Frank GotthardtCompuGroup is among the fastest growing health IT companies in Europe, but has recently been outbid in its proposed takeover of iSoft. In an exclusive interview Frank Gotthardt, head of CompuGroup, tells E-Health Europe’s Philipp Gratzel about the thwarted iSoft deal and makes clear CompuGroup has ambitions for further takeovers in the near future.

In 2007, CompuGroup expects a turnover of Euros 190m to 200m, 50% more than in 2006. Slowly, but steadily, the German firm that began as a specialist in software for dentists has become a serious competitor for big IT-companies like Agfa or Siemens. Don’t you sometimes feel dizzy?

Frank Gotthardt: "We continue to be deeply rooted with our key customers, doctors in private practice. But it is true that the focus of our business is significantly shifting from IT solutions for individual doctors to solutions for hospitals, health insurance companies, and health management organisations. This is a clear trend, and it will continue in the future."

You have always called iSoft the ideal partner for CompuGroup. In the end, IBA Health has offered less than five per cent more for iSoft than CompuGroup did in its first and only bid. Why didn’t you increase your offer at least once?

Frank Gotthardt:" I did not say ‘the’ ideal partner but ‘an’ ideal partner, and this is still our opinion. Isoft does have an interesting bundle of customers among hospitals and among doctors in private practices and private laboratories, and it does have an interesting product with its Lorenzo software. The reason not to increase our offer was a combination of different factors. The price was high before, and the second IBA bid made it even higher. But more importantly, it all started to take too long.

"Everybody knows iSoft does have problems, both financially and with its products, and these kind of problems do not become less over time. Further more in our view it became more unrealistic to receive the voting power to implement our restructuring plans in time. The whole deal became too risky for my taste and doesn’t agree with my understanding of shareholder value. No one has ever called me a waverer, but I am not a gambler, either."

When you look at it positively, the abortive iSoft deal has saved you some Euros 200m. Are you actively watching out for further takeover opportunities the size of the iSoft deal?

Frank Gotthardt: "We are always watching out for attractive takeover opportunities, no matter what size they have. Companies we might be interested in have to produce software for doctors or hospitals. This is a knock-out. You cannot get into new markets in health IT without having doctors (or pharmacists) as customers. Possible candidates for a takeover also have to have a good reputation and a stable customer basis. It is pretty exciting at the moment: In markets like Germany, where we are established for years, we grow organically by offering IT services to all stakeholders in the healthcare system. In other countries we are building up our customer basis by takeovers. That’s the only way to do it."

Can you give us some details on market shares for the most important European markets you are in?

Frank Gotthardt: "Approximately 40% to 50% of doctors in private practice use CompuGroup systems in Germany. In the Czech Republic, this figure lies around 60%. It is 30% in France, and about 25% in Italy. We are also one of the market leaders in Slovakia. When it comes to hospital information systems, we are the clear market leader in Turkey with our subsidiary Tepe International.

"With another subsidiary, Systema Group, we are market leader in Austria as well. Just a year ago, we have won a Euros 50m contract for networking all hospitals in the Austrian federal state of Lower Austria. We are in the Polish hospital market with our subsidiary OHC, a vendor of a fully web-based hospital information system. It is comparable to Lorenzo.

"Turkey is particularly interesting at the moment, because they are planning to initiate a GP system with some 30,000 GPs. So far, they did not have any GPs. We will obviously go into this market, again with a fully web-based system that we are currently developing. We do not have any doctors in private practice as customers in Austria, because the market is saturated as it is in Germany. We might need another takeover here."

Did you ever get into problems with the Monopolies & Mergers Commission?

Frank Gotthardt: "No. CompuGroup has had revenues on a yearly basis of less than Euros 500m so far, so we did not have to inform them about our takeovers. They knocked on our door once or twice, but we were able to show them that there is no need to intervene."

All in all, CompuGroup is running twenty or more different health IT software solutions for all kinds of individual needs. Isn’t that somewhat ineffective?

Frank Gotthardt: "I do not see a need to harmonize systems completely. Our customers do have different expectations when it comes to the ‘look & feel’ of a solution. And we can offer different solutions, according to their needs. Software development is not the biggest expense factor. We do not want to save money here. That said: We are trying to standardise our products below the surface, not so much in the workflow modules and administrative modules, but rather in the medical modules. This is becoming increasingly important."

What will be the big issues in health IT during the next decade?

Frank Gotthardt: "Consolidation continues to be an issue. We are working on that one, and others do as well. The implementation of evidence-based medicine into medical IT solutions is the second big topic. We are developing medication modules based on medication databases both for in-house use and as online solutions. We are also working on modules that can extract patient data from electronic medical records in order to automatically detect health risks.

"The third big issue is a trend to much more flexible IT-solutions. These solutions will enable doctors or hospitals to use different networks of care depending on who the patient is or what kind of disease he or she has. In my opinion, doctors in private practice will continue to use their own IT-solutions in the future, but they will look different."

Among other things, flexibility is a question of common standards. Are national health IT organisations like gematik in Germany doing enough to ensure interoperability?

Frank Gotthardt: "In our view, the problem with institutions like gematik is that they do far too many other things that do not have anything to do with interoperability at all. They are still trying to establish central structures for the national health IT infrastructure in Germany, for example. For what?

"It would be far more important to enforce agreements on medical nomenclature, if you want to have interoperable systems. Industry can do many things better than the state, not because of the quality of the people in the national projects, but because you are allowed to make mistakes as a company. A state is not allowed to make a mistake. As a company, when you do something wrong, you loose some money, and normally you can go for a better solution afterwards. You don’t have this option as a state. When you develop something as a state, everything has to be right from the beginning, and this takes ages. If you need five years to define two bytes, you don’t have to be surprised when you don’t get ahead. It may sound bizarre, but in recent years, the efforts towards national infrastructures have delayed the networking process in medicine rather than encouraged it."

So how long will it take until interoperable electronic patient records for the majority of citizens will finally be reality?

Frank Gotthardt: "I continue to be an optimist: Five years. A growing number of players realise that the national health IT efforts will, if anything, only lead to minimal solutions. The demand for electronic patient records is increasing dramatically, no matter what gematik does or does not do. Sooner or later, there will be a point when consumers realise that it is an advantage to have medical data stored electronically. And then they will start to ask: “What happens with my data when I will change my health insurance company or move to a different city?” Once this pressure is there, industry will be quick to agree on standards that enable systems to share data. You do not need a law for that."