Q&A: Providence Exec on Bluetree Acquisition, Trends in Health Tech

Providence St. Joseph Health, a Renton, WA-based organization that operates 51 hospitals and 829 clinics across five US states, announced its latest strategic, IT-focused acquisition last week. The company Providence has agreed to purchase—financial terms aren’t being disclosed—is Bluetree Network, a Madison, WI-based consultancy that works with healthcare providers to install and optimize electronic health records software.

Mike Butler is Providence’s president of strategy and operations, and has worked at the organization for over two decades. He says he expects Bluetree to work alongside other Providence subsidiaries as the hospital network, and others across the globe, make changes to the systems they use for managing patient records.

Xconomy recently spoke by phone with Butler. Our conversation, which also touched on the background of the deal, where the healthcare IT industry is likely headed, and other topics, has been edited for clarity and brevity.

Xconomy: Bluetree has built a business by concentrating on projects where a health system is installing, upgrading, or tweaking records software developed by Epic Systems, one of the major players in the electronic health records (EHR) industry. Providence uses Epic at many of its clinical sites. Before discussions of a potential acquisition started, had Bluetree and Providence worked together on any IT projects?

Mike Butler: A little context on what is behind this [deal] strategically: A few years ago, when we were updating our strategic plan for Providence, we made a conscious decision to focus on, “How can we take all the interesting things that we were doing that were really non-clinical in nature, and create a billion-dollar company by 2023 that can produce a 20 percent [earnings before interest, tax, depreciation, and amortization] margin?” That return can support our clinical operations going forward.

We began to look at things that we already did. We had like 23 different [subsidiary] companies with a vision to provide administrative clinical services. The two that we had that were most successful … one was called Engage. Its focus is [EHR software provider] Meditech hosting, consulting, and optimization. It started in 1996, and since then, it has doubled in size. It’s about a $44 million-a-year company.

Secondly, back in 2011 when we started our Epic journey, we started doing what we call Epic Community Connect: putting other hospitals and clinics that are not owned by Providence on our [version of Epic’s software]. That has grown to about a $15 million-a-year company.

We’ve done a pretty darn good job in those two spaces [and] it’s not a lot of effort. So we stepped back and said, “How can we accelerate it?”

We looked at companies that do Epic implementation, optimization, and consulting. The best opportunity for us was Bluetree. We got introduced to Bluetree through our CEO, Rod Hochman. We thought they were the best fit to help us advance toward this billion-dollar goal.

X: Once the deal closes, Bluetree employees will continue their day-to-day duties working with health systems across the US, correct? It’s not as if they will be working within Providence’s internal IT division or anything like that, right?

MB: Absolutely. They will remain Bluetree employees. They’ll be in a separate, for-profit subsidiary of [Providence]. The idea is we want to … let them have the entrepreneurial spirit and focus they’ve had to build what they have today.

Over time, we’ll be bringing Engage—which also is a separate subsidiary of Providence—under this hood … and then ultimately Epic Community Connect, which today is a division of our IT department.

X: So the idea with Providence’s subsidiary Epic Community Connect is to roll Epic’s software out to non-Providence hospitals and clinics?

MB: Exactly. We wanted to be able to connect other hospitals and clinics to our health system.

X: Would you say Engage and Bluetree have similar areas of concentration, the main difference being that Engage works on Meditech projects and Bluetree works on Epic projects?

MB: It’s similar. [Engage has] 165 clients today. They do everything from implementation to optimization to hosting Meditech on their servers.

The difference is I don’t think Bluetree does hosting, but [Engage does]. One thing we think is really good about it as organizations wind off of Meditech onto Epic, often they need services for five or 10 years [after they switch].

X: Are all of Providence’s hospitals and clinics now using Epic’s software to manage patient records?

MB: We’re not 100 percent implemented yet. We did a merger with St. Joseph Health, based out of Southern California [in 2016]. We’re in the process of implementing [Epic] there [and] rolling it out in Orange County, CA, Northern California, and Texas.

X: Engage focuses on Meditech and is a subsidiary of Providence. Do any of Providence’s hospitals or clinics use Meditech? Or is Providence’s ownership of Engage the organization’s main link to Meditech?

MB: It’s kind of an interesting story how this all works. The hospitals at St. Joseph’s are still on Meditech. It’s challenging to maintain staffing on Meditech and Meditech shops when it’s inevitable that you’re [switching] over to Epic. Engage is actually managing Meditech for our St. Joseph’s sites. They will do that through all the conversions to Epic that will be going [on for] a couple years.

The beauty of the business we’re building is … as Bluetree grows and is doing more and more Epic implementations, [many] of those are going from Meditech to Epic. Engage can be there to help the client transition out of Meditech, and not worry about losing staff. And then Bluetree brings them into Epic.

X: In terms of Bluetree’s outlook and where the health systems are that will be installing Epic’s software in coming years, do you anticipate Bluetree doing a lot of work outside the US?

MB: We have not yet talked about the international strategy. With think there are a lot of opportunities as it relates to implementation.

[Another area] where we see some upside is Epic is selling its technology now to health plans. We think there may be a whole other line of business that we haven’t talked about.

Jeff Buchanan is the editor of Xconomy Seattle. Email: jbuchanan@xconomy.com Follow @_jeffbuchanan

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