In the fall of 2008 I had the opportunity to do some research on the, then dormant, EMR marketplace. The results came as no surprise. Most physicians did not have an EMR and were not interested in adopting an EMR due to cost and usability barriers.
Much has changed in one short year. Spurred by ARRA and its HITECH portion, there is a renewed interest for technology in the physician community. Some of it came from the promise of stimulus funds and some stems from the perceived inevitability of the need to have technology in one’s office. There is no feverish anticipation of the great things an EMR will bring to a medical practice. Instead, there seems to be a somber resignation to the upcoming demise of a trusted friend: the paper chart.
On the other side of the market, vendors are gearing up for 2010. Since stimulus funds are supposed to begin flowing in 2011, the coming year is crucial to most vendors. There is a palpable sense of urgency for capturing market share before it is too late, and all physicians have made their choices. After all, once a physician buys and uses an EMR, changing vendors is not an easy proposition. Transferring clinical data from one EMR to another is practically impossible and the costs of change are high.
The HIT news is chockfull of announcements of mega deals almost every day. Mergers and acquisitions are rampant. Vendors are signing multi million dollar deals with large hospitals, medical organizations and regional healthcare groups to provide EMRs to affiliated physicians. At this point in the game, there are two vendors clearly ahead of the pack in the ambulatory market: Allscripts and eClinicalWorks. It is likely that the next months will add a few more contenders for large chunks of market share, most likely athena, NextGen and probably GE. These large corporations, most of them public, are very well poised to capitalize on the ARRA stimulus. They have the marketing power, the infrastructure and the ability to forge business agreements with equally large distribution partners that will lead to significant sales through 2010 and 2011.
However, the ambulatory EMR market has a very Long Tail.
Granted, the EMR market is not a consumer market per se. It has a finite size of a few hundred thousand customers and once a customer buys one EMR, it is very unlikely that he/she will be buying another one for at least several years. However, certain aspects of Chris Anderson’s Long Tail theory still apply to the ambulatory EMR market.
Examining the current state of EMR adoption reveals that a handful of products are used by many physicians, while hundreds of others are used by very few, and some homegrown EMRs are only used by their creator and maybe friends and family. These hundreds of small to tiny products are the Long Tail of the EMR market and the tail has been getting longer and longer ever since HITECH became law. Unfortunately for small vendors, the tail has been also getting narrower at most points, and many existing small businesses, as well as new entrants, are hurting.
Few medium size vendors, in the thicker part of the tail, have been around for a while and are no better and no worse than the large players. Their survival will depend on finding ways to manage costs down and identify niches where they can provide unique service.
Then there are the newer web based, or internet based, EMRs. Most have price points significantly lower than the popular products. Unfortunately, the product quality in this group is not superior to the large EMRs. These vendors are most at risk of being wiped out by the bigger, better funded competition, who is also exploring the “cloud” based paradigm.
The homegrown products will likely always exist and serve the limited market they were designed to serve, with no major effect on the overall EMR market.
And then there is the exciting part of the tail, the part where innovation occurs. Tails are much better suited to breeding innovative solutions and the EMR Long Tail is no different. The tail contains several open source products that grow and innovate based on active user participation and distributed development efforts. These are worth watching. Other residents of the tail are attempting to formulate novel business models based on aggregation of smaller software packages, such as electronic prescribing, registries and patient connectivity. Some of these companies are veteran portal service providers adding new service lines to meet government regulations. DocSite, RelayHealth and Quest 360 are just a few. Others are trying to create entire platforms on which interchangeable software service providers can aggregate their wares. And then there is the entire Health 2.0 phenomena attempting to bring consumerism to health care, but that deserves its own separate analysis.
The takeaway for small vendors in the EMR space is that one can create a very profitable business in the EMR Long Tail. Physicians are not a homogeneous group of customers and it is very unlikely that that the utilitarian large EMR vendors will be able to satisfy the majority of the market. Multiple niche opportunities already exist in providing services tailored to particular medical specialties and various practice models, such as medical homes, concierge medicine, telemedicine, micro practices and more. More niche opportunities will be created by physician work-flow preferences and proliferation of non-physician providers. Tail companies that learn how to answer the needs of these niches by providing high quality solutions, while keeping costs of customization and service to a minimum, will thrive.
Since in the software world nobody stays on top for very long (except Microsoft), a disruptive enough technology breakthrough will eventually occur and the EMR market will be irrevocably changed, and the change will likely be brought on by someone from the Long Tail.
Margalit Gur-Arie was COO at GenesysMD (Purkinje), an HIT company focusing on web based EHR/PMS and billing services for physicians. Prior to GenesysMD, Margalit was Director of Product Management at Essence/Purkinje and HIT Consultant for SSM Healthcare, a large non-profit hospital organization.