the EMR market in a big way over the next few years.

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A Workflow Example

Here is a great example of a situation that is in need of all kinds of workflow engineering. Tim shows why having detailed operational data is crucial to making business decisions. If there is a deep understanding of a business then solutions like the one Tim discusses will be much easier to justify and can lead to a very high performance organization.

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GE buys Dynamic Imaging

GE has bought Dynamic Imaging. Woah that’s big news. Props to Dalai who got this first. To me this is the clear admission that Centricity was a dead animal. The code base is not designed to operate in a true web environment. Centricity is a clunker with many more technologically advanced rivals, such as Dynamic Imaging.

What does this mean? First I think that M&A activity in healthcare is hot right now even with the private equity guys complaining about access to liquidity. Commissure was acquired by Nuance. Now GE buys Dynamic Imaging. GE is the second major company to buy another company that makes the same product that they do. Philips bought Stentor and replaced their existing PACS with it. I am sure that DIs technology will become front and center has GE’s PACS offering even if they rebrand it Centricity. They would be fools not to.

So I have said in the last few days that I do not see much room for small to mid sized PACS companies. There is another interesting exit strategy for them, selling to a large company to replace its PACS. Maybe it is time for Siemens to pony up and buy Emageon, Amicas, or one of the many privately held PACS companies.

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Funny iPhone Airplane Story

Check out this story from an iPhone user on a plane with his phone in “Airplane Mode”.

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An offhanded comment from one of my friends this evening had me researching Emageon (EMAG). I was looking for any signs that something was going on with the company. They have had a rough go of it recently as I think small and mid sized PACS companies have had recently and will continue to have. I did uncover a couple of interesting things.

I believe that it has been heavily bought by quantitative hedge funds. What makes me think that? Have a look at the owners with more than a 5% stake. See any big names? I do, D. E. Shaw. They are one of the top quantitative trading firms on Wall Street today. Together the owners 8 firms that own more than 5% of Emageon own 67.3% of the company. I admit that I am stretching a bit since I do not know the exact trading strategies of all these firms. I do know that D. E. Shaw uses statistical arbitrage as a major trading strategy. Read about statistical arbitrage if you are not familiar with it.

What does this mean? A large percentage of the company is owned by firms whose models probably don’t understand the dynamics of the radiology marketplace. Their models show a pricing discrepancy based on historical data and the relation to other stocks. I believe then Emageon may be overvalued in the long term. I think that should the quants have another blood bath like they did in August, or if one of them has liquidity issues the stock could decline rapidly. I don’t see upside with this company from an investment standpoint.

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Workflow and efficient use of technology

Workflow is one of those all encompassing topics that is thrown about. I think of it as human involved business processes. Pure technological processes can be optimized in a different way. Human processes are a source of a great deal of variance as far as a business is concerned. Variance can be bad since it means that a processes is not operating normally. Consider a cat scan(CT). If for any given type of study there is a great variance in the time it takes to complete a practice cannot determine with certainty how many studies can be completed in a day. If a business can reduce this variation it can limit the amount of time that the CT scanner is idle. As a very expensive piece of equipment its utilization should be approaching 100%. For the sake of discussion I am going to assume that if you can have more capacity that you will find a way to fill it. If your CT scanner could always be busy you would make a lot more money than you would otherwise.

used to scan patients and then bill for performing the study. This is direct revenue. For the 3D technology maybe it makes the radiologist more efficient. He can now read more complex studies faster and with fewer errors. This is indirect revenue. Remember that errors cost money such that the total cost of errors equals the sum of the probability of an error times the expected cost of an error or Cost = Sum( Pr(E) * C(E) ). Quantifiable reduction in errors does lead to decreased cost and decreased risk so that a piece of technology can be weighed as a risk reduction tool although I don’t think that you could justify it on a purely cost basis.

Questions like these need to be answered when buying a piece of equipment or technology. The questions related to variance, cost and revenue. The truth is that to answer these questions you need a deep understanding of your business. Most healthcare practices do not have this deep understanding of their business.

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Management shakeup at Amicas

Dalai was the first that I saw to point out that Amicas (AMCS) is waving goodbye to Peter McClennen, its President and COO. I am actually not shocked about this. Amicas is a second tier PACS company that has struggled to find its way. The company is thought of as a growth company but it seems that a lot of time has been spent just to maintain its position in the market. The stock as also lagged since it dropped from $5 to trade now at around $3. Now this is not Vonage territory but something over there is not working.

I am not about to knock Peter. I have known him since I was 16 and he was working at Fuji. I knew him when he worked at GE. I talked to him a couple of times a year at Amicas. He is a stand up individual that has a lot to bring to the table for any company. He is also one of the most enthusiastic people I have ever met.

I think that Amicas is the first company (maybe not) that is showing signs of problems. There are a great many second tier PACS vendors that have struggled to differentiate themselves from the major players, GE, AGFA, Fuji, Philips, and McKesson. Those companies have a very significant market share leaving Amicas, Dynamic Imagaing, Emageon, and a plethora of other companies to pickup the rest.

Over the next few years numerous small PACS companies are going to die. There is simply not enough market share to go around. Those players that are able to differentiate themselves and find niche markets to serve will survive although probably not forever.

A major force in the industry will be the introduction of the native 3D PACS from TeraRecon. The deep integration of 3D is something that will significantly raise the technological bar for all PACS companies. once that happens the first real game changer that causes the core PACS technology to change in a long time, maybe since DICOM, will occur.

The other problem for smaller companies is the exit strategy. There are not a lot of companies in radiology that need a PACS as part of their offerings. So there are not a lot of potential acquirers left. Probably a couple of up and coming EMRs will want one but who can say. I think that for small PACS companies the future looks bleak.

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