Eric Morgan is the CEO of AdvanedMD, a top medical billing software service. He has over 25 years’ experience in technology and medical application companies. He has served as a VP at Lawson Software and as the CEO of StatCom.
SM: What I would like to do first is understand both your background and the background of the company.
EM: I have been in the technology industry for over 25 years and have worked with a variety of vertical segments including retail, wholesale distribution and manufacturing. In the mid 1990s I started my career in healthcare IT.
SM: What prompted that change?
EM: I was with Lawson Software for 13 years. In the mid 1990s we launched a healthcare initiative to get our product into hospitals. I was involved with that from the beginning and was fortunate enough to be a part of that, as we grew the business from almost scratch to where it became the largest division within the company, accounting for over $150 million in revenues.
SM: Essentially you were providing ERP software to hospitals, correct?
EM: Yes, that is correct.
SM: What did you see in the healthcare market through the 1990s? What were the dynamics of the business?
EM: At the time the dynamics were interesting. If you recall, at the time managed care had come on the scene. Prior to the mid 1990s, hospitals and most healthcare providers were able to increase prices and pass on costs fairly directly to patients and insurance companies. When managed health care came on in the 1990s to try and control the growth of healthcare cost increases, it was successful because it was able to negotiate hard with healthcare providers.
At that time, hospitals were under a lot of pressure to look at their operations more as a business and gain efficiencies. They really had to change their strategic approaches. As a result, in the mid 1990s we saw a reduction in healthcare costs. The reaction from the hospitals was to band together, which resulted in mergers and consolidation. They would consolidate a segment to increase market share, which allowed them to have more clout when they negotiated with managed care.
That was a very aggressive and accelerated period of time, and it was also the time where we were joining the market. It served us very well because they were looking for integrated systems to manage across multiple entities, multiple locations and multiple hospitals, which in the past had not been that critical for them.
SM: Essentially, you are saying we can characterize managed care as the catalyst that triggered the uptake of IT in the healthcare space?
EM: The advent of managed care and the subsequent reaction from hospitals to undergo consolidation which drove the requirement for adoption of systems which could allow them to run a geographically separated business. They had a lot of different legal entities they were setting up at the time, many of which were trying to get into insurance as well, along with hospitals and outpatient facilities. Really it came down to the advent of a healthcare system instead of just a hospital. They needed IT infrastructure to support a healthcare system, and the backbone of that IT infrastructure became ERP. That drove a lot of the adoption on the business side within the hospital marketplace.