We were lucky to catch up with Claude Hooton recently and have shared our conversation below.
Claude, thanks for joining us, excited to have you contributing your stories and insights. Folks often look at a successful business and imagine it was an overnight success, but from what we’ve seen this is often far from the truth. We’d love to hear your scaling up story – walk us through how you grew over time – what were some of the big things you had to do to grow and what was that scaling up journey like?
Over the past 8 years that I’ve been here, we’ve done quite a bit. We started a cloud based medical image management system that went from a client base of 0 to 7,200 healthcare organizations. During that time, we traversed several lifecycles of a company’s growth. Getting those first few reference accounts, and making them happy, was critical. Making things work as we grew was what allowed us to get to size that we did. Our solution was the first cloud native application for this very challenging segment of healthcare so the were many false starts, trials and tribulations. Ultimately, it was a success. We sold that division to publicly traded, Change Healthcare in August of 2020.
At the same time, we were scaling up our services side of the business which is providing off-hours teleradiology services to radiology groups and hospitals. Our radiologists all work from home and read imaging studies 12x7x365. Usually we are the group that reads a CT or x-ray when patients come in late at night or on the weekend. It’s very fast paced environment in which our radiologists usually complete their diagnosis in about 3-4 minutes. That part of the business was founded in 1995 but it really took off once we were able to leverage the internet. We’ve more than quadrupled in size since 2015. We now have over 80 radiologists reading 1.5 million studies per year for 550 healthcare facilities across the U.S.
Having an MBA and many years of operational experience, I pretty much know how to build a scalable operation. However, the common theme for a startup or an established company is that you need to always put the customer first. We’re all people first and employees second. If you are honest and work hard to solve their problems, they will do a lot to help you out. A big part of this is to overcommunicate with them. Both in good and bad times. Our client (and patient) focus is ultimately what has differentiated us.
Recently, we had our fully redundant radiology system go down in the middle of the night. Our data center was supposed to be earthquake, fire, bomb – everything proof. At about 8:00 at night, I got a text from our IT Director that just said “the data center is down”. The hosting company never even told us about it. We found out almost immediately from our staff and customers. For the next 7 hours, we heard very little about what was going on from the data center vendor. In the interim, we had to call all 550 of our facilities and have them wake up their day-time radiologists and have them drive to the hospitals to read their studies. We immediately set up a web meeting for our team and we were up all night well into the next morning. During that long night, we communicated with our clients every 10 minutes to give them updates. As it ends up, there was an electrical explosion that shorted out all of the backup generators and made it actually dangerous to enter the building to asses our data center for damage. The explosion was so powerful that it blew 200 pound manhole covers into the air.
We are no longer using that data center. Not because of the rare occurrence that brought our systems down. But, because of their poor communication during the crisis. In our case, we didn’t lose a single customer. Many even thanked us for our communication. No matter how small or how big a company is, the communication must be continuous and honest.
Awesome – so before we get into the rest of our questions, can you briefly introduce yourself to our readers.
As an SDSU graduate and proud Aztec, I fell in love with San Diego while in college. After graduating, I had to go to Los Angeles because of career opportunities. However, after finishing up my MBA from Harvard, I was able to talk my wife into moving here from Boston where we met. We got married here in 1990 and we’ve never left. I migrated to biotech and healthcare technology because that was where the opportunities have always been. I’ve had the good fortune to work for some very successful companies and NucleusHealth has as much potential as any of them. There is a national shortage of radiologists in the U.S. There are 30,000 radiologists and 40% are over 50 years old. Only 1,000 new ones are licensed each year. By using teleradiology, we can provide services all over the U.S. while allowing our radiologists to live where they would like. We have radiologists who live all over including places like, Paris, Zurich, Israel, and even the islands of Hawaii. By leveraging time zone differences, we can cover emergency rooms during the off-hours without requiring our radiologists to say up all night.
Let’s talk M&A – we’d love to hear your about your experience with buying businesses
I’ve never personally bought a business in a traditional sense. However, I did organize a management buyout of our current business. In August of 2020, we sold our technology assets the Change Healthcare. Although the sale involved about a third of our employees, we still had a thriving services company after the sale. Myself and two of my colleagues decided to use our proceeds from the sale to attempt a management buyout. This would require acquiring all of the shares from hundreds of employees, investors, and stock option holders. This included our private equity investor along with an investment from a very large health system. It would be impossible to tell the story about that experience in this short essay. However, I can say that there many things that had to happen in order for it to work. In the beginning, it seemed impossible. Almost daily, there seemed to be new show stoppers could not be overcome. However, extreme perseverance, a lot of hard work, and more than a little good luck got us to the finish line. As a Christian, it was pretty clear to me that I was getting some help from above.
How’d you meet your business partner?
I first met my good friend and colleague, Dr. Vish Verma in late 2013. He was an entrepreneur and working radiologists. In addition to founding a number of his own companies, he was a major shareholder of NucleusHealth. They had recently terminated their CEO and I was interviewed for the role. During my early days with the company, we decided that it would be best for him to keep an operating role with the company. He was the CEO and I took the role of President and COO. We have always had a great working relationship because it is built on trust. Launching a startup while concurrently scaling a services business under the same company name is exceptionally stressful. I knew that he had my back and I had his. It was also very important to leave the egos at the door. There were no power trips. It was all about building a great company together.
After our management buyout in 2020, Vish transitioned to the role of Executive Chairman which allows him to focus on his other successful companies. Although we don’t work together on a daily basis, he’s always the one I go to when I need help on a complex or challenging issue.
Contact Info:
- Website: https://nucleushealth.io/, https://www.statrad.com/
- Linkedin: https://www.linkedin.com/company/15224957/admin/