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Taking On a New Task
March 1, 2008
Competing with Cambridge, Mass.-based athenahealth Inc., among others, the new Practice Solutions service bundles NextGen’s practice management software—and electronic records software if the client desires—with outsourced billing and claims clearinghouse services.
Physician practices can buy and install the software while outsourcing some or all of the billing functions, or use the full billing service with the software accessed via the application service provider computing model. Pricing varies by practice size and specialty, but NextGen retains about 4.5% to 9% of collections depending on the services selected.
The vendor went into the outsourced billing arena to meet a need among current and prospective clients who require more revenue cycle management expertise, says Pat Cline, president.
“A lot of practices don’t have the resources or expertise to operate these sophisticated systems.”
NextGen for years has offered clearinghouse services and document imaging and management software, so it had a “fair amount” of expertise before getting into the billing business, Cline says. A Testing Phase In mid-2005, he hired Fran Pedano, who owned a small billing service and now is director of the Practice Solutions division.
With two of Pedano’s clients, one of whom already used NextGen’s software, the company began testing its expertise and processes to see whether the company could give good service and make money in the outsourcing business. It then expanded testing with about 20 converted billing clients and existing NextGen clients for more than a year before formally launching the outsourced services last December and starting active marketing.
In the first month, the company made a handful of sales and increased its pipeline, Cline says. But because NextGen’s competitors include local billing services—some of them existing clients—there are regions where the company likely won’t actively market the Practice Solutions service.
“We want to limit competition with our own customers and have implemented some procedures internally to mitigate that situation,” Cline says.
NextGen’s decision to recertify its EHR software in 2007 under slightly expanded criteria from the Certification Commission for Healthcare Information Technology was another recent strategic move. Dozens of ambulatory EHR vendors got their products certified in 2006 when CCHIT launched its program. But only 11 EHRs from seven vendors were certified or recertified in 2007.
For NextGen, recertification in 2007 helped its marketing efforts in two ways. It enabled the vendor to argue that competitors who didn’t recertify couldn’t meet additional interoperability criteria. But it also gave the company an edge in competing for contracts with hospitals that are putting together I.T. donation/subsidy programs under relaxed federal laws, Cline believes.
Under an exemption to the Stark Act, hospitals can assist physicians in adopting electronic records systems that received CCHIT certification within the past 12 months. That means as long as that provision exists, “our intent will be to certify approximately every 12 months,” Cline says.
The company got a return on going through recertification again last year by nabbing “more than one” subsidy contract, he adds.
“In a couple of cases, we also kept vendors not certified in 2007 out of certain markets where we were playing.”
Still, when the first half of fiscal 2008 ended on Sept. 30, NextGen saw reduced growth in profit and revenue compared with the same period in the previous year. Operating income for the first six months rose 7.8% compared with 47.9% during the same period a year earlier; revenue grew 20.6% compared with 33.7% during the earlier period.
But Cline is proud of the company’s performance during the first half of fiscal 2008.
“Growing at around 20% is still pretty respectable.” He contends the company didn’t find itself losing deals at a higher rate and believes some physician practices last year postponed purchasing decisions after hearing that a local hospital would launch an I.T. donation/subsidy program. “A couple million dollars in a single quarter will significantly affect our growth rate,” he notes. And the downturn may not last long, Cline adds. “Our growth rate in the first half of fiscal 2008 is not necessarily indicative of our future growth rate.”
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