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Farzad Mostashari, MD, ScM, Visiting Fellow, Brookings Institute, Former National Coordinator for Health IT, US Department of Health and Human Services
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Evolving Vendor Market for HITECH-Certified Ambulatory EHR Products
Marsha Gold, ScD; Mynti Hossain, MPP; Dustin R. Charles, MPH; and Michael F. Furukawa, PhD
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Marsha Gold, ScD
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Rohima Begum, MPH; Mandy Smith Ryan, PhD; Chloe H. Winther, BA; Jason J. Wang, PhD; Naomi S. Bardach, MD; Amanda H. Parsons, MD; Sarah C. Shih, MPH; and R. Adams Dudley, MD, MBA
Older Adult Consumers' Attitudes and Preferences on Electronic Patient-Physician Messaging
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Will Meaningful Use Electronic Medical Records Reduce Hospital Costs?
William E. Encinosa, PhD; and Jaeyong Bae, MA

Evolving Vendor Market for HITECH-Certified Ambulatory EHR Products

Marsha Gold, ScD; Mynti Hossain, MPP; Dustin R. Charles, MPH; and Michael F. Furukawa, PhD
Balancing competing goals of innovation and regulatory oversight will influence the evolution of the vendor market for certified ambulatory electronic health record products.
Background: The ambitious goals of the Health Information Technology for Economic and Clinical Health (HITECH) Act require rapid development and certification of new ambulatory electronic health record (EHR) products.

Objectives: To examine where the vendor market for EHR products stands now and the policy issues emerging from the market’s evolution.

Study Design: Descriptive study with policy analysis.

Methods: We had 3 main sources of information: (1) documents describing this evolving market, which is not well represented in peer-reviewed literature; (2) operational data on certified ambulatory EHR products and their use by Medicareeligible professionals attesting for meaningful use payments from January 2011 to October 2012; and (3) telephone interviews with 10 vendors that account for 57% of the market.

Results: Those attesting for Medicare meaningful use payments used ambulatory EHRs from 353 different vendors, although 16 firms accounted for 75% of the market. The Herfindahl-Hirschman Index showed the ambulatory EHR market to be highly competitive, particularly for practices of 50 or fewer professionals. The interviewed vendors and the external analysts agreed that stage 1 requirements set a relatively low bar for market entry, but that likely will change as requirements get more demanding.

Conclusions: The HITECH Act met its initial goals to motivate growth of diverse ambulatory EHR products. A market shakeout may emerge, though current data reveal no signs of it. Policy makers can influence the shape and value of such a shakeout, and the extent of disruption, through their approach to certification and “usability” and “interoperability” strategies and requirements.

Am J Manag Care. 2013;19(11 Spec No. 10):SP353-SP361
This study examines the evolving vendor market for ambulatory electronic health records (EHRs) as implementation of the Health Information Technology for Economic and Clinical Health Act proceeds. It analyzes:

  • The market share of Medicare-eligible attesting providers and the extent of competition across the 353 ambulatory EHR vendors.

  • How ambulatory EHR vendors handle product distribution and pricing, implementation and maintenance support, and support for a meaningful use attestation.

  • The policy issues that arise with the rapid growth of ambulatory EHR products.
The Health Information Technology for Economic and Clinical Health (HITECH) provisions of the American Recovery and Reinvestment Act of 2009 set ambitious goals for using health information technology (HIT) to improve healthcare delivery. Critical first steps for success involve rapid nationwide adoption of electronic health records (EHRs) and electronic health information  exchange to support delivery improvements. In previous work, we examined critical drivers of adoption and exchange, finding that some of these drivers were not directly under HITECH or government control.1 In this study, we examine in more depth the evolution of one such driver: the availability of vendor products offering EHRs to eligible professionals, especially in office-based practice. (Other drivers of adoption are affordability, practice integration, and provider attitudes.)

Availability is particularly relevant to ambulatory care. Before HITECH, use of EHRs in office-based practice was much less developed than in the inpatient environment; products serving smaller office-based practices were particularly limited in both number and functionality.2,3 While the percentage of office-based physicians making any use of an EHR has risen over time,4 adoption rates are uneven, with uptake substantially lower for certified products that meet uniform nationwide standards. The HITECH objective was to combine such standards with meaningful use incentives and regional extension center support for high-priority  roviders to accelerate development of a strong vendor market with certified EHR products suitable to ambulatory and inpatient settings.

STUDY QUESTIONS AND METHODS

This study sought to further our understanding of the industry, which is evolving to meet the demand for HITECH-relevant ambulatory EHRs. It addressed 3 questions:

1. How has the vendor market for ambulatory products evolved with the implementation of HITECH?

2. What role do vendors play in the market, and how do they function currently?

3. How will the market evolve in the future, and what tools do policy makers have to shape it?


Because the vendor market is relatively new, there is not a welldeveloped, peer-reviewed literature on the industry and many available sources are proprietary. To begin filling this gap, we used available information to answer these 3 questions. Three main sources of information were used:
  • Documents, including available industry reports and information on company websites (the “grey literature”).


  • Operational data that federal agencies have developed in the context of certifying vendor products and reviewing applications from eligible professionals for meaningful use payments.


  • Telephone interviews with 10 diverse vendors in the ambulatory EHR market in March and April 2012.


Lacking an established sample frame, we used information in the trade press to identify a mix of vendors active in the ambulatory market that were diverse in company origins (hospital industry versus others), age, target market, and product design features as reflected in trade publications. Before finalizing our recommendations, we discussed them with Office of the National Coordinator staff, including high-level leadership familiar with the industry. Interviews were guided by a semistructured protocol covering topics relating to market position, marketing and provider support, certification, meaningful use requirements, interaction with federal programs, and future directions and issues. We asked to speak for 45 minutes with each firm’s most senior executive(s) who had strategic and operational oversight of product development, sales, and provider support of certified electronic medical record product(s). To encourage cooperation, we assured interviewees that their comments would be confidential and not reported by firm.We also elicited the cooperation of the Healthcare Information and Management Systems Society Electronic Health Record Association, which then encouraged its members to respond. (The Electronic Health Record Association had no role in choosing interviewees or topics covered and played no role in the analysis.) Interviews were conducted in March and April 2012; 10 of 11 solicited vendors responded. Our lead author conducted each interview, and a research associate participated in the call, taking detailed notes to support analysis.

Table 1 shows selected characteristics of the vendors we interviewed. While most were relatively large, their gross revenues ranged from the low millions to billions, sometimes including revenue from a parent company. Most currently are publicly traded, sometimes as subsidiaries of larger parent companies such as General Electric and Quest Diagnostics. Epic, founded in 1979, remains a private, employee-held company. e-MDs is privately held, as is Practice Fusion, a start-up firm founded with capital from Silicon Valley entrepreneurs. The origins of the 10 vendors also differ. Some were founded by clinicians for ambulatory uses (Greenway,e-MDs), and others added EHRs to existing product lines that tend to emphasize practice management products (athenahealth, NextGen, Cerner) or HIT in support of laboratory testing (MedPlus). Vendors also differed in the emphases of their marketing (see the Company Public Tag Line column, Table 1).

Given their small number, interviewees obviously did not represent all vendors; however, they did represent a sizable share of the market (57% of all eligible professionals receiving stage 1 payments by October 2012). Interviewee responses also reflected the vendor perspective and should be understood  in this context. We relied on vendor reports to describe the way the industry functions but applied a critical eye in assessing the policy implications.

MARKET EVOLUTION AND CURRENT STRUCTURE

Market Scope

The market for ambulatory EHR products is potentially quite large. Frost and Sullivan estimated that the US market was likely to double, from $1.3 billion to an estimated $2.6 billion in revenue between 2009 and 2012, peaking at $3 billion in 2013 before falling off as saturation occurred.5 These are large numbers. Customers for ambulatory products are diverse, including not only new practices but also those looking to replace existing systems with new certified options that better position them to meet increasingly stringent meaningful use requirements in HITECH stages 2 and 3.6 One analysis found that 35% of practices considering acquisitions were replacing their existing products (vs buying new ones), with replacement particularly likely in larger practices.

Market Growth

As intended, HITECH appears to have contributed to a  rapid growth in the vendor market for certified ambulatory products. Almost 800 vendors had such products in late 2012, including 666 with ambulatory products only and 129 that also had inpatient products.8  Some products predated HITECH and were adapted, as needed, to meet its requirements; others were new products from both new and established vendors.

Table 2 shows the vendors used by eligible professionals who attested by October 31, 2012, that they successfully met stage 1 meaningful use requirements for Medicare. These data show a broad market, with 353 vendors selling certified complete products used by at least 1 eligible attesting provider. (The analysis was restricted to eligible professionals attesting for Medicare payments who used 1 vendor with 1 complete EHR. These included 93% of those attesting under Medicare [100,877 of 107,907 eligible professionals who qualify for Medicare and Medicaid must decide which program to use]. We cite Medicare figures because they are collected centrally and are more current and complete.) The number of vendors continues to grow, although at a slower rate than in 2011 (data not shown). Although there are many vendors, 16 firms account for 75% of the market. They include relatively established hospital vendors (Allscripts, CCS, and Sage) and newer vendors based mainly in the ambulatory market (eClinicalWorks, NextGen, and Greenway). Some (eg, athenahealth, Practice Fusion) offered products on a widespread basis only after HITECH was enacted, reflective of significant market entry coinciding with HITECH. However, most vendors showed only a small reach to date (271 had fewer than 100 attestations; 127 of these had 10 or fewer attestations).

Market Concentration and Competitiveness

The Herfindahl-Hirschman Index is a commonly accepted measure of market concentration.9 (This index is calculated by summing the squares of the market share of each firm in an industry. The maximum score is 10,000. Markets with between 1500 and 2500 are considered to be moderately concentrated; those with higher scores are considered to be highly concentrated.) On this metric, the vendor market for ambulatory products was relatively competitive, with low concentration nationwide and across market sectors (Table 3). The main exception involved the largest practices (>51 professionals). Other analyses also show greater diversity in vendor mix among  the smallest practices (1-3 professionals) than among the largest (>11 clinicians).10 Although the market may consolidate,11 these data provide no evidence that this consolidation has begun, as the index reported here was relatively unchanged from that calculated at the end of 2011 (data not shown).

Specialization

Industry reviews highlight the relevance of particular vendors to different sized practices.12 The attestation data show most large vendors used by practices across the size spectrum. Epic users are almost all professionals in the largest practices or multiple practice settings. Conversely, half or more of Practice Fusion, Eyefinity, Compulink, Biomedix, and Amazing Charts users are in the smallest settings (<5 professionals; data not shown).

Studies show higher rates of attestation among primary care professionals than specialists.13 Our analysis showed somewhat more dispersion in vendors used by specialists than by primary care physicians (Tables 2 and 3). However, there were no striking differences in the vendor mix by individual specialty (data not presented). (Eyefinity/OfficeMate and Biomedix Vascular Solutions are exceptions.) Thus, both our analysis and industry sources suggest that most of the largest vendors aim to satisfy a wide audience.14

VENDOR ROLES AND FUNCTIONS

Product Distribution and Pricing


All of the vendors with whom we spoke were actively soliciting new business. They commonly used a variety of sales channels, varying the emphasis with their target market. One vendor relied almost exclusively on online marketing and social media to attract large numbers of new but small practices. Another relied heavily on word of mouth to attract largescale customers best positioned to take advantage of its product. Another vendor, part of a parent firm with other lines of health business, solicited new business from its existing clients using other firm products.

 
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