The Current Health IT and EHR Bubble

I had a really great conversation with Shahid Shah, Jenny Laurello and John Moore at Health 2.0 about the bubble that we’re sitting in right now. John Moore’s response to my question, “When do you think the bubble will pop?” was priceless: “Which bubble?” Yes, we might be seeing multiple bubbles in healthcare IT: EHR, HIE, mobile health, etc.

For this blog, I’m most interested in the EHR bubble. Obviously, the bubble in this case is the creation of the $36 billion in EHR stimulus money that’s being handed out thanks to ARRA and the HITECH act. With over 600+ EHR vendors and a limited number of customers (I think there’s about 700,000 physicians in the US), there are going to be quite a few EHR vendors that won’t make it.

With that said, I don’t think the EHR bubble will pop like it has in other industries. In fact, I think the current IT industry bubble is going to be a much bigger problem. What’s amazing to me is how you can make a decent EHR business with only a few hundred doctors. Sure, a few hundred doctors won’t create 10 times return to investors, but those who take a conservative approach to building their EHR company could get by with what I believe is an astoundingly small customer base. Physicians are just that valuable.

Shahid Shah described EHR as a cottage industry and so cottage EHR companies will survive. I’m not exactly sure how he’d described cottage industry, but I think the regional nature of healthcare is definitely an influence on this. I’m sure many could argue that long term this strategy won’t work, but I believe at least for the forseeable future we’re not going to see the EHR bubble pop for a while.

As I think about the EHR companies I know, they all seem to have plenty of cash to make it through meaningful use stage 2 and likely all the way to meaningful use stage 3 at least. We’ll see how the smaller EHR companies do post meaningful use stage 2, but I don’t see any EHR vendors not making it to meaningful use stage 2. They’ll at least make it to MU stage 2. Then, based on their adoption results (or not) we may see a few EHR vendors run out of money.

What do you think? Are we in an EHR bubble? When will the EHR bubble pop? What other healthcare IT bubbles do you see?

About the author

John Lynn

John Lynn

John Lynn is the Founder of, a network of leading Healthcare IT resources. The flagship blog, Healthcare IT Today, contains over 13,000 articles with over half of the articles written by John. These EMR and Healthcare IT related articles have been viewed over 20 million times.

John manages Healthcare IT Central, the leading career Health IT job board. He also organizes the first of its kind conference and community focused on healthcare marketing, Healthcare and IT Marketing Conference, and a healthcare IT conference,, focused on practical healthcare IT innovation. John is an advisor to multiple healthcare IT companies. John is highly involved in social media, and in addition to his blogs can be found on Twitter: @techguy.


  • The EHR bubble is primarily an implementation, or services bubble, in my opinion. Most people have a vendor selected, and prospects are rapidly drying up. If the vendors continue to collect their 25% maintenance fees they should survive in general, but without the extra income from implementations they may not be able to improve their product as much. There are so many EHRs that need a complete rewrite…

    The HIE bubble is real, I think. There are only so many customers and that market space has a lot of players with a few standouts. Seriously, the technology needed is not THAT hard to do compared to an EHR. Expect many to go out of business in the next five years.

    Great discussion topic!

  • I agree with Joe, but one sector you’re overlooking is the companies that went with planned obsolescence, taking advantage of the ocean of money that was available, and have no plans to meet stage two requirements. I think some providers will be mildly unhappy when they ave to implement a new EHR in two years, without the benefit of incentive payments.

  • What bubble?

    You got to have a business explosion to cause a bubble first before it can pop.

    Beyond the $18B (or $36B if you prefer) with so many vendors in the space there will be so many collapses when government money dries up that when it happens there will be resellers stuck we stock they will be posting on eBay and

    Until that happens and practices see a real business and clinical value for EMRs they can quantify on their books … any bubble is in my opinion sheerly a dream of the developers … and ONC who funded it.

  • It won’t pop per se – it will probably deflate slowly and turn into a limp sac on the ground. Driving factors – 1)EHR’s are silo’ed and the most successful ones like EPIC are adamant on building walled gardens. 2) HIE will eventually become the new necessity in the light of the development of regional ‘community’ systems of care (aka ACOs) – in the same way that EHR’s enable a system to talk, they inhibit neighbors from talking. 3) the inflation of the bubble was partially driven by MU, which will eventually cease to exist and already seems like it will wind up petering out before stage 3 (frankly, ONC is more focused on info exchange than emr in the long run)

    Nice post though – you picked the brains of some great people!


  • I have a client who is looking for a merger with an EHR company or another company that can accelerate penetration into the Emergency Room. He has found it difficult to penetrate hospital emergency rooms as a standalone product, despite the fact that users love his product.

  • John…

    Which EHR companies do you know and how much cash do they each have?

    And how long’s their available cash gonna last with all the indecision and competition in this space?

    And what happens when they can’t implement or provide services?


    IMO, the balloon is inflating and it’s gotta Pop…

  • Naveen,
    Some very interesting comments and some points really worth their own post and discussion. I could see the slow leak happening in the EHR world more than some major pop. Although, once the leak starts happening, the hole often gets bigger quickly. We’ll see.

    You mean kind of like how NextGen just purchased an ED EHR company? I’m sure the transaction was similar. NextGen needed something to cover the ED space and the ED provider needed NextGen’s other offerings to really do well in the hospital ED market. I’ll call that the Epic all in one software hospital influence.

    Steve S,
    I know a lot of EHR companies. I actually made a list recently of people I could think of EHR companies I knew off hand and had some sort of personal connection with and I think I got up to about 60 easy to find emails. If I had kept better track, I’m sure that number would be much higher. With very few exception I don’t see any of them possibly folding up before stage 3 based on what I know about them. We’ll see how it plays out, but most are very cognizant of their burn rate and can last that long from what I’ve seen.

    Now, those that can’t make progress on the sales front by MU stage 3 are going to have to face the fire. Maybe that’s when the pop will happen.

  • LOL! Always love the quick response from a fellow in the Western Timezone!

    I guess you do know a lot of EHR companies! Don’t you! You’re sorta known as the Real EHR Guy in certain circles, so I read and hear…

    All banter aside, I was just thinking back and forward in my own small sphere of experience about the importance of cash and longevity – however seeming that stuff seems at the time. Those qualities just seem so fleeting – especially in technology.

    Seems like there’s a large value in keeping track of these cash things? Especially when it impacts ones own longevity! :’)

    Now there’s a metric I suspect will never be widely known of published: EHR Company Burn Rate and Longevity Index.

    So I was looking to someone in the know about cash reserve longevity qualities in EHR companies.

  • Also…One more thing…

    Sounds like Shahid Shah is mirroring what Jon Bush said yesterday: “think small at first–explaining how oversized deals or even buy-outs may sound good, but can wind up diverting the company from its mission. “Don’t give away your company.”

    “…the health care industry is full of opportunity for smaller companies, particularly in the emerging era of accountable care organizations. EHR goliaths may encounter limits to their growth and lack the flexibility of smaller firms”

  • I always love how the west coast represents!

    I was surprised when I started making the list too. It’s pretty neat to think through those relationships. I do kind of eat, drink and sleep EHR. Hopefully I’ve learned a little something over the years.

    There’s actually quite a bit of publicly available data out there if you look at the financing rounds of EHR companies. I’ve posted about a lot of them on and will certainly post about others that I find.

    Each EHR vendor is unique, but I think many fall into one of the following categories: Seed Funded, Well Funded, Positive Cash Flow, Large EHR Company, Large Company backed EHR. In this list of EHR companies, the only ones that I think are at risk before MU stage 3 is the first category and I don’t know many EHR companies in that category. I think this is probably because the money is so available right now for EHR and IT startups in general.

    I think Jonathan Bush’s comments were focused a bit differently, but there’s some application. Coincidentally, the discussion mentioned above was a few hours after Jonathan Bush’s keynote. So, maybe there was some influence.

  • The EHR bubble will inevitably deflate after incentive money dries up, but I agree with Shah that the “cottage” EMR companies will endure. This because most smaller EMR companies such as ours have spent less and accrued less or no debt in comparison to some of the newer, larger companies who sprung up overnight and may have had to rely heavily on venture capital. In the future, the available money in the EMR market will not be even enough for many companies to pay off their debt, let alone be a successful investment.

  • Then this comes out:

    The article claims: “In the health IT sector, there’s currently a glut of buyers and not enough companies to acquire. There are many non-healthcare players like Lockheed-Martin wanting to buy healthcare IT companies – and many suitors”. Interesting, but there are a ton of start ups trying to gain traction with new models like SAAS delivery, and others that have no venture funding, making profit off a handful of customers, and claim they are not looking to merge.

    At least from an M&A perspective, they claim no bubble. So, keep buying stock hoping your favorite vendor gets acquired.

  • As a resident of the Bay Area, technology bubbles – even when they burst – result in more opportunities, more, business, more productivity. Same as the healthcare environment we find ourselves in.

    Implementing EHR is not the end game – big data is. In order to get at the data, you need the EHR first.

    Speaking to a Director of Finance who works for the largest medical groups in the country, there is a HUGE disconnect between EHR and data needs.

    The IT implementation may experience expansions and contractions – all of it will lead to significant analytical capability that will transform the industry.

  • @Debra…
    “Implementing EHR is not the end game – big data is. In order to get at the data, you need the EHR first.”

    I think you have to convince the practitioners who generate the first bite of data how they benefit from the data FIRST.

    I mean practical, defined, clear, distinct, demonstrated, immediate data value both clinically and business focused … not fluffy theoretical, researcher-oriented, foggy, hard to define data. Recognizing the non-structured information is more valuable to the practitioner than discrete researcher oriented data.

    “…there is a HUGE disconnect between EHR and data needs.”

    That shouldn’t surprise anyone. EMRs are designed by developers to meet ONC-defined MU specifications … not the needs of practices.

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