$20B In Federal Payouts May Upend The Electronic Health Record Market

Posted: 6/4/2013

 As seen on VentureBeat.com

By: Lauren Wagner

SAN FRANCISCO - Health care providers have been slow to adopt  electronic health records (EHR), especially compared to countries in Northern Europe and Spain. To spur  EHR use, the U.S. government has been paying out $20 billion in bonuses  to those who comply. This program has purportedly been a success, and the  Department of Health and Human Services recently announced that the majority  of doctors are now on board.

From here in our opportunistic Valley, entrepreneurs are keen to take a cut  of that $20 billion.

Epic Systems and legacy EHR

At VentureBeat's HealthBeat conference  last week, Dr. David Levin, CMIO of Cleveland Clinic, referred to EHR providers like Epic Systems as EMR 1.0, saying these legacy companies "started a revolution that got health care moving off paper and into an  electronic world. This is the Model T era and we're at the beginning.'

I wouldn't want my company compared to the Model T in the age of Tesla, but based on how the conference progressed, his  comment could be construed as a compliment.

Health care providers, and now technology entrepreneurs looking to develop  EHRs, have long been frustrated with corporations like Epic, which sell systems  that are largely closed to third-party developers and difficult for users to  navigate. At the conference, a doctor was asked whether his institution is on  Epic and his decisive "no" was met with a round of applause.

Epic Systems was founded in 1979 and now boasts $1.6 billion in revenue. CEO  Judy Faulkner said in a recent interview that anyone developing a third-party  application for Epic must have signed agreements with the company. "Customers  can do it in a controlled environment, but not the whole world," she added.

Faulkner touts safety, intellectual property, and selectivity in third-party  partners as reasons to remain closed. And it's worked.

According to a report in the New England Journal of Medicine, EHR vendors have  successfully convinced providers that health IT is entirely different from  industrial and consumer systems, thus protecting their market share and blocking  new entrants.

HealthBeat featured startup CEOs who described their products in a markedly  different tone.

Instead of focusing on intellectual property, privacy, and database  performance, Owen Tripp, CEO of ConsultingMD,  honed in on user experience saying, "[Currently], health care isn't  designed for the user; it's designed for the data." In addition, Aaron  Levie, CEO of cloud-storage company Box, said  secure knowledge transfer and storage is the next widespread innovation in  health care software, facilitated by the launch of his company's HIPAA compliant file sharing platform.

Startups that successfully enter the market are faced with huge opportunity;  a health system can expect to pay as much as $700 million for an Epic EHR  implementation (and there are about 6,000 hospitals in the United States.)

Don't hate the player ... hate the game?

Although Epic has been criticized in the media, some are wondering if there  is a larger cultural issue at play, where products are simply being built to  reflect hospitals' implicit preferences.

However, in an age of mobile, apps, file sharing, email, etc., it seems  natural for companies like Box to make inroads into health care  markets with their user-friendly, cloud-based tools. Startups seem focused  on understanding customer concerns and infusing technology with the transparency  and efficiencies we've grown to expect.

These features are a significant departure from legacy health IT. To ease the  transition for providers, Levie explained that his team is even "inventing a new  language for health care privacy."

EMR 2.0?

Starting in 2014, the government will pay additional bonuses to  doctors that provide "modern" technological offerings, such as access to  personal health information for patients and direct messaging for  practitioners.

So whether you decide to hate the player, the game, or neither, be aware that  the standards, rules, and even language used to describe the industry are in  flux.