Idx Systems Corporation Business Information, Profile, and History

Company Perspectives:

IDX Systems Corporation uses information technology to maximize value in the delivery of healthcare by improving the quality of patient service, enhancing medical outcomes, and reducing the cost of care. Supporting those objectives is a broad range of complementary, functionally rich, and highly integrated products that are proven across care settings and organizational models.

History of Idx Systems Corporation

IDX Systems Corporation is a leading healthcare information technology company that offers software, hardware, and related services to the likes of academic medical centers, hospitals, clinics, and management service organizations. The company's products include electronic medical record software and information systems that address functions like billing, scheduling, and patient registration. According to IDX, some 138,000 physicians use the company's practice management software to provide more efficient care to their patients. In addition to its headquarters in Burlington, Vermont, IDX has regional offices in Arlington, Virginia; Atlanta; Boston; Chicago; Dallas; Deerfield Beach, Florida; Louisville, Kentucky; San Diego; San Francisco; Seattle; and London.

Establishing a Foothold: 1969-79

Robert Hoehl and Richard E. Tarrant founded IDX on June 2, 1969 in Burlington, Vermont. Then known as Burlington Data Processing Inc. (BDP), the company initially managed accounting, billing, and payroll for other firms. Hoehl and Tarrant, who both played basketball for Saint Michael's College in Vermont and then went to work for IBM as marketing representatives, used $12,500 to start their own enterprise.

BDP quickly became involved in the healthcare industry. In its June 1998 issue, Business Digest revisited a 1985 article about Hoehl and Tarrant that included comments from Dr. Henry Tufo, one of BDP's first customers. Tufo recalled how Hoehl and Tarrant outbid a number of national firms to build an information system for the new University Health Center during the 1970s. At the time, the field of medicine was evolving from a so-called cottage industry into one characterized by physician groups.

Joking that their low bid may have stemmed from a relative lack of industry experience at the time, Tufo praised the entrepreneurs, calling Hoehl "the best practical computer mind I've ever run into" and stating that Tarrant "understands his business and has the talent to sell ice cream to the Eskimos."

In 1970, BDP rolled out what it described as the first open item physician billing system. The following year the company declared that the healthcare industry would be its specialty and it embarked on a path of steady growth that continued into the late 1970s. In 1978, an important development occurred when BDP merged with Interpretive Data Systems, a Boston firm with similar capabilities.

Formed in 1974 by Paul Egerman and Terry Ragon, Interpretive Data Systems developed medical software that operated on Digital Equipment Corporation (DEC) mini-computers. Prior to merging with BDP, Interpretive Data Systems recorded several noteworthy accomplishments. In 1975, the company developed the National Timesharing Center in Boston, and the following year it installed the first physician billing system that operated on mini-computers. As a result of the merger between BDP and Interpretive Data Systems, a new enterprise called Interpretive Data Systems Inc. (IDS) was formed. That same year, an IDS office was established in Boston and the IDS Systems Group was created to serve small physician group practices.

Initial Growth and Expansion: 1980-94

Computer workstations with graphical capabilities appeared in growing numbers across all industries during the 1980s, and healthcare was no exception. In 1980, IDS rolled out an interfacing standard for labs and pharmacies called HL7. The following year, the company began offering comprehensive software systems for large healthcare organizations. It also was in 1981 that IDS moved into new headquarters in Burlington, Vermont, at 1500 Shelburne Road.

A period of regional expansion took place during the early 1980s, as IDS continued to grow by serving new markets and introducing new products. The company installed its first hospital information system in 1984. More milestones were reached the following year when IDS introduced an integrated system for ambulatory care, hospitals, and managed care, as well as an integrated electronic medical record (EMR) application. Initially named IDX Electronic Medical Record, the application would eventually become the company's Clinical Repository System (CRS).

By late 1985, IDS had sales of $20 million and employed approximately 200 people. In addition to its Vermont headquarters, the company had established offices in Dallas, Chicago, Philadelphia, and San Francisco. At this time, IDS's sales force was broken down into separate groups that concentrated on specific vertical segments like billing or scheduling applications. By the end of the 1980s, the company, now known as IDX Corporation, had moved into a new headquarters facility at 1400 Shelburne Road in Burlington.

IDX began the 1990s with 425 employees. In 1991 the company began marketing a radiology information system called IDXrad. Formerly named DECrad, the system was originally created by the Radiology Information System Consortium and Digital Equipment Corporation. In 1992, IDX Corporation changed its name to IDX Systems Corporation. The following year, the company made its applications capable of running on both IBM and Digital platforms. It also continued to expand, opening a new office in San Diego. A new Atlanta office was established in 1994, when IDX celebrated 25 years of operations.

During its silver anniversary year, IDX paid $23 million for a 14-story building in Boston at 116 Huntington Avenue. Built in 1991, 60 percent of the building was already occupied by other clients. The purchase enabled IDX to move some 200 workers from Brookline, Massachusetts, to the new location in 1995.

Going Public in 1995

IDX recorded revenues of $128.1 million in 1995 and employed 1,095 workers. In November of that year, the company went public. Dr. Henry Tufo, who had been among the company's first clients some 25 years before, was named chief operating officer in 1995. In the June 1998 issue of Business Digest, Richard Tarrant commented on how going public affected IDX. "Going public helped us focus," he explained. "One of the best parts--and I never would have expected this about going public--was that, while I had heard all the bad things about dealing with Wall Street and stockholders--the pressures, quarterly numbers, all the stuff that's hard--what nobody ever said is that they will ask great questions. Wall Street analysts ask great questions. They are very smart people. They focus on an industry. They study the competition. They really make you answer the tough questions. It's had a side benefit that I never would have expected."

By this time in IDX's history, the company had shifted its focus from individual products that addressed specific functions like billing or scheduling for doctors' offices to broader systems and methodologies. These changes mirrored the maturation of healthcare from a fragmented industry to one that included so-called integrated delivery networks comprised of clinics, hospitals, home healthcare agencies, and managed care companies. Along these lines, IDX's sales force was no longer broken down into different groups that focused on different vertical markets.

IDX was experiencing rapid growth during the mid-1990s. In addition to its Vermont headquarters and an international site in the United Kingdom, the company had offices in San Francisco; San Diego; Seattle; Louisville, Kentucky; Deerfield Beach, Florida; Dallas; Chicago; Boston; Arlington, Virginia; and Atlanta.

As IDX evolved from a small firm to a large public enterprise, Tarrant found it challenging to switch to a new style of management. In the same Business Digest article, he said: "An entrepreneur kind of manages everything him- or herself, knows where everything is, can do everything. Entrepreneurs can do a job better than someone they're going to hire, but they need someone to help them. I pride myself on having made the transition to professional management, where the people who report to me are better at what they do than I could ever be. I couldn't do any of their jobs. In fact, I don't even manage day-to-day stuff. That's the chief operating officer's stuff. As the CEO, I'm responsible for strategy, direction, Wall Street, the investors and waving the flag when we're dealing with big customers. You know, a lot of times, with a CEO, if you just show up, it means something."

Sales reached $251.4 million in 1997. That year, the company acquired PHAMIS Inc., a Seattle-based hospital information systems company founded by Drs. Mark Wheeler and Malcolm Gleser. With its LastWord patient record system, PHAMIS bolstered IDX's capabilities to serve integrated healthcare systems that included hospitals and clinics.

At this point in IDX's history, the company's growth frequently included the acquisition of other firms. One of the biggest challenges for Tarrant was not coming up with resources to acquire other technology companies, but figuring out which ones to acquire and how to combine them in meaningful ways. Acquisitions in 1998 included Laureate Enterprises Inc., a project and process consulting services firm for LastWord users, as well as Trego Systems Inc., a company that had developed a contract management system for integrated delivery networks.

In 1998, IDX released a Web-based practice management system called IDXsite. The company also established a new business unit called The Huntington Group (THG) to serve as its consulting arm. THG provided a variety of technology and application-related consulting services in areas like systems integration and information-driven operational redesign. Revenues reached $321.7 million in 1998, about 15 percent of which was devoted to research and development initiatives. IDX employed 2,000 people, 650 of whom worked at IDX's Vermont headquarters, which was made up of two buildings with 143,000 square feet of space.

Late in the year, the company announced a $28.6 million expansion plan for its Vermont campus. Scheduled for completion in 2003, the plans included a five-story, 240,000-square-foot building and a parking garage capable of accommodating 1,400 cars. The expansion plan, which was supported by nearly $9 million in state tax incentives, meant the addition of nearly 1,400 new IDX jobs over four years. In addition, the plan held the potential to create more than 1,000 jobs within the surrounding community and nearly 1,000 new homes. By this time, IDX had evolved into the third-largest player in its industry. While the company's competitors served more hospitals, IDX had made significant inroads with clinics and physician practices and served about 75 percent of U.S. medical schools.

IDX capped off the 1990s by celebrating 30 years of operations. However, the company posted an $8 million loss on sales of $341 million in 1999. Also in that year, James H. Crook Jr. was named president and chief operating officer, responsible for an employee base that had grown to approximately 3,000 people.

Two acquisitions were made in 1999. These included EDiX Corporation, a medical transcription service provider serving hospitals and large medical groups, and ChannelHealth, a Web-based service provider for the healthcare market. As part of the latter acquisition, ChannelHealth became an IDX subsidiary, enabling the company to offer more Web-based products and services to physicians and their patients.

In December 1999, IDX announced that it had formed a strategic partnership with ProxyMed Inc., a provider of network-based connectivity services for the healthcare industry. The partnership allowed clients to engage in various types of transactions, including online insurance claims processing.

Challenges and Achievements in the New Century

The call for automation was a boon for healthcare information technology companies in the 1980s and 1990s. However, the dawn of the 21st century found many of these firms struggling amidst Y2K-related problems, Medicare reimbursement cuts, and subsequent delays and cutbacks in spending by healthcare providers. IDX was no exception. In 2000, the company withstood a $36 million loss on revenues of $341.9 million and cut roughly 250 jobs. IDX also sought to save $10 million by eliminating under-performing products for hospital-owned physician groups, as well as some of its offerings for the managed care market.

Despite this grim news, IDX agreed to lease 40 percent of Seattle's newest office building in April of 2000. Named IDX Tower at Fourth and Madison, the 40-story structure spanned 810,000 square feet. Approximately 1,500 IDX employees were to move from an office at 1001 Fourth Avenue to the new building when it was completed in 2003. IDX also pressed on with the expansion of its Burlington campus.

In July 2000, IDX agreed to sell ChannelHealth Inc. to Libertyville, Illinois-based Allscripts Inc., a developer of software that physicians used to submit patient prescription information to pharmacies. According to the Associated Press, the deal was worth $250 million in stock, making IDX Allscripts' largest shareholder. The sale was beneficial to both sides. Allscripts gained access to IDX's large base of physician customers and expanded its sales channel, while IDX rid itself of the money-losing ChannelHealth.

In 2001, sales climbed to $379.9 million and employees numbered 4,200. However, the company registered a loss of $8.6 million amidst weak economic conditions. IDX also restructured in 2001, putting less emphasis on its Enterprise Solutions Division, which had accounted for some 40 percent of revenues in 2001.

While sales had steadily improved during 2001, IDX was negatively affected by the terrorist attacks against the United States on September 11, 2001. In their wake, the company was forced to eliminate 200 jobs. In a September 28, 2001, Associated Press story, Richard Tarrant said: "The real issue here is that after September 11, meetings stopped, work stopped. We have a counseling program going on for people who want to talk about air travel. There are some people who will not get on airplanes. ... We're giving them time to reconcile that or see if there are other positions they can fill."

One positive development in 2001 came midway through the year, when IDX and Stentor Inc., a medical image distribution firm based in Silicon Valley, joined forces to offer clients a medical image and information management system. Based on a hosted, or application service provider model, the system would allow healthcare providers to bypass the hefty costs normally required to implement picture and archive communications systems (PACS), which enable doctors and clinical staff to transmit, view, and store X-rays via computer. The partnership involved the integration of Stentor's iSite system with IDX's Imaging Suite and ConnectR products. In its issue for June 7, 2001, Market News Publishing said the proposed system would be "an integrated solution for image and information management, without redundancy of data or function. The resulting solution is an entirely Web-based system covering most aspects of the radiology enterprise--from registration and scheduling through the patient scanning process to diagnostic interpretation and reporting, onto archive storage and image/report distribution to referring physicians."

Another significant achievement came in December 2001, when IDX was selected to spearhead a three-year project for the U.S. Commerce Department's National Institute of Standards and Technology (NIST) Advanced Technology Program. Worth $9.2 million, IDX explained that the project would "fund the development of software infrastructure aimed at improving healthcare quality and reducing medical errors by enabling the creation, distribution and application of computable clinical practice guidelines (or CPGs--best practice benchmarks that provide clinicians with patient-specific recommendations at the point of care)."

By early 2002, conditions were again improving at IDX, as the company continued to cut costs. That year, sales reached $460.1 million, the company posted net income of nearly $10.0 million, and IDX's employee ranks swelled to 4,900. IDX also unveiled its Carecast enterprise clinical information system, which was based on the company's pioneering LastWord system that had been developed many years before.

In October, IDX announced that President and Chief Operating Officer James Crook, Jr., would assume the role of CEO in January 2003, replacing Richard Tarrant, who would become chairman. Robert Hoehl, who had been serving as IDX's chairman, became vice-chairman. At this time, IDX systems were in place at some 3,200 locations.

In June 2003, IDX sold EDiX to Franklin, Tennessee-based Total eMed, a medical transcription services provider. The company's employee base then fell to 2,100 workers. By late 2003, things were going well for IDX. The company served a customer base of 138,000 physicians and its solutions were installed at 3,300 sites across the United States, Canada, and the United Kingdom. Tarrant told the Associated Press that IDX had made corrections to change the company's course from the previous three years, including the addition of new management personnel and a comprehensive product suite that included IDX Flowcast, IDX Groupcast, IDX Carecast, IDX Imagecast, and EdiX. Although sales fell to $399.2 million in 2003, IDX's net income skyrocketed to $58 million--up from $10 million the previous year. One encouraging development was a contract to provide a clinical information system to Britain's national health system. According to IDX CEO Jim Crook, the project gave the company its first real foothold for international expansion.

Two key leadership appointments were made at IDX in early 2004. First, Thomas W. Butts was named president and chief operating officer. In addition, Stephen C. Gorman was named president and general manager of IDX Groupcast. As IDX headed toward the mid-2000s, the future appeared to be bright. In a February 12, 2004, Associated Press story, CEO Jim Crook provided an optimistic outlook, stating: "Today, we're performing better, delivering better results for our customers than we have last year and three years ago, and next year we'll be delivering better results than we are today."

Principal Competitors: Cerner Corporation; Eclipsys Corporation; McKesson Corporation.

Chronology

• Key Dates:
• 1969: Robert Hoehl and Richard E. Tarrant establish Burlington Data Processing Inc. (BDP).
• 1970: BDP rolls out an open item physician billing system.
• 1971: The company declares healthcare as its specialty.
• 1978: BDP merges with Interpretive Data Systems, a Boston firm with similar capabilities, forming Interpretive Data Systems Inc. (IDS).
• 1981: IDS moves to new headquarters in Burlington, Vermont.
• 1989: The company, now known as IDX Corporation, moves into a new headquarters facility in Burlington.
• 1992: IDX Corporation changes its name to IDX Systems Corporation.
• 1995: IDX goes public.
• 2001: IDX is selected to spearhead a $9.2 million, three-year project for the U.S. Commerce Department's National Institute of Standards and Technology (NIST) Advanced Technology Program.
• 2003: President and Chief Operating Officer James Crook, Jr., is named CEO; net income skyrockets to $58 million on sales of $399.2 million.