Some healthcare information systems companies have so much work that they're closing the sales window.
Others are waiting anxiously by the phone for a live prospect.
It's a Y2K world they live in, and sales of fancy new features and elaborate advances in clinical software are not a very big part of it for the time being, consultants and observers say.
How long the aberration will last is open to debate, but one thing's for sure-it won't last forever. And if hungry vendors survive the sales drought, they could be in a bargaining mood when providers shift back to the plans they were making before the Y2K wave hit, says Tim Zinn, president of Chicago-based Zinn Enterprises, a healthcare information technology consulting company.
After talking with several client vendors, most of them from the clinical software business, Zinn says he believes the delaying effects of Y2K "are going to change the dynamic for new system sales" in such areas as decision support and computerized clinical records.
Forces of supply and demand will "probably increase the bargaining power for those wishing to purchase these new niche systems by giving them more leverage in a purchase, since there will have been a dry spell in sales for some," Zinn says.
Evidence of that dry spell became noticeable as early as last fall when some publicly traded software companies brought up the Y2K effect in explaining lagging sales in financial reports.
"Sales activity has been slower than planned as many healthcare institutions are focused on resolving year-2000 compliance problems with legacy systems," reported Brian Patsy, president and chief executive officer of LanVision Systems, in a Nov. 23 statement on its results for the third quarter and first nine months of 1998 ended Oct. 31.
Revenues of $9.4 million up to that point in 1998 were 57% higher than the same nine-month period a year earlier but still less than anticipated, Patsy said.
Cincinnati-based LanVision provides systems to automate and improve access to clinical and financial information on paper, X-ray film, magnetic and optical disks, and other sources such as voice and video.
Boston-based Transition Systems, before it was acquired by Eclipsys Corp. on Dec. 30, 1998, sang its last tune as a separate public company last November and included some blue notes about the effects of Y2K.
"We are disappointed with the fourth-quarter results," stated Bob Raco, Transition's president and CEO, referring to a 27% decrease in revenues for the quarter ended Sept. 30, 1998, to $10 million compared with $13.7 million in the year-ago quarter.
Transition's main offerings are specialized decision support, cost management and quality-control products. Delray Beach, Fla.-based Eclipsys sells a range of information systems and services.
In his statement, Raco attributed the lower revenues partly to senior management's "distraction" related to the Eclipsys acquisition but also to "the continuation of the year-2000 problem in healthcare legacy systems.
"Specifically, healthcare organizations, mindful of the approaching deadline, have redirected their (information systems) resources primarily to resolution of this issue, effectively postponing their attention to system acquisitions and implementations," Raco said.
By "legacy systems," Raco was referring to older models of financial and administrative systems in many healthcare organizations that contain programming unable to handle 2000 in dates and calculations.
Companies that address those problems, either by fixing faults in the older systems or selling bug-free replacement versions, are preoccupied by sales and implementations.
Shared Medical Systems, Malvern, Pa., for example, pulled out of this week's Healthcare Information and Management Systems Society exhibition, saying the demands on the information systems and services company for Y2K-related repairs and replacements were its main focus rather than sales of the next wave of software.
At Meditech, the industry's largest privately owned healthcare software company, sales of new information systems were up 35% to 40% in the last two quarters of 1998 compared with sales activity typical of those quarters, says Stu Lefthes, the company's vice president of sales.
The 170 people in Westwood, Mass.-based Meditech's implementation division have been going full speed and borrowing bodies from the 45-member international division, Lefthes says. The company soon may not be able to take on new business and still keep an on-time schedule.
"We have not had to turn anyone away yet, but we're getting close," he says. "We won't make a commitment if we can't meet the `go-live' date," the target date for putting the system in operation.
There's a chance a new customer can sneak in if an existing customer without a Y2K problem can wait a little for additions such as clinical software and allow customers with millennium emergencies to cut in line, Lefthes says. But the accommodated customers first would have to show a signed contract with a check for 10% of the average $1 million sale price, and the contract can't include pages of legal language haggling over details, he says.
Last-minute customers also can't expect to dicker over price. "They've got a problem. If they don't get signed and get on the docket, what good will it have been to try to negotiate a discount?"
As it is, "we're approaching the point where nobody is going to be able to help a hospital that's starting to wake up to the fact that there's a Y2K problem," Lefthes says.
Zinn says the preoccupation with upgrades and replacements may affect the capacity of larger companies to switch gears and return to their new products.
"Y2K delays now mean further vendor delays in ramping up sales in other areas in the future beginning the New Year of 2000, thus providing improved negotiating power for the buyers that know what they want and are ready to pounce after the New Year," he says.
After all, large publicly traded companies have to show improved revenues and continued earning power, he adds.
Not everyone is so bearish.
"We think most of the Y2K slowdown is behind everyone," says Stephanie Massengill, spokeswoman for Delray Beach, Fla.-based Eclipsys. She predicted a return to normal by the second quarter of 1999.
But Eclipsys and other publicly traded companies are telling a more cautious story in required disclosures of possible adverse effects on future business performance.
The U.S. Securities and Exchange Commission has warned companies to be upfront in their quarterly and annual reports about the costs of making their organizations Y2K compliant and also the effect of their customers' Y2K-related problems on sales and revenues.
In the healthcare information industry, similar passages started popping up in quarterly, or 10-Q, filings last fall that acknowledged the chilling effect of Y2K on business in 1999.
Eclipsys, for example, reported in its Nov. 16, 1998, filing on the first nine months of 1998 that "as a result of apprehension in the marketplace over year-2000 compliance issues, businesses, including the company's customers, may elect to defer significant capital investments in information technology programs and software."
If that's the case, "the company may not achieve expected sales revenues, and its business, financial condition and results of operations could be materially adversely affected."
SMS early this month released boffo results for calendar 1998, including a 23% increase in revenues to $1.1 billion-the first billion-dollar year for the company. But its latest 10-Q report, issued last fall for the first nine months of 1998, left the door open for upcoming news of a different sort.
"While the company expects a continued demand for its services, it is possible that the year-2000 issue will cause a decline in decisions to purchase new information systems by healthcare providers as they focus instead on efforts to update their current systems," according to the report.
"Customer efforts to update their current systems, and potential constraints on available resources, could cause delays in installation of the company's products."