Katherine Rourke recently did a post on EMR and HIPAA entitled, “Major EMR Vendor Consolidation On The Verge.” This is an incredibly important topic, and so I’m glad that she’s writing about it. However, I have a number of differing views on EHR consolidation.
Probably the two biggest differences of opinion is how quickly she believes we’re going to see EHR consolidation and how much EHR consolidation will happen. Sure, we all know that the current mass of EHR companies isn’t sustainable (I personally put us at about 600 EHR vendors, versus her 1000+ EHR company projection).
In my EHR Company Funding Risks series I looked at all the various type of EHR companies. In that analysis, I realized that each type of company seems to be really well funded through at least the next stage of meaningful use stage 2. Sure, there might not be a few that make it that far, but I believe that most of them will. So, yes EHR consolidation has got to happen, but I don’t see EHR companies falling like flies until at least after meaningful use stage 2 and possibly after meaningful use completely.
I also don’t believe that we’ll ever see the MASS EHR consolidation that many predict. The reason I believe this is that healthcare is very regionalized and so I think there could be many regional EHR companies that are quite successful. Plus, there are such a wide variety of practices including things like: specialty, practice size, billing method, etc on top of local that I believe each of these factors are likely to make it that each factor could have its on EMR market.
Plus, the other challenge I see is that there are a large number of EHR vendors that I know that have no interest in consolidation. In many cases they’re what I call Cash Flow Positive EHR companies and so they are in a good position to last for a long time to come and don’t have any need to sell their company to someone else. I believe they’re in a very good position to be around for a long time.
I imagine some would make the argument that there could be some market forces that could come into play that would change this situation. The most likely argument I’ve heard is the new ACO (accountable care organization) model requiring a large EHR company that can support the entire ACO. This is an important change that should be considered, but I personally don’t think this will drive EHR consolidation. We’re going to have a heterogeneous EHR environment and so ACOs will have to be possible across EHR companies. I don’t see a small set of EHR companies creating a virtually ACO monopoly and shutting out certain EHR companies from that ACO. Although we’ll see how that plays out.
I am interested to hear what other forces people see that could cause EHR market consolidation to happen faster.
I also concur with Katherine’s suggestion that practices have a plan if (and in many cases when) something happens to their EHR company. Maybe I should start seeking out and publishing experiences of practice who’ve gone through this and can share what they learned.
John,
I agree with what you say about the market not being as volatile as Katherine suggests. However, I think the level of analysis should look at products rather than corporate behavior.
Companies often buy and sell individual products. These sales may be the first step to a consolidation, a sign that the selling company is leaving a field or is cutting its losses. I suggest that an analysis of what is going on at this level would be a useful adjunct to looking at major corporate activity.
The innovation and proof-of-market environment for EHRs is quite Darwinian (like for all other sectors too). There are many vendors who have created EHR products that have not caught on, and a handful who have gathered the lion’s share of market. Rather than expecting consolidation, which is more about buying a vendor’s market share than it is about acquiring their technology, I expect attrition.
This post got me to thinking about the question, and I have commented on it in more detail here: Will there be mass consolidation among EHRs?
Dr. Rowley,
Great comments. I’ve got 2 blog post responses/comments that queue off your comments.
I think attrition will play a major role in taking out many EHR vendors.