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Quality Looks Good on Proxy Fight; Key Exec to Leave

Decker: will stay in healthcare

Irvine-based Quality Systems Inc. is seeking a new head for its dominant division.

Quality said last week that Scott Decker, president of its NextGen Healthcare Information Systems subsidiary, would leave the company effective Sept. 7.

Decker is taking an executive-level position at a company that’s in the healthcare sector but does not compete directly with Quality, his current employer said in a release.

A search for Decker’s successor is under way.

Chief Executive Steven Plochocki will assume Decker’s responsibilities in the interim.

Decker has been with Quality—which makes software that dentists and doctors use to manage their practices—for about five years. His career has also included founding and serving as chief executive of Healthvision Inc., a medical software company that’s now part of St. Paul, Minn.-based Lawson Software Inc.

He became president of NextGen, which accounts for 76% of Quality’s annual sales of about $430 million, in 2009 after serving as a senior vice president.

“Scott’s knowledge, talent and leadership skills have helped contribute to the company’s growth,” Plochocki said.

Decker’s departure comes as a fourth proxy fight in eight years winds down between Quality management and dissident director Ahmed Hussein, who owns about 17% of the company.

Quality shareholders met on Aug. 16. Final voting results showed seven members of the eight-member company slate and two members of a seven-member Hussein slate won one-year terms as directors, according to a Securities and Exchange Commission filing.

Hussein backed a slate of new directors for the company’s board after it lost about a third of its market value at the end of July. Hussein contended a different board is needed to ensure strong performance at the company.

“My entire motivation in this proxy contest has been to further [Quality’s] success both for my own investment and the rest of the shareholders,” Hussein told the Business Journal in July.

Quality management urged shareholders to vote for the company’s slate of nominees to its board and has argued that Hussein and his slate of nominees didn’t offer a credible plan to create value for Quality shareholders.

“His business plan is similar to ours,” Plochocki said.

Quality also claimed Hussein violated its insider trading policy by pledging shares in margin accounts, something the investor has denied.

“I wasn’t highly leveraged, and the brokers got nervous and sold without my orders or anything like that,” he said.

The feud reignited after Quality reported financial results that missed analysts’ projections for the three months ended June 30. Plochocki said the company wasn’t going to reaffirm its previous guidance for the 12 months ending in March 2013 because of “evolving conditions affecting our industry and uncertainty in predicting future results.”

Quality reported a $15.5 million profit in the June quarter, 18% lower than a year earlier and below consensus analyst estimates of $20.8 million.

Revenue was $118.3 million, which was 18% higher than the three-month period ending in June 2011. Wall Street was looking for Quality to have revenue of $120.6 million during the period.

Quality’s overall results were affected by lower-than-expected revenue from large, higher-margin software system sales, Plochocki said. He also said the company was “going through a period of deceleration” after the federal government delayed deadlines for healthcare providers to reach certain levels of proficiency in using electronic medical records.

Quality had been one of the fastest-growing Orange County public company stocks in terms of price for more than a decade. Its share price had risen by more than 1,000% since the start of 2000 before recent events.

Events fueling the company’s rise included the Obama administration’s economic stimulus package passed in 2009 and federal healthcare reform passed in 2010. The latter gave doctors financial incentives for adopting electronic medical records.

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