Luther Nussbaum, Chairman and CEO, First Consulting Group
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bout a decade ago, Luther Nussbaum's daughter barely survived a serious car accident and spent nearly two years convalescing,first in the hospital and subsequently in a rehab facility. While the ordeal took its toll on the entire family, Nussbaum was able to learn firsthand what works and what needs fixing in American health care.
But having run information technology companies such as Ashton-Tate and later the national systems integration firm Evernet Systems, Nussbaum decided he could combine his personal encounter with the health-care system and his experience running companies that offer business solutions in a way he had never considered,providing health-care solutions.
Nussbaum joined First Consulting Group (FCG), which provides IT services primarily to companies in the health-care industry, in 1995 as executive vice president for worldwide practice support. In 1997 he became CEO and in the following year,when FCG went public,he became chairman as well.
FCG has three core lines of business: health care; life sciences; and outsourcing, a division that is aggressively pursuing several big deals and is looking at a possible acquisition in the business process outsourcing market.
In a recent interview with VARBusiness Senior Editor Jeffrey Schwartz, Nussbaum discussed his views on the integration needs of companies in health-related fields. Here are excerpts:
HCI: Why did you choose to specialize in health-care integration?
NUSSBAUM: Health care is one of the largest, if not the largest, vertical, so there's significant opportunity and most of the people who have joined the firm are passionate about improving the quality of care in [this] country by improving what we do with our clients. My daughter had a serious automobile accident about 10 years ago and wasn't expected to live. When she did, and after we got through caring for her for a year or two, it seemed natural to give back to a profession that had done so much for our family when I decided to re-enter the job market.
HCI: What did you learn about the profession when you were going through that?
NUSSBAUM: American health care from my perspective is the best in the world. When someone has a crisis, they come into the U.S. The problem is that it's not terribly efficient; it has all sorts of side issues. Patient safety is a current issue that is very much in focus, but we can do better. I think there are dramatic improvements that could be made in quality of care.
HCI: FCG is becoming well-known for its work in the life sciences and biotech industries. Given that the sectors have taken a beating, is there long-term viability there?
NUSSBAUM: Our business is predominantly in the pharmaceuticals and the large biotechs like Amgen, and those entities are not cutting back on their IT investments. IT services are still growing,they're not growing as rapidly as they have in the past, but they're still growing and there are still significant needs. Our specialty in the pharmaceutical, medical device [and] biotech space is regulatory compliance. The complex issues with regulatory compliance need a lot of specialization, and they've been dramatically facilitated by good systems. So that is the core of our business in the life sciences space.
HCI: Are you speaking of Federal Drug Administration approval cycles?
NUSSBAUM: It's the whole gamut of the interaction with the government, from early clinical trials through to compliance with adverse drug reactions, post-release of the drugs and the later stages. There's a tremendous amount of gathering of information, digestion of the information [and] submission to regulatory authorities, not just in the U.S. but also in Europe and other major countries around the world.
HCI: What role does FCG have in helping its clients meet those needs?
NUSSBAUM: We predominantly build systems. We have a prepackaged offering called FirstDoc that sits on the Documentum document management platform and allows clients to facilitate the regulatory process, the gathering of documents, the sorting through them and the submission of [them] on a worldwide basis under the new electronic submission guidelines. At one point it was a way of gathering information for a manual submission, and it has morphed into an electronic submission.
HCI: What is the biggest challenge clients are facing in regard to electronic submission?
NUSSBAUM: With the regulatory compliance section you want to make sure you have good risk management and that you're in compliance on the manufacturing side, you're in compliance on the drug-discovery side, and you're in compliance post-release. It's extraordinarily important for the large pharmaceutical companies to have adequate systems to be able to ensure that they are in compliance today, tomorrow and always.
HCI: Are these engagements typically long term, where you're in maintenance mode with them as well?
NUSSBAUM: They range with some clients. We've had some very long-term engagements; others we will install a FirstDoc system for R&D compliance or for good manufacturing process compliance and then we would exit the client after that implementation. We tend to have longstanding relationships with most of the major global pharmaceutical firms, but for some of the other midsize and smaller [companies] we would come in, do an engagement and then leave the client for a year or two and then come back and do something else.
HCI: You have said that growth this year is going to be 5 percent, down from 10 percent. What do you attribute that to?
NUSSBAUM: More pressures, fewer blockbuster drugs, more roll-off of proprietary drugs that are subject to generic competition. There are more financial pressures on the pharmaceutical companies, and that's going to increase over the next few years as well.
HCI: Switching to the health-care provider part of your business, are you seeing a greater shift in strategy in that space?
NUSSBAUM: The providers are highly focused on making improvements in clinical outcomes. They would like to improve the quality of patient care and like to improve the outcomes that are yielded. In order to be able to do that, they're looking for sources of cash to be able to spend back on investing in those areas so we might work out an engagement for revenue cycle enhancement, which is basically about improving their cash flow. That would free up some cash that they would potentially invest back in a clinical transformation project. Budgets have improved, there's more investing, [but] they're still not flush with cash and there still is tremendous need to find creative ways to free up cash to be able to invest in the areas.
HCI: What's driving that? Is it competitive pressures?
NUSSBAUM: The health-care market spent a lot of money in 1998 and 1999 preparing for Y2K. Post that in 2000 and 2001, they underspent based on historic trends in order to compensate for the overspending by historic trends in '98 and '99. As we've gone through 2002, people have started spending again at close to historical levels, and in 2003, they're continuing those trends.
HCI: How difficult is the sales process today?
NUSSBAUM: It's less difficult than in 2000-2001 but still challenging. The sales process is always about helping the clients understand why they ought to invest and what the benefits are.
HCI: What typically drives a hospital to outsource,is it the ability to save costs or is it to improve service levels?
NUSSBAUM: It varies by each client, but it's usually a mix with different weighting. Some need immediate cost savings and want to know what cost savings we can apply, and others want better service and quality of thought about what systems we can employ so that we can go after the major problems of the hospital, which are cost, cash and quality of care.
HCI: How much of your business these days is coming from those who need to comply with the Health Insurance Portability and Accountability Act?
NUSSBAUM: Things that are HIPAA-only would be measured in several million dollars of what we're doing in that space. It's not a huge part of our business, but it's big enough to be significant. People have been working on HIPAA compliance for multiple years,the biggest part of what we do with them is to offer assessment services and program management to make sure everything gets implemented. A lot of things with HIPAA are behaviorally related, so you get the security implementations; a number of things are systems related,we certainly have been involved in those as the pieces of HIPAA roll out.
HCI: What is the biggest trend you are seeing that will require IT investments in the health-care industry?
NUSSBAUM: The biggest issue is improvement of patient outcomes and the improvement of the related patient safety. That is foremost in our thinking and foremost of most in the industry.