A focus on a market niche and a truly family-oriented workplace make health care software pioneer MEDITECH an industry leader.

As far as technology goes, any discussion about computing in 1968 would probably have centered on IBM. But the landscape was about to get a little more crowded. Neil Pappalardo, then working in the computer science lab at Massachusetts General Hospital, developed Massachusetts General Hospital Utility Multi-Programming System (MUMPS). The revolutionary new programming language made writing database-driven applications easy while making efficient use of computing resources.

The next year, Pappalardo and his partners obtained $500,000 in outside investment—at a time when there was no widespread use of computers—and founded MEDITECH in Cambridge, Massachusetts. Pappalardo and his team planned to use a variation of MUMPS to build proprietary management software that would feature a range of clinical, business and administrative solutions for hospitals and other health care industry companies. Today, MEDITECH offers solutions geared toward information transfer, team management, tailored treatment, disease management, business management and more.

If you think it was difficult to get anyone to invest in a technology-based company nearly 40 years ago, imagine what it must have been like to build a client base. At the time, Pappalardo has said, most people didn’t even know what a computer was. “It was an uphill climb to get a hospital to understand the computer and the software, and then convince them to dedicate the physical resources to it,” says Paul Berthiaume, MEDITECH spokesperson.

MEDITECH found traction quickly, picking up clients Cape Cod Hospital in Hyannis, Massachusetts, Beth Israel Hospital in Boston and the Institute for Learning in Hartford, Connecticut, in its first year of operation. The company now has more than 2,100 customers in 18 different countries, had $344 million in revenues during 2006 and houses more than 2,600 employees in its six Massachusetts offices.

Unlike other software and technology providers, MEDITECH did not choose to grow through broad diversification. Instead, said Pappalardo in 1986: “We will ‘stick to our knitting’ and do what we have always done—respond to the software needs of the medical community. And we will control our growth so that we effectively serve our existing customers.”

That devotion to its core mission has helped MEDITECH maintain profitability for 30 consecutive years—even through the technology bust of the late 1990s. “If you look at our industry, no one has been around as long as we have,” notes Berthiaume. “We’ve been up against some pretty heavy competition—American Express, GE, Lockheed, Siemens, etc.—but they haven’t had our success. Building this type of business in the hospital and health care industry is difficult, especially if it’s just a portion of what you do. It requires a strong focus and targeted commitment. The sales process can take 12 to 36 months, and it can be daunting. Our single-minded focus is why we’re a leader and why we’ve been around so long.”

While MEDITECH remains devoted to its mission and its market, it has continued to grow by remaining on the leading edge of the industry. The firm has taken advantage of every new technological development in meeting client needs, and it constantly updates its own software with major new releases launched regularly.

“Our goal is to constantly make the software easier to use as well as more scalable and manageable,” says Berthiaume. “When you do it well, it becomes seamless. It’s hard to promote that, but the best software package is one you don’t think about—it does the work with a minimum amount of interaction—and that’s what we’re always striving for.”

While its market has become increasingly crowded in recent years, with companies like Cerner, Epic and pharmaceuticals giant McKesson joining the fray, MEDITECH has maintained its leadership position for nearly four decades. The health care software pioneer enjoys a U.S. marketshare of 24%, or roughly one out of every four hospitals, and 39% marketshare in Canada. In its home state of Massachusetts, it has 75% market penetration.

As MEDITECH continues to grow, its key obstacle may not be external, but internal. There is an acknowledged “skills gap” in the tech industry, and the company is actively seeking new employees across all its functions. “Our hiring needs are probably most critical, as we’re growing so quickly,” Berthiaume observes. The company has just broken ground for a new office in Fall River, Massachusetts, making recruiting efforts crucial, he adds.

But even in this case, MEDITECH has a somewhat unique answer. First, the company tends to have a strong track record in retaining its people. In 2006, its turnover rate was 9.9%, in an industry where most companies see attrition in the mid- to high teens (the company in recent years has been in the 8% to 10% bracket). Even its founding team has remained largely unchanged over time, and the company does not bring outsiders in at the senior level.

Then there’s the way it grows its employee base. Imagine a firm that has perhaps 100 husband-and-wife teams and scores of uncles, nephews, sisters, brothers and best friends working together. “People do move on, but those who stay here do so for a long time, and they want to bring in other like-minded family and friends,” Berthiaume notes. “We encourage people to recruit those close to them. It builds relationships and a stronger operation, and therefore, happier customers.”

In fact, MEDITECH’s referral program remains by far its strongest recruiting tool. And it benefits employees as much as it does the company: Each new hire garners a $3,000 bonus for the employee who referred him or her. “Quarter after quarter, year after year, that referral program has worked better than any other initiative,” adds Berthiaume.

After 38 years in the health care industry, Berthiaume says that MEDITECH still has new market goals to conquer. One is interoperability—the ability for physicians, hospitals, pharmacies and others in the health care industry to share patient records through an interconnected network. Another is improved chronic disease management. Statistics show that there are approximately 15 diseases that cause 80% of medical bills in this country.

“If we can proactively treat these conditions and educate patients, identifying the populations at risk, this can help bring down our currently astronomical health care costs,” says Berthiaume. “Our health care system in general wants this deliverability and patients want it. MEDITECH is at the absolute forefront of both these issues, both locally and nationally. In fact, the nation is looking at Massachusetts in particular for these breakthroughs, and we believe MEDITECH can help spearhead these efforts.”