Much has been written about the demise of small and medium-sized EHR vendors. The conventional wisdom is that Stage 2 of Meaningful Use is the dagger to the heart of all but the largest vendors. However, the smart small and medium-sized vendors are pursuing a strategy I’ll outline below that will position them to thrive well into the future. Unfortunately, many of their brethren are taking a conventional approach that will seal their fate.
So what does this mean for the future? Ever consider why so many vendors have so few attestations? SRSSoft reported the following:
“The top 24 EHR companies (just 6% of the 392 ambulatory EHRs with attestations) account for 80% of the total attestations to date – only 19 companies have delivered over 1,000 attestations and only 32 have exceeded 500. At the other end of the spectrum, 112 of the vendors produced only 1 to 5 attestations and a full 252 report 50 or fewer.
“It could be that they are small companies, new to the market, with limited revenue, resources, and staffing — which suggests they likely lack the significant development resources required to meet the increasingly complex certification requirements of Stages 2 and/or 3.”
The five strategies below can level the playing field with the big boy EMR solutions – systems that support the patient engagement tactics to impact behavior change of populations. EMRs have migrated to be EHRs and this means a more holistic approach to patient relationships than EMRs had in the past. Allscripts acquiring Jardogs is a good example of the importance of comprehensive patient engagement to accountable organizations.
Smaller and medium players can partner with lower cost solutions to compete more effectively. There is an opportunity for smaller and medium players to sell against siloed, tethered tools with EHR agnostic multi-provider tools such as patient relationship management tools and e-prescribing to help open the door to practices considering replacement solutions over time. [Disclosure: My company is one of the companies that provides patient portal tools.]
Half of ambulatory practices are considering replacing their existing solution. The choice for smaller and medium sized players is to be the hunter or the hunted. These five strategies give them the opportunity to be the hunted.
Five Smart Strategies for Small and Medium EHR Vendors
#1: Move Beyond Monolithic ‘Wang’ Model & Leapfrog Competitors
Unlike virtually every other sector, the “Wang model” (i.e., one company provides the complete technology stack) has persisted 15 years longer in healthcare. Another analogy is the phone carrier’s failed app stores. Did anyone notice that Verizon shut down their app store earlier this year?
When requirements were simpler and healthcare was in stasis, it was acceptable to have everything come from one vendor. Healthcare providers accepted slow development cycles. However, this proves to the be an expensive and slow way to develop systems. With modern Web services, a vendor can move much more quickly. For example, my company was asked if we could expand our patient alerts to be sent via SMS text messages. In a matter of a couple days, we had integrated, tested and deployed a best-of-breed Web service from a third party that enabled SMS messages. Our customers were thrilled (shocked might be a more apt description).
The “not invented here” syndrome is obsolete and has long since passed. Seamless integration with third parties is common and can get products to market quicker. This brings greater value to existing clients and is a value-add attraction for new customers. Companies such as Twilio and SendGrid are good horizontal technology examples where they provide their technology to everyone from emerging companies such as mine to major players such as Pinterest, Pandora, Intuit and and Hulu. Even highly resourced organizations such as those recognize that focusing on their differentiation is critical. In healthcare, similar companies exist that allow for co-branding options to support brand consistency for the EHR.
Stage 2 of Meaningful Use and new models such as Accountable Care Organizations (ACOs) and Patient Centered Medical Homes bring with them a bevy of new requirements in patient-facing technology that haven’t been a focus of EHR vendors. Just as being a wireless carrier such as Verizon isn’t the same skillset at developing consumer-facing mobile apps, being an EHR vendor developing provider-facing tools is very different than developing tools such as patient engagement tools. Consequently, the patient portals from the established vendors are the equivalent of pre-Google web search. That is, they are not terribly compelling. That’s a major issue as the requirements for patient engagement are growing exponentially.
By partnering for robust patient engagement tools, EHR vendors can gain an array of features demanded in the new models with dramatically less investment than before. One of the leading thinkers in health IT, Shahid Shah, outlined it this way:
“It will be nowhere as easy for existing legacy EHRs to simply retool their current platforms, like they did for MU.” With that said, Shah outlines nine ways future EHRs need to support accountable models.
“1. Sophisticated Patient Relationship Management (PRM).” According to Shah, today’s EHRs are more document management systems, rather than sophisticated, customer/patient relationship management systems. “For them to be really useful in ACO environments, they will need to support outreach, communication, patient engagement, and similar features we’re more accustomed to seeing, from marketing automation systems than transactional systems.”
Examples of PRM that go beyond old line patient portals include features such as targeted patient education tools, coordinated health tracking that incorporates biometric devices, family proxy handling, and more. The same is true in other areas such as how DrFirst provides e-prescribing and medication management. These features would otherwise take years for a small to medium sized player to develop and the alternatives would be market-proven.
#2 Move into the Age of Agility
As I outlined in Healthcare’s Age of Agility Will Shuffle Market Leadership, the industry is moving faster than ever. As Clay Christensen outlines, despite the actions of many large health systems, the era of “Mainframe Medicine” where everything had to be done at a centralized, big facility is ending. Whether it is hospital-at-home programs, or surgery centers that are 50-90% less expensive, there is a new supply chain of healthcare that is being developed.
The vendors who are able to be nimble enough to meet the requirements of the new healthcare delivery models will be leaders in the post Mainframe Medicine era. While some physicians are folding their tent and becoming employees, a whole raft of physician entrepreneurs know they can win in the new model. They want to take advantage of Healthcare’s Trillion Dollar Disruption.
As with any industry change, the leaders of the next era aren’t obvious and are often dismissed. For example, banks dismissed PayPal and missed out on a massive opportunity. Already you could say there is a shadow healthcare delivery system. The most significant of these are in primary care.
Employers recognize the value of primary care and consumers prefer a system that is responsive to their time constraints. Consequently, onsite/near site clinics, direct primary care, and retail clinics providing diagnosis and treatment all have experienced explosive growth. Combine emerging primary care models and efforts such as Walmart’s Centers of Excellence program that puts every hospital in the country in competition with Mayo, Cleveland Clinic, etc. for surgeries and you can see that a parallel delivery model is already here. It is unfortunate that most (not all) health system executives are making virtually the identical mistakes newspaper executives made in the late 1990s.
One certainty of an uncertain healthcare future is that there will be tremendous innovation around patient engagement. Traditional release cycles of 18-24 months will be a disaster for providers who must adjust rapidly to what is/isn’t working. This is a key reason why cloud-based systems that don’t require version upgrades are critical. Product cycles frequently are less than a month and one is always on the latest version in these models.
While healthcare is thought of as a $2.8 trillion industry, in reality, it is made up of countless sub-markets. Traditional EHR and some HIE vendors are like Sears – meant to fit everyone’s needs, but that is a near impossibility. In contrast, the vendors that specialize in particular niches are positioned best for the future.
The pendulum has swung, once again, to an extreme of employing physicians. It may not swing back as much as it did last time, but it’s not hard to project how many employed physicians will eventually work for smaller organizations in the future. Even if they don’t, many physician groups want to remain independent. Those specialists who are best-of-breed will always have an option to stay independent leaving many specialties available for vendors focused on that arena. There are also other niches such as post-acute care or those who may focus on serving a multi-lingual population.
Naturally, an EHR that focuses on a particular specialty is going to deliver to that sector a more tailored offering. As long as those niche EHRs can become interoperable with the rest of the healthcare system, they have a great opportunity. It’s not unlike how a community bank or credit union of modest scale can compete as they can offer interoperability for their ATM and wiring services. Their tailored model appeals to many.
#4 Focus on Core Differentiation
Forward-looking vendors understand the areas where they have unique, differentiated competence. Those are the areas to double-down on such as what was outlined in #3. The corollary to doubling down on differentiation is to partner for non-core items. If you aren’t going to be differentiated on items such as patient portals, why steal resources from your core to develop, at best, a me-too offering.
Reimbursement changes, ICD-10, Meaningful Use are all items that demand changes to the core of an EHR system. Freeing up resources to focus on those critical areas is a life-or-death decision for small to medium sized EHR vendors. These new requirements are non-trivial. In fact, reimbursement changes literally flip some items on their head. What was once a profit center becomes a cost center. Naturally, existing systems are optimized for the old model. If they aren’t changed, they quickly become obsolete.
This is an area where the agility of a smaller vendor can be an advantage versus old line vendors whose customers aren’t able to move as quickly. Small to medium-sized vendors frequently have smaller provider customers who can be more agile.
#5 Enable the Seven Habits of Highly Patient Centric Providers
As patient-centricity goes from a motherhood and apple pie statement to a survival imperative for providers, demands on vendors respond in kind. Any EHR vendor can read through The 7 Habits of Highly Patient Centric Providers and see the accompanying requirements that providers will demand of vendors.
The EHR vendor that provides their client a siloed or non-portable patient portal jeopardizes the business of their provider client. Consumers won’t tolerate having several different user id/password combos for their various providers. When polled, consumers are stating that they will make decisions on what provider they’ll choose based on access to their health information. Every pundit I’ve read expects that high deductibles and other major trends will drive much greater consumerism. The vendors who help their provider clients respond will gain a competitive advantage.
Beyond the competitive advantage, the ascending fee-for-value model makes the importance of patient engagement central to future healthcare delivery models. There is a reason Leonard Kish, Dr. Eric Topol, Dr. Farzad Mostashari and many others are stating that patient engagement is the Blockbuster Drug of the Century.
The strategies outlined above represent a shift from the status quo for EHR vendors. However, it has never been clearer that business-as-usual is a guaranteed recipe for failure. The smart small to medium-sized EHR vendors recognize this and are rapidly evolving while their competition clings to old ways.
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