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?