Sheldon “Shelly” Razin, who in the 1970s invested $2,000 to start a medical records tech company that became one of Orange County’s longest-running software and services firms, and just a few years ago tried to regain control of the company, died on Jan 15 following an illness.
Razin, who was 85, “was an intensely passionate and entrepreneurial innovator,” said NextGen Healthcare Inc. (Nasdaq: NXGN), which got its start under the name Quality Systems Inc.
The firm was long headquartered in Orange County and still has a base of operations in Irvine, though it said near the end of last year that it is now a remote-first business without a true headquarters.
As recently as 2021, the Laguna Beach resident led a bitter proxy battle that was eventually unsuccessful against NextGen, which counted a $1.2 billion market cap as of last week.
The two sides made peace after the proxy battle, according to NextGen Chairman Jeff Margolis.
“That was an unfortunate chapter in a long collaboration,” Margolis told the Business Journal.
“Shelly said to me, ‘Even though I lost the proxy battle, I felt like I won because of where we ended up with the leadership of the company.’”
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Razin “grew up in the streets of Boston,” becoming a big Red Sox fan and a collector of trivia, especially on the legendary Ted Williams. He shoveled sidewalks and delivered meat as a youth to pay his way to earn a degree in mathematics at the Massachusetts Institute of Technology, where he and his wife, Janet, later endowed a $1 million research fellowship.
He worked at Rockwell International Corp. prior to 1974, when he started Quality Systems.
“I founded this company on a desk in my garage when I had a vision for applying technology that would automate healthcare,” Razin said in a 2015 statement.
Quality Systems became the first company to build ready-to-use software for dentists. Demand for the company’s dental software systems ballooned from there, according to Razin.
“We went from trying to do dentistry on timeshare to putting the system on the client’s site,” he said. “We pioneered that. No one else had ever done that.”
Later, Razin had what he called “another epiphany,” when he realized that he had to train his customers’ employees and “support them for life” to be successful.
Quality went public in 1982, raising $11 million. It initially touted itself as a dental software platform before expanding to the ambulatory healthcare market.
By the 2000s, he had grown the company to more than 1,200 workers.
“It’s not just the visionary that does it, it’s actually the people you’re able to get around you, and so those people deserve a huge plaudit,” he said.
The company eventually morphed into a subscription software model to help thousands of clinics that offer outpatient services, via electronic health record software and practice management systems.
“Shelly was absolutely instrumental as an entrepreneur in turning electronic health records into a category of software,” Margolis said. “That legacy only becomes more important over time.”
Razin received several recognitions, including winner of the Software Category of TechAmerica’s 52nd Annual Innovator Awards in 2010 and Chairman of the Year in the 2009 American Business Awards.
The Business Journal presented him with an Excellence in Entrepreneurship Award in 2009; he’s made prior editions of the paper’s OC’s Wealthiest list. During that decade, the company’s shares rose more than 2,000%.
Razin “was a true visionary,” the company said in a statement following his death.
“Epic and Cerner, today’s hospital-focused behemoths, didn’t start up until 1979, five years after Shelly saw a need at the intersection of healthcare and IT and set about fulfilling it,” the company said.
“By digitizing health records and automating workflows decades before the HiTECH Act mandated the use of Electronic Health Records, Shelly helped improve the lives of thousands of employees, tens of thousands of providers and millions of patients.”
Razin stepped aside as chairman in 2015, relinquishing the role to Margolis.
“Shelly and I had a common background of starting and building companies in the healthcare space,” Margolis said. “We were friends who shared many common viewpoints on running a business.”
Razin was involved in several high-profile proxy battles.
In the 2000s, he had a long-running tussle with company director Ahmed Hussein, an Egyptian businessman who owned about 16% of Quality Systems.
The company fought hard in those proxy battles, at one point disclosing Hussein was once censured by the American Stock Exchange. Razin said at the time, “We only put up a fraction of what this guy has done.”
Hussein mounted three proxy battles against the company and succeeded in electing some directors. Razin, who owned about 18% of Quality at that time, still retained a majority on the board.
In 2021, a simmering dispute among board members broke into the open at NextGen, which had moved its headquarters from Irvine to Atlanta, saying that city was more centrally located for its executives.
Razin, who at that time owned 15% of the shares, took issue with what he called an “imperial boardroom culture” that “had an increasingly corrosive effect on the business during the six-year chairmanship of Mr. Margolis, as evidenced by the company’s anemic organic growth, deteriorating margins and sustained underperformance,” he said in a 2021 letter to investors.
On the other side of the dispute was most of NextGen’s board of directors, including Chairman Margolis, an OC resident who among other positions is also a director at Orange-based Alignment Healthcare Inc. (Nasdaq: ALHC) and at Hoag Memorial Hospital Presbyterian in Newport Beach.
As typical in many proxy fights, the battle turned nasty at times. NextGen said that when Razin departed as chairman in 2015, it was “a deteriorating business with unproductive R&D; investments and a disenfranchised customer base.”
“Moreover, Sheldon’s capital allocation plan prioritized $400 million in dividends that thwarted sustainable high growth and largely benefitted him personally,” the company said.
Razin lost that proxy battle and, in the process, lost his seat on the board of directors. According to the latest proxy, Razin was still the company’s largest shareholder with 15% of the shares worth an estimated $176 million at press time.
“Shelly and I never stopped being friends throughout that proxy battle,” Margolis said.
“Shelly was a very focused and straightforward builder and investor in a business. He believed the purpose of the business was to produce excellent returns for shareholders. He believed the pathway to do that was do an excellent job for customers.”
The company on Jan. 24 reported fiscal third-quarter sales rose 8.1% to $161.9 million. The company boosted its full-year forecast to $642 million to $650 million, up from a prior prediction of $630 million to $640 million.
Another OC software firm, Newport Beach’s Planet DDS, bought QSI Dental, the dental software division of NextGen, last year for $12 million.