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Quality Systems Rides Surge in Medical Paper Purge

Plochocki: electronic medical record world shifted from “methodical pace” to “overdrive”

Irvine-based medical-software maker Quality Systems Inc. expects the healthcare industry’s move to electronic medical records to quicken this year, its top executive said last week.

Quality Systems makes practice-management and medical-records software for doctors, dentists and smaller hospitals.

Chief Executive Steven Plochocki told a Boston healthcare conference audience the industry holds an “ever-expanding need and requirement for software technology.”

Quality Systems moved beyond its core dental- and medical-software business in 2008. That’s when it bought a pair of businesses specializing in revenue-cycle management, involving software for billing and collections.

In 2010 the company created an inpatient hospital division after buying Opus Health-care Solutions of Austin, Texas.

The move keyed on opportunities created by the $787 billion federal stimulus package, which called for an industrywide adoption of paperless, electronic records-keeping by hospitals and provided financial incentives for doing so.

“The electronic medical record world (was) progressing at a nice, methodical pace,” Plochocki recalled. “The stimulus comes into play and put it into an overdrive. This whole movement toward electronic health records isn’t because somebody got a whim in Washington and thought it’d be something nice to do. The reason why we wanted to get electronic-based healthcare is to reform healthcare.”

Boomer Retirements

• Headquarters: Irvine

• Business: medical-software maker

• Founded: 1974

• Ticker symbol: QSII (Nasdaq)

• Market value: about $2.63 billion

• Notable: Shares have risen 495% since 2000

Plochocki suggested that a projected $80 trillion in healthcare costs related to baby-boomer retirements will force systemic reforms in the industry.

“You have to wire the healthcare system and reform it before the end of this decade in preparation for my crew,” he said.

About 20% of the healthcare industry was using electronic records-keeping when the stimulus bill was announced, Plochocki estimated. Today about 34% has gone electronic, with an industry goal of achieving 70% conversion to paperless records by 2015.

Electronic medical records will have “quite an aggressive adoption curve in the healthcare market, realizing great benefits to companies like ourselves,” Plochocki said.

The Quality Systems chief said the software market for hospitals is about $7.2 billion and for doctors more than $4 billion.

He also cited efforts by doctors and hospitals to consolidate and suggested the trend will translate into boosted market share for the company during the next few years.

Achieving an “entirely electronically based healthcare world” in which payers, providers and consumers would be connected electronically could take up to 15 years, he said.

“Advent”

“We’re at the very advent of that, beginning with the provider movement,” Plochocki said.

He said about 64% of the company’s $354 million in annual revenue is recurring, up from 42% when he joined the company’s board seven years ago.

He became chief executive in 2008 after the departure of Lou Silverman.

Quality was launched in 1974 as a dental software company under founder and Chairman Sheldon Razin.

It began to evolve into an electronic medical record provider in the late 1990s, and its stock has been hot since the turn of the millennium.

Quality shares have risen 495% since the beginning of 2000 to a recent market value of about $2.63 billion.

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