CEO Spotlight: Interview with Sam Chebib, Nightingale Informatix Corporation (NGH.V)

By Angel Mehta, Managing Director, Sterling-Hoffman Executive Search

One of the fastest growing software companies in North America thinks it can help solve the healthcare crisis by showing doctors how to run more profitable clinics – and deliver better care to patients at the same time. Angel Mehta, Managing Director of Sterling-Hoffman chats with Sam Chebib, CEO of Nightingale Informatix (NGH.V), about entrepreneurship, helping doctors save lives, and the exploding market for electronic medical records (EMR) technology.

Angel Mehta: Nightingale seems to have been a regular on various ‘Fastest Growing Company’ lists over the last 2 years…what’s behind this? Most software companies have been devastated by the recession…

Sam Chebib: We operate in an under-adopted market and have high growth potential. Healthcare IT as a market is in its infant stages…like the DOS days of PCs, before anyone knew what Windows was. Our success was achieved as a result of a combination of factors: The clear need from the market for this kind of technology, our technology leadership, broad suite of healthcare IT services and having an experienced management team who is passionate about this business.

Angel Mehta: It’s funny because when we talk about why Nightingale has done well, you almost sound like going back to the beginning, you evaluated the opportunity as a venture capitalist more than as an entrepreneur who was just crazy about the core intellectual property?

Sam Chebib: Absolutely, and that’s the way to do it now isn’t it? Return on investment is the primary metric that should be used to evaluate a business opportunity. Passion certainly plays a roll…is this going to be fun? Will it be rewarding to engage in? But we’re very fortunate with Nightingale because it meets the test of having a strong financial return but also has an amazingly noble cause…. We’re contributing in an immense way to providing better healthcare which ultimately…

Angel Mehta: saves lives. I asked a physician friend about Nightingale recently and started to ask him what he thought about electronic medical records technology…he just cut me off and said, ‘There is no way to do medicine over the next 15 years without deploying EMR (Electronic Medical Record) technology – period.’ He was fanatical about it.

Sam Chebib: Right. And when you are engaged in a business that has both the amazing potential financial return of Nightingale and our core product contributes to society in the way it does…it’s hard not to be excited about what you do every day.

Angel Mehta: You were not a technologist or software guy by training…what was different about running a software company than companies you’d run in the past?

Sam Chebib: I think there are a lot of positives to the software industry and a lot of negatives. The first negative is everybody is younger than you are. When you come from an industry where you’re the young kid on the block and all of a sudden you’re in the technology world and you start hiring smart people and realize in the interview that you probably have socks older than they are…[Laughing]. But I love the margins that come with the software industry; I love the recurring revenue component – the benefits that the software as a service (SAAS) model provides. We are building annuities in a fairly sticky business. In other industries, you win a contract, and it probably takes you 2 – 3 years to deliver on the terms of that contract. But when a customer buys our software, they see the fruits of their investment in a matter of months, not years. We add value right away. It’s incredibly rewarding to see that happen.

Angel Mehta: As someone who was new to the software industry, do you find it challenging liaising with your development team? Software engineers are a tough bunch to work with…they’re smarter than everyone, and they usually know it. [Laughing]

Sam Chebib: Oh, always. I mean, as an outsider or newcomer to the software industry, you tend to think everything is simple…modifying the product or creating any given module is doable. You don’t appreciate what the R&D folks have to go through to make those things happen, no matter how many times or how frequently they push back and explain how the pieces work together.

Angel Mehta: So based on those experiences…what advice would you have for non-technical CEOs who are running technology businesses?

Sam Chebib: I go back to this – it’s all about surrounding yourself with the experts, people smarter than you are and empowering them to do their job.

Angel Mehta: Let’s talk about Nightingale’s offering because the EMR market is pretty complex. What is the problem that you’re solving for customers right now?

Sam Chebib: If you want the story in layman’s terms…let’s say you bought a GM car – and you decided to take your kids to Florida and your car runs into problems, you go to any GM dealer, they punch in the serial number, they can give you a very detailed, chronological order of everything that happened to that car from the day it left the factory until today. Then you can make intelligent decisions on what’s wrong with that car and how big the problem is and the best way to fix it. That’s how things work with a car.

Now consider the same for something of greater importance. You are the patient, and you walk into any clinic and ask for a diagnosis of what your problem is, with no real understanding of your own body’s history and of course, as a patient, no real understanding of medical issues. Well then you cross the street from your GP to your specialist. And chances are they have no clue what your medical history is. They have no clue if any tests have been completed, what medication you’re on, what your family’s genetic tendencies are, what you’re allergic to. In the absence of properly documented clinical information, the specialist will have to consider what you tell them. And what you tell them is pretty much your subjective view of your condition, untrained observations about your situation. There is no place to just punch in a social security number or some unique identifier and obtain your medical history. It’s not a big issue if you’re young, but as you grow older…and the number of medications you’re on (or have been on) grow…it makes a huge difference. People die because there’s no access to real time clinical information through an information highway for healthcare – especially in North America.

The main reason that there’s no such information highway for healthcare is because in North America, 80% of the clinical information collected by the doctor or a nurse is done in an outpatient setting.

Angel Mehta: With a pen and a paper…?

Sam Chebib: Exactly. Hospitals tend to be a little better in terms of automation and documenting your personal history, but this is a small fraction of our medical history. But the majority of the medical information is not stored anywhere that is easy to access for any given physician that may need that history to offer you the best treatment. That’s what we’re trying to solve. Our mission is to try and get physicians to document what happens to patients electronically so that ultimately, the patient receives better healthcare, the physician becomes more efficient and our overall cost of healthcare is lowered.

Thankfully, various government policymakers understand this problem and the overall costs to society of not having electronic medical records. They’re determined to do something about it. For the first time in any industry, governments in the United States and Canada are encouraging physicians through programs or incentives to adopt EMR technology. Governments have realized that EMR can provide better quality care and reduce the overall cost of healthcare to the system, freeing up dollars for investment in additional facilities.

Angel Mehta: Can you quantify that? I mean, why is it the best investment a physician will ever make?

Sam Chebib: There are studies that suggest that for every dollar spent in healthcare and in delivering healthcare, 25¢ is waste and redundancy. I’ll give you an example on how that may happen. If you were to go today to your GP and you complain of anything, they may send you to get some blood work done or an EKG. You can go back a day later to another clinician for a second opinion or maybe a specialist who doesn’t have access to the results of that blood work or EKG. So what happens? The exact same lab work needs to be done again. The same principle may apply for prescription drugs. It’s all about access to real time information.

They can’t rely on what you tell them because as a patient, you don’t have the qualifications to give them the detailed information they need. So they need to do those same tests over again.

Physicians operate in a quasi information vacuum since the information they need may already exist but they don’t have access to it. I’ll give you another example related to efficiency at the physician level: When Vioxx was recalled from the market a few years ago, because of certain perceived risks. Word got out that you have to immediately tell your patients to stop taking Vioxx or at least what the risks were. The average physician has 2,000 charts. The amount of effort required by each physician to go through these 2,000 charts to figure out which patients have been prescribed Vioxx is quite laborious…the sheer number of hours involved…no physician can possibly do that by hand. Yet it’s a 30-second exercise with EMR technology to just scan the data, pull up a report and spit out letters or send e-mails to everybody who is on that drug to stop taking it.

That’s the power of digitizing medical records. See what I mean?

Angel Mehta: Yes, but that seems so obvious…. Why is there such a giant delta between the technology that’s available and the number of doctors that have implemented it? It’s almost like healthcare, an industry full of really smart people, is behind every other industry when it comes to the deployment of really basic technology. Is that true?

Sam Chebib: In North America, yes. But in the UK, the adoption for Electronic Medical Records technology is near 100%. In the Netherlands it’s 100%. Scandinavia it’s 100%.

Angel Mehta: So why is it taking so long?

Sam Chebib: There are valid reasons for why it is taking so long. Number one – there is a behavioural change required by the physician. That’s our biggest obstacle. Some physicians are not convinced on the return on investment from implementing an EMR to justify dropping their paper pads and pick up a tablet.

I think there is a demographic issue as well – physicians tend to practice way beyond the average age of retirement so we have a good chunk of physicians in their 60s and 70s that may not necessarily be open to changing their behaviour. I think what’s happening right now is the younger generations of physicians are changing the landscape: They know that EMR is critical, and they won’t run their practice without it. Government subsidies are making a huge difference. I think in about three or four years from now, it won’t be an option anymore – every medical clinic, every hospital, will either have EMR technology, or be on the path to getting one. You can’t do business without email today, and in the future you won’t practice medicine without EMR software.

Angel Mehta: Are government subsidies from the Obama stimulus helping Nightingale’s cause?

Sam Chebib: They will, I believe in a major way, as they will force mainstream market to occur. But as of now, the Obama dollars have not started to flow yet. The criteria have not yet been defined for what makes a physician qualify for some of the subsidies available. But in Canada, the subsidy programs are a lot more mature, and we started to see some pent up demand and a lot of positive signs in the market place

Angel Mehta: How does Nightingale’s offering compete with the other EMR products on the market? In essence, why should a physician buy from Nightingale and not someone else?

Sam Chebib: Good question.

While we realized that the ultimate customer is a single physician, and the product has to satisfy their specific interest, we also saw a shift in the buying behaviour, where it is done at the Enterprise level on behalf of many physicians. So we built a function rich, enterprise grade product for large scale roll-outs We sell at the enterprise level to hospitals and buying groups, but they have the capability to roll the product out to hundreds or thousands of physicians under their pyramid if they wish and the product was built with the physician’s needs in mind.

The way to do it was to leverage the internet and deliver our products and services as an ASP model, eliminating the need for our clients to invest in servers and IT infrastructure. It is a total outsourcing model.

This has proved to be the most efficient model for optimum adoption.

Angel Mehta: What are the biggest misconceptions that physicians and customers have about Nightingale or EMR technology in general? Is there a gap between what customers perceive and what the reality is?

Sam Chebib: Yes, and its simple – just technology related.
Unfortunately, physicians get attracted to simplicity. They are probably justified in their thought. The problem lies in the fact that extreme simplicity defeats the purpose of being able to capture clinical data in discreet fields, reducing the user’s ability to report properly on the data and defeats the purpose of being able to aggregate the data to create the clinical information highway. I believe that the various certifying bodies have realized this problem and are tightening the specification for approving products

Angel Mehta: What are some of the most exciting transitions that Nightingale has gone through in terms of its product offering and its ability to help physicians run their practice?

Sam Chebib: One major transition that we went through about a year ago where we came to realize that at the end of the day our user’s interest is in the output, not in the input. So the first thing we did was bundle a traditional medical transcription service with the offering, so those physicians who like picking up the Dictaphone and having someone else transcribe their notes can now dictate directly into their EMR. So essentially, doctors can use our technology without changing their behavior or workflow. Doctor’s love being able to do that.

The other major transition is what we call natural language processing, where we can take the input in text format, and through complex algorithms extract reportable discreet fields. This helps in providing easy input methodology with intelligent output.

Angel Mehta: Let’s switch gears for a bit and talk about entrepreneurship and the CEO experience…I’ve always wondered if there is a formula we can use to predict whether someone will become a CEO or entrepreneur. Do you think there is a correlation between growing up in a business family and becoming a business leader? Be it as a formal CEO or just an entrepreneur?

Sam Chebib: I don’t think so. I think there are numerous examples of siblings who grew up in the same household that ended up on the two opposing extremes of the business spectrum. I believe that you’ll find that there are two types of CEOs – those who follow a well defined plan of moving up the corporate ladder…those are the ones that inherently do not take a lot of risk, so it takes them relatively longer to become leaders.

Then there are those who take larger risks very early on in their lives….Some fail as we all know, and a few of them actually make it big.

I was in the former category; I moved up the corporate ladder, doing it the safe way…and didn’t become an entrepreneur until I turned 40.

Angel Mehta: If you had a chance to go back and do it again, would you have taken more risk early on?

Sam Chebib: I guess I would have. I mean it’s a big mistake to take it later on in your life; you’ve got to do it before you have kids because your priorities change when you’ve got a family to care for and rightfully so. I would have missed out on a lot of the leanings that I acquired being with large organizations, but it may have balanced itself out.

Angel Mehta: So what finally drove you to finally take the entrepreneurial risk later on in life?

Sam Chebib: I think there are a number of factors. I think you have more confidence as you mature as a business executive, you’re a lot more confident in your ability to take the deep dive and take some risk. After so many years, it’s not necessarily intuition, it’s not a gut feeling of what may or may not succeed, it’s a properly thought out approach that come with age and maturity and you can see a clear path in front of you.

You know, with some degree of certainty, how you’re going to get from here to there. Another element that comes into play is that if you’re a bit older, perhaps you’ve built some financial security; so your tolerance for failure becomes a bit higher.

Angel Mehta: Bill Gates used to keep a memo called “The Ten Great Mistakes of Microsoft” and update it every year…I always coach the CEOs I’m working with to keep that type of list, as a way of having a log/formal history of bad decisions so that they can avoid similar mistakes in the future. Have you ever kept an inventory like that? Perhaps of early mistakes made in your career…things that you wished you had done differently?

Sam Chebib: This is a good practice, that maybe I should adopt. I wouldn’t say there is one flagrant mistake that I made, but there are a number of smaller mistakes that haunt me now and then. But if I were to pick the biggest one, it would be the tendency to be impatient and lose focus. When you’re an entrepreneur, you start working on something interesting and exciting and pretty soon you’re off chasing a brand new idea, falsely assuming that the core business will look after itself. So a lack of discipline is a key weakness for many entrepreneurs, and it was certainly one of mine early on. Fortunately I’ve learned to curb that vice.

Angel Mehta: Was the ability to curb that vice, as you say, a function of having been a fairly senior executive prior to becoming an entrepreneur?

Sam Chebib: Partially, yes. That training gives you a sense for the importance of using metrics and trends and numbers to evaluate your actions. If the trends and the metrics are going the wrong way, then there is something wrong with what you’re doing – beyond the excuses you give yourself.

But I have to give credit to close friends and business associates that have my best interest in mind.

Angel Mehta: Entrepreneurs who get started early will inevitably be surprised at every turn as they encounter the challenges of running a business for the first time. But you were obviously quite seasoned by the time you became an entrepreneur….so what surprised you, if anything?

Sam Chebib: I think the biggest surprise for me, and probably for a lot of entrepreneurs, is that ‘if you build it, they will come’ fallacy. As an entrepreneur, you inevitably believe in what it is it you’re offering – more so than anyone else. And you just assume that with the amazing value proposition you have, customers will come. But it rarely works that way… I have spoken to many entrepreneurs, very few of them saw their early plans unfold as they have anticipated. But with focus and perseverance, it works itself out couple of years into it.

Angel Mehta: Unless you’re EBAY or Google…

Sam Chebib: Sure disruptive technologies with viral marketing element…but 90% of the time, customers have to be shepherded…they have to be lead into buying. It never happens as quickly as you want it to and it never happens as easily as you want it to. The more you dive into the business, the more you find that there are others that are just as smart or probably smarter than you are that have figured out a lot of the questions that you’ve been struggling with for a long time. And they’re struggling to get customers just like you are.

Angel Mehta: What was the best advice you’ve ever received from an early mentor that is still relevant today?

Sam Chebib: I had a number of great bosses and mentors. The one that stands out, is my boss two jobs ago, who I would like to think is probably one of the greater minds in Canadian business. While I don’t think he verbalized his advice, but rather articulated it by setting an example through his everyday conduct. It was this: Establish your core values, live them and let them dictate your behavior and surround yourself by likeminded people who share those values. Everything else will look after itself.