Why the EHR market is on the brink of mass consolidation

The number of vendors or Electronic Health Records products seems to no be very sustainable.

Federal Meaningful Use incentives have stimulated the industry along with pressures and encouragements from licensing boards, insurance payers, the need for EHRs has been on the rise.

As a result, larger more established EHR companies that have been around for 15 years or more are suddenly faced with a growing number of competitors, many of which are smaller startups – some quite successful.

More specifically, two general categories of EHR have emerged:

  • EHRs for ambulatory use
  • EHRs for hospital use

If one carries out a detailed analysis of 2011 Meaningful Use data, some patterns emerge.

Firstly, ambulatory clinicians nearly always choose Complete EHRs – 95% of ambulatory Meaningful Use attestations were done using Complete EHRs.

Hospitals, on the other hand, represent a different pattern – only 48% of hospitals attested for Meaningful Use using a Complete EHR, whereas 52% used Modular EHR components.

The resulting landscape looks like this:

  • On the ambulatory side, there were 949 products offered by 558 vendors on the Certified product list (CHPL). 70% of all attestations were made using products from the top 12 vendors; 30% of attestations were made using products from 272 vendors. 295 vendors offered certified products that were not used by anyone for Meaningful Use in 2011.
  • On the hospital side, there were 220 products offered by 175 vendors. 72.5% of hospital attestations were made using products from 5 top vendors. The remaining hospital attesters used products from 54 different vendors. 134 vendors offered hospital-based certified products that were not used by anyone for Meaningful Use in 2011.

Failure of products, even well-designed ones, are part of the startup experience and this is true in all market spaces, not just health care.

Give the above scenarios, there will likely be some consolidation.

As is seen in other sectors, when companies buy other companies it is more a purchase of their market footprint than it is a purchase of their technology.

In fact, examples of mergers with ultimately incompatible technologies behind them abound.

If this pattern plays out in the EHR marketplace, then we might see purchase of companies with significant market footprints by others wishing to acquire their market base (and let the technologies merge in the background once the acquisition takes place).

More likely, however, is that companies that offer Complete EHR systems for ambulatory audiences, and companies that offer Modular EHR components for hospital customers, will end up buying niche technology companies

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