"To improve the quality of our healthcare while lowering its cost, we will make the immediate investments necessary to ensure that, within five years, all of America's medical records are computerized." — President-elect Barack Obama, Jan. 8, 2009
In 2009, just 16 percent of U.S. hospitals had an electronic health record system. Currently, on the eve of the five-year mark, more than 80 percent of hospitals eligible for meaningful use incentives have implemented an EHR and have begun the process of computerizing medical records, according to CMS data.
The EHR and meaningful use incentive programs caused the EHR market to spike in 2012 and report record revenues, according to the Millennium Research Group. Revenues began to decline in 2013 due to market saturation. "Pretty much all of the major hospitals have made a decision and selected an EHR" says Juergen Fritsch, chief scientist at health IT provider M*Modal.
However, 2013 saw three significant market trends that offer insight into what 2014 has in store for the EHR market.
1. Not all providers are content with their current system. More than one in six providers currently using an electronic health record system has plans to change vendors within the next year, according to a Black Book Strategies report. Micky Tripathi, president and CEO of the Massachusetts eHealth Collaborative, believes that number could be as high as 30 percent, especially among providers that initially chose smaller or start-up vendors. "A lot of the smaller vendors aren't going to be able to hit the meaningful use stage 2 requirements, either for technology reasons or because they don't have the consumer base or the resources," he says. "That will drive people to another EHR." Girish Navani, CEO and co-founder of eClinicalWorks, says the trend of EHR replacement has benefited his company: "Approximately 60 percent of our new customers are switching to us from a previous system," he says.
Among physician practices, nearly one in three is considering a new EHR. "We knew there would be some switching, but we thought most people who had made the investment in an EHR would stick with it," says Emily Peters, vice president of marketing communications at Practice Fusion, a free, cloud-based EHR targeted at physicians. "But we've been seeing a lot of providers dropping their old system and moving to a new one."
Of the hundreds practices that sign up for Practice Fusion each week, about one in four are switching from another EHR vendor, says Ms. Peters. She estimates even more providers will begin looking for a new EHR system as meaningful use stage 2 nears and the vast majority of vendors will not be ready. "An estimated 90 percent of EHR vendors won't be certified for stage 2 by Jan. 1," she says. "I think that's creating a lot of fear and uncertainty and fueling all this switching — people don't want to be stuck with a system they can't use for meaningful use."
2. A few EHR vendors now hold a large market share. "The history of technology development always follows the same trajectory," says MeHC's Mr. Tripathi. "There's rapid innovation and a market ramp-up with a lot of different firms with different ways of doing the same thing. Then there's a shakeout, driven by various market factors and you start to see a dominant approach, a dominant technology and a few dominant companies." The meaningful use program may have artificially elongated the market life of some companies, but Mr. Tripathi sees market forces coming back into play now. He equates the progression of the EHR market to the progression of the automobile or the telephone services market in the U.S. from the last century to the present day. "The market is still competitive, there's just fewer players and more maturity within the market," he says.
M*Modal's Dr. Fritsch has seen this consolidation happen in the EHR market over the past year. “At least for acute-care hospitals, you basically have two main vendors now, Epic and Cerner. No one else has really made inroads this year," he says. A recent report from KLAS verifies his observation — Epic and Cerner combined grabbed 75 percent of all new hospital EHR business over the past year.
Dr. Fritsch believes the EHR industry may have consolidated so quickly because of the general outlook of healthcare organizations. "The healthcare market has always been very conservative," he says. "Most hospitals want to buy from established vendors, and they think you can't go wrong picking one of the two big ones [Epic and Cerner]."
Merger and acquisition activity within the healthcare industry as well as the formation of accountable care organizations has encouraged hospitals and health systems to select prominent, common vendors. "Consolidation, either formally or in less direct ways, like through ACOs, drives people towards common EHR platforms, and towards large, enterprise EHR vendors that can handle the business needs of larger organizations," says Mr. Tripathi.
3. The next big market will be for EHR add-ons. "My main observation is the market has progressed from looking at EHRs from a purchasing perspective to looking at them from a meaningful use perspective," says Dr. Fritsch. "They're thinking, 'Now that we have implemented one, how do we make better use of it?'"
CMS' meaningful use incentive program is designed to foster better use of EHRs. Hospitals around the country have begun to demonstrate meaningful use in earnest — the most recent CMS data shows 3,689 eligible hospitals and critical access hospitals have received an incentive payment since the incentive program began in 2011.
The focus on achieving meaningful use will only intensify as hospitals and health systems begin to prepare for meaningful use stage 2. Stage 2 goes well beyond EHR implementation to require population health management, patient engagement and other requirements to move the healthcare industry towards coordinated care. Many EHRs do not currently have this functionality, says eClinicalWork's Mr. Navani, and are struggling to meet these government mandates.
Uncertified EHRs are creating a demand for new products to complete these tasks. "We're seeing people start to cobble together solutions to meet meaningful use," says Mr. Tripathi, and a product designed to perform a specific meaningful use-related functionality will sell well in the current market.
Patient engagement and education, decision support, mobile capabilities, interoperability and clinical quality measurement solutions will be the add-ons hospitals will be increasingly seeking, says Mr. Tripathi. Additionally, he believes IT vendors will continue to partner to combine solutions to provide a more comprehensive product.
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