Sunday, June 17, 2012

Can we make it even more meaningful and useful?

As part of the American Recovery and Reinvestment Act (ARRA) of 2009, the Health Information Technology for Economic and Clinical Health (HITECH) Act was created to fund and support a paperless national health information network through the adoption of electronic health records (EHRs).  Congress appropriated over $30 billion dollars for doctors and hospitals to receive if they install EHR systems that meet minimum standards. Doctors qualifying for the meaningful use incentives in stages over five years can earn up to $44,000 per physician. Hospitals’ incentive vary but start with a $2 million base payment.  The map above shows payments made through April 2012.

This is a huge infusion of money into the hardware and software sector that serves doctors and hospitals, amounting to about a 50% expansion of the entire national installed base of these computer systems.  The result has been a windfall for those few big firms that dominate the business, like Cerner and Epic.  They promise a lot and are getting paid a lot and are recruiting a lot of software engineers and the like.

The talk in the industry is that these firms are getting over-extended because of the size of the contracts and the need to quickly recruit, train, and assimilate staff.  I do not have a way to judge that, but I do notice that there is already a parallel growing industry of firms like Arcadia Solutions that, among other things, are brought in after the big guys come through and help the systems actually deliver the promised benefits.

One thing is for sure, though.  The major firms offering EHRs are not in a position to offer much in the way of customizable systems.  In part, they simply have too much to do just to meet the market demand for the basics.  But some of the firms have adopted a strategy that, in essence, says, "This is what we offer.  We will enhance it and/or customize it on our timetable.  Don't call us.  We'll call you."  This is not a surprise, given both the required schedule for meaningful use and the dominant market position of these suppliers.

Meanwhile, though, there are hundreds of entrepreneurs and small firms -- often, but not exclusively, based in Silicon Valley and Cambridge -- who have developed apps that could dramatically enhance the delivery of care.  The rub is that these apps need to be integrated into the EHRs to preserve the integrity of the patient records.  If you have a stand-alone system on which a clinician is relying for decision support or enhanced hand-off management, for example, the results of that transaction should often be documented in the EHR.  But the big firms are too busy or commercially unwilling to prepare interfaces to make it possible for this integration to be carried out.

In a recent article, Forbes writer David Shaywitz and co-author Tory Wolff cite the special dominance of Epic in this marketplace and offers two scenarios of what might happen in the future.  They does not propose that the big vendor give up proprietary information and make its system the equivalent of open source programs.  Their proposal instead is that the vendor should adapt its systems to permit portal entry of data, in the format it desires, from these stand-alone apps into the EHR.

The optimistic scenario would be that Epic could take inspiration from Apple’s approach to apps, using its dominant market position to provide a clear set of operating standards and expectations, and cultivate a far-flung innovation ecosystem based on its established platform.  In this scenario, Epic could keep its products relevant and stay on the leading edge by adapting quickly to evolving market needs. 

Alternatively, if Epic . . . decides to maintain an essentially closed system, and to drive all innovation internally, this could prove stultifying, limiting the development of novel ideas, and forcing the many high-profile adopters of Epic to accept stagnation or pay the staggering costs of switching.  The restrictive mindset might drive determined innovators – entrepreneurs, developers, and eventually even clients — straight into the arms of competitors.

I don't buy the authors' argument that Epic's competitors will be any more nimble or willing to open up their systems, but I do agree with them that Epic is uniquely suited to set the standard for doing so.  However, they worry that:

Epic’s “capture all the information” approach certainly feels at odds with a distributed world; moreover, if Epic manages to dominate the market using their existing approach, they will enjoy significant “locked-in” revenue, and may simply not see a lot of incremental profit in rapidly changing.

I hope this is not the case.  As a privately held company with an inspirational and thoughtful leader who truly cares about the future of health care in the country -- and enough revenue and profit to carry it through for years to come -- Epic has the potential to accelerate change more than anyone in the country.  What will it be, Judy?


David Shaywitz said...

Appreciate perspective on the Forbes piece Tory Wolff and I wrote; some of the issues you thoughtfully raise here are also discussed in a second piece Tory and I put together last week, available here: . It will be fascinating to see how this important story unfolds.

Paul Levy said...

Thanks, David. I added Tory to the author list and also fixed the spelling of your name!

Matthew Holt said...

You're asking the wrong person, Paul. The Epic folks are going to do what they do and it's not in their DNA to open a platform. They'll build it themselves and do a good job. But Allscripts has already taken tentative steps to open their system, and so have the SaaS platform vendors in the physician market...and my guess us a few more losses and Cerner heads there too.

But with Epic's growning footprint in the big systems here, the question is whether a big Epic client will insist on Epic allowing other applications on to their version of the Epic platform. So the question is, what'll it be George or Paul? (I don't know which groups John & Ringo run!)

Michael said...

This is spot on in many ways. Epic's role in this act is only increasing - with great power comes great responsibility.

Anonymous said...

Billions of tax dollars into the stew – making many people rich beyond their wildest dreams - and no federal mandate about interoperability or shared applications. Weird.

It makes me root harder for some of the open solutions against the Empire that seems to be growing up in Wisconsin.

@claudiawilliams said...

From Twitter:

Providers (& patients) will need an ecosystem of platforms & tools. Agree, EHR vendors can enable this future

Anonymous said...

My dream is to re-orient EHRs
around an open-source core and let the vendors compete in the
area where they're currently most lacking--user interface.

Jeremy Engdahl-Johnson said...

Centers for Medicare and Medicaid Services (CMS) has provided $4.5 billion in electronic health record incentives. How might electronic health record (EHR) efforts progress from here?

Dave said...

I agree w/ Matthew's POV. The org winning using a closed, proprietary model rarely is the first to open. They only open when they start losing business (e.g., look at IBM & MSFT when they lost dominance, they got "open" religion). Those losing to Epic are most likely to open first.

If the market was in stasis, Epic would have a much better chance of long-term dominance. It's entirely unclear that the providers who are dominating today and can afford Epic's price tage are well positioned for the future. As the healthcare leaders stated in this piece, it's the disruptive models that are their biggest worry. While they are slogging through automating the historic delivery model, others are inventing the models most likely to win in the future.

Anonymous said...

Why is no one talking about cost? At 700 million over 10 years for Partners Health Care to install Epic, the cost of EHR's alone will drive the quest for hospital revenues to new heights. I am by no means a computer guru, but after a career full of marginal to outright failed enterprise solutions at community hospitals, I am sick to death of these large, expensive systems which promise much but deliver little - all the while telling the customer it's their own fault.

It's time for a second generation, affordable, flexible and patient-centered EHR, not incremental changes to these dinosaurs. And yes, I believe EHR's should be designated as a 'medical device.'

nonlocal MD

Paul Levy said...


I agree with you in theory, i.e., if this were any other sector in the economy; but health care is notoriously slow in changing. Normal market forces don't seem to work in the normal way and over the same time horizon. So I don't expect to see the phenomenon you describe happening at all or very fast.

What might be different here -- and I say MIGHT -- is that Judy is an extraordinary person with a good heart, and no shareholders to worry about. If she decides to head in a new direction because she sees societal value in it, she can make it happen even if it does change the nature of her semi-monopoly.