“H.I.S.-tory” by Vince Ciotti

© 2011 H.I.S. Professionals, LLC

Episode # 20:

Sentry

Data

Another Hospital “Pilot”• As we have seen many times in this HIS-tory, hospital pilots were

responsible for developing & pioneering many HIS systems:– Walt Huff’s “HFC” at the Order of St. Francis in Peoria, IL– Mike Mulhall’s “HIS” at Monmouth Medical Center in NJ– Lockheed Aircraft’s “MIS” at El Camino Hospital in CA– Meditech’s early “HCIS” LIS at Cape Cod Hospital in MA– Dave Pomerance’s Dynamic Control at Variety Children’s in FL

• Most of these hospitals all had good experiences with their “early adopter” HIS approach.

• This week, however, we cover an episode with a frustrating series of ups and downs for its founding hospital, executives and employees,

• Showing both sides of such ventures, that have great up-side potential, but also a down-side…

Our “Geek” Tragedy Begins…Our “Geek” Tragedy Begins…• In Chicago in 1975, with a start-up mini firm named: DATXDATX• The founders started with the same basic turnkey concept as DCC,

Meditech, Compucare, JS Data, et al:– A “total HIS” on a minicomputer– All basic financial and clinical apps– Bundled hardware, software, install– Small company service & support– And at a price less than the equivalent shared system’s “TCO”

• DATX sold well at first, signing up hospitals eager to embrace this new technology, and also eager to pursue clinical systems, which only ran on inhouse boxes, even if from shared system vendors:– McAuto offered HDC on a combo of DEC and Four Phase minis

• Plus inhouse boxes for LabCom, RXCom, RadCom and PCS– SMS offered ACTIon on either Four Phase or DEC (no combo!)

Act IAct I• Like most small start-up firms, financing was as challenging as the

technological and R&D obstacles that had to be overcome...• Most firms started with a small amount of seed money, then

counted on rapid sales to cross over from red ink to black ink.• DATX was no exception, struggling to complete the system and

earn payments from early clients to meet its payroll…– (remember how SMS almost didn’t make the transition in the early 70s!)

• For 5 years, DATX struggled before succumbing in 1980 when it entered bankruptcy liquidation - Chapter VII.

• Frustrating for:– Owners - hoped to make it BIG on Wall St– Employees finding themselves out of a job– Client hospitals, who found out that they

had bought the proverbial farm…

Act IIAct II• Among the early clients was a community hospitals in Chicago:

– Norwegian American Hospital (NAH) – that bought in 1978, made some install progress, but still had a ways to go:

• The usual phases, bugs, delays, etc., with any new system…• DATX employees approached the hospital with a proposition:

– If it would fund a successor company to DATX, they would complete the project, creating a win/win/win:

• NAH would not only get its system completed, but gain a major stake in a potentially lucrative IPO of the firm succeeded

- DATX executives would get a 2nd chance to make the firm succeed, take it public

and make it big like SMS and HBO...

- DATX employees would still have a job, and a chance to finish the hot, new system they had worked so hard on…

Act IIIAct III• In addition, the software license and miscellaneous hardware could

be bought at a very low price at the bankruptcy auction… • With few options to complete their installation, NAH agreed, and in

1980, a new firm was formed, called at first “HoCompCo” for Hospital Computer Company (like Eclipsys started as “NewCo”)

• HoCompCo employees started back to work on NAH’s installation, which was completed within a reasonable time & budget.

• NAH became a “flagship site” for the new system, giving demos with rave reviews, since it had the system built to its own specs.- (Does this seem unfair? NAH wasn’t the

only one: nearby Evanston Hospital gave demos for many years for Medipac, developed by Medicus, earning ≈$75K per successful site visit. A good question to ask of any site visit you go on!)

Act IVAct IV

• Tandem “Non Stop” computers were perfect for healthcare, where operations never stop, nor should the computer!

• Ironically, one of their first clients was Wall Street, where trading never stops.

• NAH gave such good demos, two other DATX customers bought the new system in 1981.

• HoCompCo was re-named Sentry Data Inc., and the new firm was off to the races.

• Things went wonderfully well due to several innovations the new company had:

1. Tandem “Non Stop” computers – introduced

in 1974, they had two CPUs, two disks, etc.

If one failed, the other took over automatically!

What’s a “DDC?”• Glad you asked, as it has to be one of the all-time pieces

of trivia in HIS-tory, and Sentry’s hot techie ticket:– Most minis back in the 70s & 80s were challenged by system

response times, as every character on every keyboard had the transmitted all the way back the CPU before the system was ready for the next keystroke. There were no PCs yet! The only “intelligent terminals” were the poor users, who had to wait and wait and wait, for these mini clunkers to respond…

– Tandem was no exception, and the clinical arena posed major challenges for this slow reaction time in a “STAT” world!

– So some very bright guys at Sentry came up with a series of “Distributed Database Controllers” (DDC) – bubble memory boxes linking a number of terminals and handling them immediately, updating the central CPU a few seconds later…

– Neat, huh?

Sales Successes• Sentry’s sales started to rock, led by two HIS mavens:

– Gerry Mathys – CEO – and all-around great guy, who could charm an IRS auditor, let alone a prospect hospital. I worked with Gerry at SMS in the 70s, where he came as part of the ISD merger from American Hospital Supply, and then later at Dorenfest & Associates, where we both landed apres Sentry.

– Rick Magyr – #2 at Sentry who led much of the early sales efforts; a graduate of RPI in NY, and equally smart/nice guy.

• Gerry, Rick and their growing team of hard-working employees (≈60) added 8 new sales to the original DATX 3.

• NAH was thrilled, and try to sell Sentry Data in the early 80s to recoup its investment, but no deals bore fruit.

Stock Sales• So NAH did what every other mini vendor dreamed of

doing back then: it took Sentry public in March, 1983.– In the 70s, early IPOs like SMS and HBO had gone great guns– SMS’ stock split so often it was hard to value stock options!

• Let’s see, they gave me options on 1,600 shares in 1969 for $1 per share. SMS went public at $16 per share in 1975, which rose to $28 by 1977, when it first split to $14 per share. It rose again to $36 when it spilt in 1978 down to $18. So what was I worth in 1979 at $23/share???? • As we’re learning

day by day in 2011, what goes up must come down, and Wall Street’s “Bull” eventually meets:

Vicious Spiral…• At first, the stock took off, as Sentry seemed like another SMS

and HBO “sure thing” to investors & brokers.• Sentry sales prospects weighed the stock in their HIS

deliberations too: everyone wants to be part of a winner!• In late 1983, Wall Street took one of its many periodic down-

turns, and Sentry’s stock spiraled down too…• Poor Sentry found itself caught in a vicious trap:

– In the 70s, • Wall Street brokers were looking for more

sales to boost Sentry’s stock back up,• While hospital buyers were waiting to see

Sentry’s stock progress before signing…

• Couldn’t win for losing!

Second Collapse…• The viscous spiral continued for about a year, with NAH

having to shell out more cash to keep Sentry afloat.• In 1984, NAH tried to sell the firm again, like so many

other turnkey mini firms had done before,• But the Wall Street downturn had spooked buyers too…• Sentry’s stock plummeted below its IPO, and on “Black

Tuesday,” a huge layoff halved Sentry’s work force to 30.

• Things really got ugly when clients stopped paying maintenance bills to boot – worried they were pouring good money after bad…

• NIH hired Dorenfest & Associates to analyze the situation, and Sheldon wisely recommended putting the firm in Chapter XI

The End?The End?• Not quite: Shelly made one

of his rare mistakes: hiring me to be Interim CEO of the bankrupt company and run it while he sought a buyer.– I had just left HIS, Inc. in

Brooklyn, which will be another fascinating tale.

– I had admired Shelly for years, and jumped at the opportunity to work with the master!

• (Pay wasn’t bad either…)

– Which is how I learned all these gory details…

Personal AsideTwo unforgettable vignettes from my days at Sentry,

sitting in Gerry Mathys’ office in Mt. Prospect, IL:• Rummaging through the files and finding a “Disaster Plan,”

well-thought out and impeccably detailed, with:– What to do if a storm, fire or other non-Wall Street disaster hit: – Moving CPUs, contacting employees, continuing service to clients, etc.

• Taking phone calls from numerous stock brokers about the fate of Sentry’s stock, delisted from Nasdaq during Chapter XI, and with a face value now of but a few cents per share…– Especially one call from a broker about some poor, little old lady for

whom he had invested all of her savings into this hot commodity…– What a lesson for today’s wild ride on Wall Street – I’ve had my

investments highly diversifies ever since!

Selling A Vendor to a Vendor• A lot more challenging than selling a system to a hospital!• But Shelly reminded me of Harvey Wilson or Art Randall

at their finest – brilliant strategiser and always up-beat!• And he knew so much about the business, and had all the

facts to back up his story – hell, I even believed him!• In fact, Sentry’s Non-Stop Tandem & DDCs were such a

hot commodity, and it was easy selling their potential.- Who were the hot prospects? Shelly wisely solicited

bids from other HIS vendors offering software on Tandem’s popular Non-Stop boxes back then.

- One of the hot prospects being IDS (Interpretive Data Systems), later IDX, now part of GE, and whose “Centricity Enterprise” is still running on Tandem!

- I remember hosting CEO Rich Tarrant on his site visit to Mt. Prospect, IL – fascinating to hear his HIS plans...

And the Winner is:• Control Data Corporation (CDC), founded by Seymour

Cray in 1957, later of Cray Super-computer fame…• Turns out CDC had a hot project going internally to

develop software for Tandem boxes, and Sentry offered them a quick short-cut to getting all the HIS apps.– The DDC and 11 clients caught their eye too…

• Plus, being from nearby Minneapolis, they didn’t mind the rotten Chicago winter weather…

- CDC bought Sentry for $1.5M down, and $2.75M in future payments based on performance.

- Not a bad deal for NAH and Sentry’s employees!

Lessons Learned?• NAH and the other Sentry clients realized a reasonable life

expectancy out of their Tandem-based product.• Eventually CDC abandoned the HIS field, just as so many giant

conglomerates before it that have tried a while:– Baxter, AHS, McDonnell-Douglas, Lockheed, HP, Amex…

• What can one take away from Sentry’s HIS-story?– Some pilot hospitals win, but many don’t – the odds are tough!– When visiting “flagship” sites, ask about financial incentives...– Vendors come and go – look at the product far more carefully!– New systems are hell, no matter how big

or small the parent vendor is…

• Programmers mean well, but writing systems for an industry as complex as

healthcare is incredibly difficult!

Muchas Gracias!• For input to this week’s episode:

– Gerry Mathis and Rick Magyr – who came so close to getting the big “brass ring,” and deserved it just as much as the lucky ones who did. Just a few timing issues and they’d be on some Caribbean island with Walt Huff... We all know the success stories, but we should remember just as well the incredibly bright, hard-working folks who came so darned close!

• And once again:– Sheldon Dorenfest – who not only saved

NAH and Sentry’s employees from disaster,but gave their 11 clients a new lease on life!

Help Help for Future Episodes!?• The next episodes on turnkey minis to be covered are:

– AR/Mediquest – Paul McVicker from Hannibal Hospital in Missouri sent some fascinating details on this early IBM mini player – anyone else got any stories about Jean’s firm?

– JS Data – Tom Aikens, now VP with maxIT, offered help– Gerber-Alley – thanks already to 3 ex-Gerber/Ally veterans,

who woke me up to get Urban’s name right (it’s not “Irwin!”)• Gary Lakin – now with MS in Australia hooked me up with G/A vets• Karen See, G/A Marketing maven promises embarrassing old photos…• Gary Salazar – now VP at Merge, who volunteered more connections.

– Mr. HIStalk – that obscure blogger once again found amazing information on the web that even god couldn’t…

• Like Bill Brehm now own a restaurant in rural Alabama!

• Please send any contributions to: vciott@hispros.com