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Fast-Growing Companies
The software success of Modernizing Medicine
Despite Cane’s success with Blackboard, he struggled to raise venture capital for the new startup. Investors were concerned both by the Great Recession and also the challenge posed by taking on medical records.
“It was a super highly regulated industry in an incredibly crowded space. We were going to need to raise millions and millions of dollars to build our first unit and get it certified, and even then we were going to be displacing big incumbent systems,” Cane told his Cornell audience. “They weren’t wrong about any of that.”
He and Sherling asked their “beta” customers — dermatologists who had agreed to test their software before its release — to vouch for them to potential investors. Instead, the dermatologists asked if they could invest in the company themselves. “We accidentally raised over $3 million from our customers before our first dollar of revenue,” Cane says.
Over time, he and Sherling took advantage of the newly launched Apple iPad and Amazon Web Services to create touch-screen, cloud-based technology that could understand its users’ specialties, remember their preferences, suggest treatment plans and call up billing codes. To help develop the software, they hired other doctors and taught them to write computer code.
Cane likes to say, “I’m really good at raising money and spending it. I’m OK at returning it.” In the company’s first five years, Modernizing Medicine received nearly $100 million in venture capital. Then, in 2017, it secured $231 million from New York-based private equity giant Warburg Pincus.
Amr Kronfol, managing director at Warburg Pincus, says the firm was impressed with both Cane and Sherling and their focus on helping doctors use technology to improve care rather than merely meet the standards required by the federal government to get incentive money for going digital.
Kronfol, a board member at Modernizing Medicine, says many legacy electronic medical record (EMR) systems were clunky and primarily designed to “check a box” so that doctors could qualify for Medicare incentive payments. Under the federal Health Information Technology for Economics and Clinical Health (HITECH) Act signed into law in 2009, doctors who fully implemented EMRs by 2016 would get $44,000 from Medicare and $64,000 from Medicaid; those who didn’t adopt the technology faced penalties.
“Our view is that if you build good next-generation software for electronic medical records and practice management, you can really help doctors, patients and insurance companies,” Kronfol says. “That’s what Dan and Michael set out to do. They were not legacy players that were part of the problem. They were trying to create something that would be part of the solution.”
While Florida has a history of seeing successful startups move to California or New York to be near larger pools of capital and talent, Modernizing Medicine is here to stay, Cane says. Local universities are producing the “talent we need to grow,” he says, and South Florida has a vibrant ecosystem of technology companies and professionals. “We’re able to attract employees from some of them, and sometimes we lose employees to local tech companies,” says Cane, a former member and vice chair of Florida Atlantic University’s board of trustees.
In 2018, he and his wife, Debra, gave $1 million to support science, technology, engineering and math (STEM) initiatives at two local public schools associated with Florida Atlantic University, A.D. Henderson University School for K-8 students and FAU High School. All three of their children attend one of the two schools.
About 15 months ago, Modernizing Medicine moved its headquarters from FAU’s Research Park to the Boca Raton Innovation Campus, a 125-acre office park where IBM once had a large presence. Cane says he chose the location because of its symbolism as the birthplace of the IBM personal computer and because there’s ample room to grow. When renovations are completed later this year, Modernizing Medicine will occupy about 150,000 square feet, increasing its space by 80%. It also has offices in Roseville, Calif., and Santiago, Chile — the result of two acquisitions.
More than 16,000 physicians across the U.S. use its EMR systems, and the company continues to add specialty areas and products. Along with dermatologists, it makes software for gastroenterologists, ophthalmologists, orthopedic doctors, plastic surgeons and otolaryngologists. It also has specialty-specific software to help with billing, accounting and customer service, including apps that enable patients to see their lab results, schedule appointments and give feedback.
The company charges a one-time cost for its software, startup and training fees and a monthly subscription fee. It does not publicly disclose prices, saying they’re negotiable and varied based on the number of users in each practice. Over the past five years, its sales have increased 461% from $30.5 million in 2014 to $171 million in 2019. If trends continue, its sales will surpass $200 million this year.
Today, nine in 10 U.S. health care providers use EMRs, up from about one in 10 a decade ago. The industry is now entering a period of consolidation, Cane says. “We’re seeing a handful of companies emerge as leaders, Modernizing Medicine being one of them.”
“Warburg is a fantastic partner,” Cane says. “They want growth, which is what I want. Today, we have close to 800 employees, and that number will grow to over 1,000 in the next 18 months.”
Dan Cane
Title: Co-founder and CEO
Education: Bachelor’s in applied economics from Cornell University, 1998
Family: Wife Debra, three children: Connor, 16; Elizabeth, 14; Anya, 12
Philanthropy: In 2018, the couple established the non-profit Cane Institute for Advanced Technologies to support STEM initiatives at A.D. Henderson University School and FAU High School in Boca Raton.
Background: As a college student, Cane and a few Cornell classmates founded an education software company that later became Blackboard, an e-learning tool used by many universities.
Read more in Florida Trend's February issue.
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