Consolidation, physician demand drive change

This information is part of a Medical Economics exclusive ranking of the top 100 EHR companies. (medicaleconomics.com/top-100-EHRs)

In the next few years, the  electronic health records (EHRs) industry is likely to change rapidly, from a wide variety of choices to just a few key players. But of the hundreds of EHR systems currently on the market, how many will be at the top?

If you take a look at primary care,  the number of EHR vendors is already becoming more concentrated, says Jason Mitchell, MD, director of the Center for Health Information Technology for the American Academy of Family Physicians. He predicts that there will be 20 EHR companies that will make up the majority of the market by 2018.

“Meaningful Use 2 (MU2) will be the big shakeout and by Meaningful Use 3 (MU3) there will be pretty significant consolidation,” Mitchell says. “There will always be a need for boutique systems that offer free EHRs. Larger companies are still having issues wading through lots of code. Even when most of the consolidation occurs, there will always be room for the little guy. There’s still room for an innovative player.”

In 2007, only 17% of physicians used basic EHRs, according to the Centers for Disease Control and Prevention. Now about 70% of physicians are using one of the hundreds EHR systems currently on the market. Government incentives for EHR usage in 2009 caused a race in the healthcare information technology community to develop and market the next big EHR system.

EHR study by Kalorama says that six companies make up 58% of the EHR market. The remaining 42% represent a fractured market that many experts predict is ripe for mass consolidation.

But how will this consolidation occur? According to Kalorama, EHR market saturation is still a few years away, and the market could mushroom from $20.7 billion in 2012 to $36.7 billion in 2017.

There are major challenges within the industry-half of practice owners say they are ditching their current EHRs for new ones, while many systems still struggle with interoperability issues as MU2 deadlines approach. If the EHR market is going to shrink and become more efficient, system providers need to balance innovation with government standards and increased specialization in physicians’ technology needs.

“Patients and providers are expecting up-to-the-minute access to healthcare data and the government is interested in leveraging this data to improve patient outcomes and to encourage better communication across the healthcare spectrum,” says Tim Sayed, MD, medical director of Modernizing Medicine’s Electronic Medical Assistant systems for surgery and cosmetics and executive committee member of the Healthcare Information and Management Systems Society EHR Association. “EHR has moved from being a simple concept of a computer-generated text file replacing handwritten chart data to a complex ecosystem of clinical data, patient education, and patient engagement tools which will increasingly require cross-platform interoperability.”

The next big driver
Mitchell says that the end of government incentives and the beginning of penalties in 2015 won’t be a big factor in the EHR industry, though MU2 standards could cause a lot of companies to bow out of the industry.

“Healthcare reform and the transformation in healthcare payment models will be the real drivers,” Mitchell says. “Needing to do data analysis and the switch into value from volume metrics will be important. The payment structure is changing with patient-centered care and accountable care organizations (ACOs).”
Sayed agrees that the move into MU2 and MU3 requirements will cause many companies with older technology or small marketing budgets to decide between upgrading, merging or closing their businesses.

“Certain vendors may lack the engineering and marketing resources to compete successfully for remaining new providers and newcomers to electronic record use, particularly given the complex requirements of stage 2 and stage 3 MU implementation,” Sayed says.

A big shift in the EHR industry will be from server-based systems that require hardware or software to be installed on office computers to web- and cloud-based systems that can be available in the office or on mobile devices. According to the Practice Profitability Index released in May 2013 by CareCloud and QuantiaMD, more than 40% of physicians say they will be implementing new EHR systems in 2014. Half of the physicians surveyed want to improve operational performance in billings and collection, while 31% want to improve their technology overall.

“We are already seeing legacy vendors continuing to merge or go private in order to address various functionally or business model issues,” says Albert Santalo, chief executive officer of CareCloud. “On timing, that all depends but I think it’s a forgone conclusion that if you are not moving to a cloud-based model it will be harder to compete as a vendor moving forward.”

Is interoperability possible?
Mitchell says that the industry talks a lot about interoperability, but no company has yet to deliver.

“If we can have general interoperability it will open things up more, but I don’t see that happening. There’s too much competition. Health systems want to keep patient information within their system-they don’t want to share. That’s in their business model,” Mitchell says.

The industry has yet to leverage big data to predict and manage outcomes, Sayed says. “I believe that big data analytics, which allow stakeholders (the government, payers, patient advocates, competing hospital systems, accountable care organizations, etc.) to observe patterns of care and outcomes of these different patterns, will be the true vanguard of EHR technology moving forward,” Sayed says.

Opportunities to help doctors with existing issues with Health Insurance Portability and Accountability Act (HIPAA) compliancy and communicating with payers in simpler ways are other entry points for small businesses to make an impact in the EHR industry.

“There are many opportunities to make it easier for physicians and patients to communicate in HIPAA-compliant ways, by using tools that are as easy and intuitive as the kinds of tools they are using in their personal lives,” Sayed says. “Integration between EHR’s and billing clearinghouses remains somewhat clunky for various systems, and comprehensive practice solutions that include marketing/customer relationship management tools, inventory management, revenue cycle analytics, and human resource business intelligence will increasingly be demanded by high performing practices and enterprise-level organizations like hospitals and ACO’s.”

Room for innovation
Though physicians are vocalizing their needs, and the changes in the industry are being outlined, EHR systems are still behind, says Santalo. This means there is still room for a lot of innovation.
“From a technology standpoint, we are decades behind other industries. Physicians are facing pressures to adopt and use EHRs to comply with various healthcare reform efforts and demonstrate Meaningful Use. It’s clear there is a growing number of providers and groups that signed up for their first EHR in haste and are now entering the market again, wiser about what they need in a clinical system. Specifically, they are looking a more modern, usable, and faster EHR,” Santalo says.
What does EHR innovation look like? Devices such as Google Glass, that could display patient records on eyeglasses, is a likely leap. Wireless and wearable EHR technology will be a necessity in the next few years.
“There are huge opportunities to continue innovating in this field to achieve more transparency and portability of patient data and integration with devices like wearable monitors and mobile apps that track patient health trends and behaviors,” Sayed says.