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- [00:02]
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- [00:30]
Scott Becker
This is Scott Becker with the Becker Business and the Becker Private Equity Podcast. We're speaking today with Srinivas Vellamore, who's the Chief executive officer of NextGen Healthcare today and the sort of the audience that Srinivas and NextGen work with. They're one of the biggest providers of information technology and software to ambulatory and independent clinics as well as private equity sponsored practices and clinics in the nation. I think they work with almost 9,000 practices and sites. Today we're going to talk about healthcare and enterprise software more broadly. Healthcare is entering into one of the most significant periods of disruption that we've seen in decades. Artificial intelligence is fundamentally changing how software is built, how organizations compete than what customers expect from their technology partners. I'm thrilled today to be joined by Srinivas to discuss why transformation is no longer optional, how leaders of practices, clinics and private equity sponsored platforms have to balance speed with disciplined execution and why the companies that come out ahead won't simply be those with the best artificial intelligence, they'll be ones that build the strongest competitive moats. Srinivas, we're so thrilled to have you here today. I know we're going to dig into a deeper discussion of building competitive modes and what both clinics and software and technology providers need to do before we do so can you take a moment to introduce yourself and tell us a bit about NextGen Healthcare?
- [02:05]
Srinivas Velamur
Thank you Scott. Excited to be here and to have this conversation. Thank you again for having us. As you mentioned, I'm Srinivas Velamur, I'm the president and CEO of NextGen Healthcare. I've been here a little over five years and NextGen Healthcare, for folks who don't know, we are a software and services company that provides transformative cloud based solutions for ambulatory practices across the country. And today we touch over 85,000 providers and several hundred thousand patients across 30 different clinical specialties nationwide, covering everything from clinical solutions to financial solutions to interoperability and patient engagement solutions.
- [02:48]
Scott Becker
Thank you. And yes, these practices, ambulatory clinics, private equity, you know, sponsored practices get larger and larger and you work for everything from very small to very large. What's creating the urgency for companies to transform now for clinics to transform now, you know, as healthcare changes so rapidly. What's driving the urgency currently?
- [03:12]
Srinivas Velamur
Yeah, absolutely. As you mentioned at the start of the conversation, while artificial intelligence is taking up all the oxygen in the room, the urgency actually isn't driven by technology alone. It's actually driven by the fact that customers, patients, providers are all consistently still starving for better access, outcomes and economics in an increasingly complex environment. I mean, you don't have to go too far down a couple of clicks to notice that healthcare. National healthcare expenditure is topping over $5 trillion annually in the United States. It's almost 18% of GDP. And organizations are navigating everything from workforce shortages to financial pressures to rec complexity, rising patient expectations, all at the same time. Just a couple of stats that are eye opening. 44% of US adults still say that they can't afford healthcare. Average wait times in most metro areas in the country are still almost 31 days. Plus your average medical practice, 61% plus report that it takes them more than six to seven solutions and portals to take care of their basic administrative work. And we're looking at hundreds and thousands of shortages in nurses and providers by the year 2028 across the country. And your average hospital operating margin is 1.7%. So tons of change, tons of disruption, very little cushion and room to absorb all these discontinuities. So it's unsurprising that everyone is feeling the pain 100%.
- [04:47]
Scott Becker
And as organizations transform, when you think about customers, consumers, the ambulatory practices as well as private equity driven ambulatory practices, the 9,000 that you serve, what's in it for the customers? Yes, this transformation happens.
- [05:04]
Srinivas Velamur
Yeah, it's a great question. And when we talk about customers in an industry like healthcare, it really is almost everybody in some ways, the providers, the patients, the medical groups themselves, they're all customers in a different context. But to get to the question, what's in it for customers? In short, real, positive and measurable impact at the end of the day, if transformations don't materially move the needle from an end user and customer perspective, they are just expensive science projects. And you know, great example illustration of this. There was a survey that Doximity conducted recently and it said over 94% of physicians are interested in using AI or already using it. But then you get to the next question and nearly 71% of the same providers still say that accuracy and reliability are their top concerns. And there's still a clear and emerging demand to see ROI and value as well. So I think the appetite is There for change, for customers change. But ultimately they're sitting here saying, where's the return? Where's the value for me, how is this going to make my experience better? How will it reduce administrative burden? If I'm a practice, if I'm a provider, will it give me more time with patients? Will it reduce burnout? If I'm patients, they're saying, will my experiences have less friction? Will they be more delightful? And if I'm an administrator, I'm looking around saying, will this improve my top line and bottom line? Is it driving efficiency and, and will I have greater agilities and economies of scale? So it comes down to, like James Cargill said, it's the economy stupid for politics. For us, it's impact all day, every day.
- [06:43]
Scott Becker
Thank you. And talk about this. Every CEO or health system leader knows that transformation is necessary but really challenging to figure out how fast and how hard to push. How do you think about that balance with big systems today? And how can they digest what they need to do more or less quickly? How do you think about that?
- [07:07]
Srinivas Velamur
Absolutely. This is something I wake up thinking about every day as well. If you simply just take all the stats we were just talking about and you treat them like a wall of depressing statistics, it can be quite overwhelming. What I find helpful is to actually take all of those numbers and, and think of it more as a quantified pressure dashboard and use that as a way to prioritize the need and the urgency for change into discrete action areas. And the reality is we can all choose our own adventure. While the urgency of now is relevant to all stakeholders, the pace, the scale, the scope of change is actually a unique imperative for each of our organizations. So I personally start with the question, Scott, Is transformation truly necessary? Because it is after all, a means to an end, while speed is the real competitive advantage in the age of AI, Wiseman told me that speed without focus is chaos. And we believe therefore that the best way to find the balance you just mentioned is by being 100% aligned on what is the fulcrum for this balance? I believe the fulcrum should always be our customers and ensuring that we're delivering market leading results and impact to them in a sustainable way. And if you take that approach, then you find the right mix of what problem to solve. Will this really move the needle for clients? What is the scale and scope of change required to solve that problem? That allows you to then put a box around what transformation really means for your organization and then you line that up against the urgency to make that change and how do you make it stick with customers and internally from a sustainability problem. And like any math problem, there are five variables here. If you keep one of these constant, which is, you know, how do you deliver customer impact? Then it gives you the options and the scenarios to shape the rest. The reality is, at the end of the day, transformation isn't just one giant leap. You know what a good way to think about it is? It's a series of deliberate decisions that build confidence, trust and momentum.
- [09:06]
Scott Becker
Thank you. And Srinivas, talk a little bit about you're in a situation where artificial intelligence is dramatically lowering the barriers to building software. If that's true, how do established software service companies, SaaS companies, think about defending and strengthening their competitive advantage as you have this evolution happening?
- [09:28]
Srinivas Velamur
Yeah, that's a terrific question as well, Scott. The reality is AI and agentic solutions are disrupting the nature of work across every function in every company. But if you truly unpack all the news that you're hearing about the change, the disruption they're causing, in many ways what they are doing, these technologies, they are amplifying and revealing your organization's strengths and weaknesses. They're not necessarily fundamentally changing what customers ultimately value. So in a world where anyone with access to open source AI models and magentic platforms, they can build a company in weeks, they can build prototypes in hours and days. The application interface layer, that software layer at the top, it can no longer be a source of competitive advantage. It is often something else. And in every organization I believe the answer can vary a fair bit. And the real advantage is not, does not lie in whether or not your organization understands AI. It it really lies in whether or not you understand how value is created in your customers, businesses, and whether or not you have the means to amplify and unlock those value creation mechanisms using AI and agentic capabilities. We joke internally about getting to know the alligators in your moat. Who are they? Which are the ones that are getting fatter and how are they protecting your castle? And my contention is that for most enterprise software companies, as you look behind the software itself, the real alligators, the real sustainable advantages, they are domain expertise. They are trust and scale. They are your ability to take all the richness of data you have and turn it into actual business context. And it's taking the distribution footprint that many organizations like ours have built over decades and turn those not just into distribution, but change management and adoption mechanisms. And if you do those things, those become your favorite alligators. And collectively, you know, they ensure that we our business and of course everyone else is listening that we understand our customers businesses deeply and we have a very, very deep knowledge of all the non software pieces that quietly make their businesses successful day in and day out.
- [11:50]
Scott Becker
In how important building those competitive modes, that domain expertise is it that combination of domain expertise with technological expertise and customer service that's a big differentiator.
- [12:06]
Srinivas Velamur
It is the technology expertise are largely known to the software companies. But I think what we are really talking about here is decades of understanding how customer workflows actually really work in practice. Let me give you a tangible example. You could get an AI solution to write you an intake solution today, which is our prior authorization solution today, fairly quickly. Writing that model doesn't take a ton of time. But once you actually dig into how that particular workflow occurs in a doctor's office in real life, you have a greater appreciation of the challenge. Many times the front office worker, the administrator has to flip through six, seven different screens they need to spend several hours on with with payers in spite of having an elegant software solution. And there are all kinds of exceptions and nuances that get in the way of driving it all the way through to a successful transaction. It's that understanding of what does that workflow look like in real life. What are the operations, who are the persons, who are the individual contributors that serve as the glue that make a process successful? Where are people essentially taking matters into their own hands and bypassing what the system says is actually happening in reality? That is the kind of domain expertise we're talking about. Otherwise all you've done is you've taken AI and you've taken the friction of real life and made it a lot more efficient.
- [13:33]
Scott Becker
Thank you. So the real key is really understanding almost in the deployed way, the way in which workforce workflows work with the customers, whether it's a clinic, a hospital or health system, you could really help integrate it well versus throwing solutions at people.
- [13:49]
Srinivas Velamur
Indeed.
- [13:50]
Scott Becker
Thank you. And talk a little bit about if you're the CEO or private equity investor or leader looking ahead 5 to 10 years, how do you strengthen some of those competitive modes so that there's so much like we talk about in the media business, so much information overload you talk about in the software and AI world, so much technology overload. How do you strengthen those competitive modes so people aren't just overwhelmed with everything. How do you become differentiated and strengthen those competitive modes?
- [14:21]
Srinivas Velamur
Yeah, in a nutshell, I think it comes down to understanding the assets that AI cannot commoditize that are part of your particular business. Look, AI native innovators are going to continue to introduce important new capabilities and I think the pressure they put on the system to re examine what good looks like and what we've normalized is very, very important. It's a key part of our ecosystem and how we get better. But as established enterprise platforms, particularly folks that are P backed and others, I think they will remain incredibly valuable because they combine innovation with trust. They continue to invest in operational scale. There's a difference between just being big and being enterprise great. There's still a premium on deep customer relationships and, and taking decades of institutional knowledge and making them real. So at a high level, those are the things that you really want to strengthen. If you want it to be really precise, you can get into some specific levers for each of these. So take, take domain expertise for instance. Codifying best practices, capturing institutional knowledge, everybody does that. But doubling down on the subject matter expertise and as you mentioned, understanding the lived and the deployed experience of software solutions and translating that that expertise into real domain, understanding that informs AI powered workflows and agentic orchestration, that's an important action every organization can take. Number one, doubling down on enterprise trust and reliability, really important. So in a world where AI solutions are coming at you 50, 60 a week, I think building the right governance and the risk assessment mechanisms, so you are assessing whether or not these models are responsive, responsible, they're debias, they're ethical, they're auditable, they're explainable and they can meet the compliance and governance checks that are needed are critically important. Because if you cannot go back and unpack every process that an AI model or an agent can touch, you are not going to have the ability to earn and retain customer confidence. So building the governance mechanism and the observability mechanisms around these is just as important as building the solutions. And when you do that, you build enterprise trust. And when you build enterprise trust, you build enterprise loyalty. And that's a key part of what organizations need to focus. The third area. So many organizations are data rich and there's a difference between understanding the data elements that your software generates that explain the business and the analytics and the charts that everyone uses today versus understanding how workflows actually connect across the enterprise and the ability to productize that context by using knowledge graphs, specific content graphs, those can do a better job of driving AI and automated decision making better than just throwing a bunch of data at these open source AI models. So that notion of turning intelligence into context and investing in the platforms and the systems to do that is item number three and critically important. And then lastly, on the distribution side, modernizing your distribution capabilities is really important to invest in. So it's not just about retraining your sales and your customer success organizations, it's about building new playbooks. It's about creating change management and value realization teams, not just installation teams, and treating adoption and value delivery as a competitive advantage, not just software delivery. And if you do these things, I think you create a reinforcing mechanism where the distribution capabilities, the domain expertise, the trust as well as context all work in tandem to compound roi. And that's really what creates sustainable advantage over time, regardless of how you use AI. In closing, I'll say that the companies that win ultimately aren't the ones that are chasing every new AI breakthrough. They will be the ones that are using AI to amplify the advantages that they've already spent decades building and will spend the next decade reinforcing.
- [18:22]
Scott Becker
Srinivas I want to thank you for joining us and for the work that NextGen Healthcare does in this area. Simply remarkable. Always brilliant to visit with you. Thank you so much for joining us on the Becker Private Equity and Business podcast. Thank you very much.
- [18:36]
Srinivas Velamur
Thanks for having me. Scott.
- [18:42]
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