Implementation. When technology solutions enter the public conversation, the assumption is that their practical use is not far off. Actual progress, for a myriad of reasons, is often much slower. Nowhere does this apply more than healthcare. Research firm Forrester estimates that the paper based health information wastes hundreds of billions of dollars annually.
Founded in 2002, Nightingale Informatix (TSXV:NGH) is an up and coming provider of web-based Electronic Medical Record (EMR), practice management and patient health record portal solutions, as well as revenue cycle management services to doctors, clinics, hospitals and other healthcare organizations throughout North America. Nightingale now has 140 employees across offices in Markham, Ontario and Rancho Cordova, California.
Cantech Letter talked to Nightingale President and CEO Sam Chebib.
Tell us a bit about your business. How do you make money?
We provide web-based EMR, practice management and patient health record portal solutions, as well as revenue cycle management services. Our primary revenue growth driver is our EMR business, where we look at sales on a per seat basis with a seat being equivalent to a full-time physician. We consider cash from operations and deferred revenue to be two key financial metrics for us.
Our economics of a seat sale differ for enterprise versus small and medium business wins. For Enterprise clients such as hospitals, governments or large clinics, Nightingale charges $6,000 per seat and a 25% annual maintenance fee. For small and medium businesses such as individual physicians or small clinics, we receive $18,000 in cash upfront, which we then amortize over the life of the three-year contract, recognizing $10,000 in revenue in year one with $8,000 in deferred revenue.
Is your space growing? How are you positioned to benefit?
The North American EMR industry is growing, having particularly started to gain momentum more recently. While EMR adoption rates among healthcare practitioners in Canada and the U.S. have increased from 23% and 28% in 2006 to 37% and 46% today respectively, this is compared to other countries, such as the U.K, Australia, New Zealand, Norway and the Netherlands where EMR adoption is 95% or higher.
Of late, North American government bodies have been stepping in, offering funding as a means of encouraging physicians to implement EMR. We estimate that based on the varying funding programs, there is between $20,000 and $44,000 of funding on average available to physicians. Longer-term, we believe that as more and more physicians take advantage of these government funding initiatives, we will see the emergence of a more mainstream market. We anticipate that there will be a growing recognition among physicians of the value EMR technology brings to medical practices, moving the market toward the phase of mass adoption.
We are well positioned to benefit from these industry trends in Canada as we are a recognized leading provider of web-based EMR solutions; in Ontario we are one of only three funding approved web-based EMR providers and in Nova Scotia we are the sole government approved EMR provider for the entire province.
In the U.S., we are well positioned to benefit from these industry trends as we completed a series of strategic acquisitions from 2005 to 2007 (three in total) of revenue cycle management and practice management companies that provide an excellent cross sell opportunity for our EMR product.
What is the most common misconception about your company or its business?
During 2008 and 2009, the EMR market hit a bit of a standstill as there was a delay in some of the government funding initiatives. Some people believe that the EMR market is still stalled. However, that is not the case. This is evidenced by our success in selling approximately 850 seats in fiscal 2011 compared to 290 seats in fiscal 2010. There may still be near-term fluctuations in adoption, but the market is in fact opening up. We anticipate that North American healthcare practitioners’ adoption of EMR will continue to gain momentum.
What’s your financial situation like?
When the EMR market hit the standstill as physicians started to delay purchase decisions as they waited for funding to start flowing, we took the opportunity to hunker down and further strengthen our financial platform. We entered fiscal 2010 and have been moving through fiscal 2011 operating from a stronger financial base.
In fiscal 2011 nine-months to date our revenue was $13.0 million, up from $12.4 million in 2010, our cash generated from operations was $1.8 million compared to a loss of $1.3 million, and we have delivered our eight consecutive quarter of positive EBITDA. From a balance sheet perspective, we had $2.4 million in the bank at the end of Q3,
we had total deferred revenue of $6.8 million, and we no longer have any subordinated debt on our books.
What is your key competitive advantage?
We think it is our ability to help physicians overcome EMR adoption hurdles. We have taken the time to truly understand out customers, and through what we call the “Nightingale Promise” or “fanatical customer service” we effectively partner with them through the transition to EMR. We provide solutions to what we consider the three main adoption hurdles. The first is an apprehension to technology, which we combat with our technology leadership. We stress flexibility with input devices such as tablets and digital pens. The second is IT infrastructure costs, which we combat by having a web based solution that uses no local servers. The third is the basic economics of the equation. To combat this we employ funding approval, varying payment models, and we also highlight the additional revenue streams that can be added through patient targeted offerings