Today at a healthcare IT meetup I attended in Dallas I ran into a former contact at an EHR vendor. He no longer works at that EHR company and has moved on to two other companies. In our discussion we had an interesting discussion about the market. Having moved on, he’d lost touch with the EHR market. He asked me, “Are there still 700 EHR vendors?” I told him there were probably 300, but I’ve contended that their have been 300 EHR vendors for a while. I’m not counting the hundreds of ancillary companies that are “certified EHR” but only perform 1-2 EHR related functions.
Over and over again I hear people talking about consolidation of EHR vendors. They say it’s going to happen and we’re going to get down to a really small number of EHR vendors. Some go as far as saying that there will be 2-3 EHR vendors after EHR consolidation happens.
I think this idea is ridiculous. At HIMSS, I figured out why I don’t think it’s going to happen. Someone told me, “Ambulatory healthcare is fragmented. It’s second only to florists when it comes to market fragmentation.”
This to me illustrates exactly why there can and will be so many EHR vendors. The ambulatory market is completely fragmented with thousands of really small businesses (ie. solo doc) doing just fine. Think about it. There are very few businesses that could survive at the size of a solo doctor practice. In every other industry, the businesses the size of a solo doc practice get eating up as the big boy competitors kill them with their buying power. The same can’t be said in healthcare. A solo doctor practice is a very viable business. Thus we see the market fragmentation and the plethora of EHR companies.
The above analysis does make you wonder why the solo doctor practice is still a viable business and if something in the future will make that option unreasonable from a business perspective. Although, that’s a subject for a future blog post.
Of course, when you think about the hospital EMR market there’s a much different story. We’ve seen EHR consolidation. The hospital market is much less fragmented and becoming less so every day. However, I’ll still be surprised if we go below 100 ambulatory EHR vendors.
John, I think you got it on the mark. Perfect assessment. Consolidation to the extent many people expect will not happen. It will remain extremely fragmented. As long as solo practices exist, so will small EMR companies.
The debate about whether the solo practice will go away or not is a different issue.
So many EMR companies I talk to and consult with are managing the show profitably. Some are struggling, but being small, they are able to reign in costs. While their desired hockey stick growth is a mirage, going down under is not happening soon.
Some companies are waiting for buyers, but their perception of evaluation is so lopsided that it won’t work. In the end, it will be mostly status-quo and life goes on…
There is also the issue of the cost of migrating from one vendor to another one. Even though some EMRs are built on 1980’s technology a medical group might not want to front the cost of that migration which may include hardware, software, consulting services to install and possibly enhance the new system, and then a trainer to train your staff in the new system. These are all viewed as cost issues and not as improvements in service.
I can’t see consolidation down to a “big 3”, but I wouldn’t be surprised if it drops down to the century mark.
Compared to where it started, that’s quite a bit of consolidation.
You failed to mention what I believe to be the #1 reason why the EHR market isn’t like others…the fact that it is not market driven.
If the G wasn’t forcing EHRs on practices & plunking money on the table, this explosion in fake demand would not have happened.
When a market is artificially created, the progress of the market is difficult to forecast.
Your statement “There are very few businesses that could survive at the size of a solo doctor practice” is way off the mark.
Lawyers, restaurants, consultants, builders, painters, lawn services…the list goes on.
What makes a medical practice unique is how they get paid.
Great comments and additions to the discussion. Thanks for sharing.
John,
I worked in the Perinatal Information System Industries for years, and these EMR’s were and are under the of the FDA due to the Fetal Monitoring Interface component that sends information to the system. The development was greatly impacted by the FDA, but also ensured that the information systems were safe for patient care.
There were historically a couple of times that vendors had FDA complaints against them, causing all development to answer the complaints and leaving a bad image in the industry. OB Information Systems can provide a good case study for the larger EHR if these systems had to be approved by FDA – for both sides FDA and Vendors. There are pros and cons. The FDA would have some work to do on their side as well. It might behoove the industry to take a look at this smaller model to see what can be learned regarding project development and adherence to FDA scrutiny.
Debby,
Good advice. I think we could learn a lot from the Fetal Monitor side of FDA regulation of EHR. Although, I hope we never go there.