A Microsoft EMR: It’s Not Just a Matter of When, It’s a Matter of Who

Austin Merritt

Microsoft Dynamics is largely present in just about every software market but medical. And they’re missing out big time. The United States healthcare IT market is growing at about 13% per year and is expected to reach $35 billion in 20111. The biggest opportunity for growth in the industry is among ambulatory care physician practices, partly due to the Stimulus Bill requiring the use of electronic health records (EHR) systems by 2015.

You would think Microsoft would be in such a promising industry, but you won’t find a Microsoft EHR available. The primary reason why is that EHRs are highly specialized, and Microsoft’s main products (Dynamics, CRM, and SharePoint) don’t come anywhere near the needs of physician practices. It would be very difficult for Microsoft to build an EHR from scratch and introduce it to the market.

So what should Microsoft do to enter the industry? Acquire a current player.

Such an entry into the medical market would mimic the acquisition spree that Microsoft conducted between 2000 and 2002, when it acquired Great PlainsNavision, Damgaard, and several related vendors. These systems were re-branded and offered as Microsoft Dynamics. Before these acquisitions, Microsoft was not present in the enterprise resource planning (ERP) application market. Its only ERP presence was as an infrastructure vendor, licensing SQL Server databases and related platforms to support application rollouts. However, this lack of application presence gave competitors such as Oracle and SAP the opportunity to squeeze Microsoft out of the ERP infrastructure market by pushing Unix, Oracle databases and IBM DB2. By acquiring several applications, Microsoft was able to drive sales of its SQL Server and Windows Servers directly, in addition to the Dynamics applications themselves. This strategy proved effective in giving Microsoft a multi-billion dollar share of the lucrative ERP market.

Setting its sights on the medical market, Microsoft is starting to squeeze its way in with a few smaller acquisitions and developments of its own, mainly Amalga and HealthVault. However, these current medical offerings are on the periphery of the market and do not really target the sweet spot: electronic health records for physician practices. An intelligent acquisition of a large EHR player would provide a key piece of the puzzle for Microsoft’s entry into the medical market.

Acquired by Microsoft in 2006, the Amalga family of products (Hospital Information Systems, Life Sciences, and Unified Intelligence System) addresses hospital administration, data aggregation for biotechnology firms, and information connectivity to large enterprises. Microsoft may be planning to expand Almaga’s presence or may be looking to acquire another vendor to complement it. Regardless of Microsoft’s strategy, Amalga still would not address the physician practice EHR market.

On the other end of the spectrum, HealthVault is a patient-managed, centralized health records solution. It is essentially designed to be a reference point for consumers, not a substitute for medical records. If Microsoft were able to introduce an EHR to the market and enable its users to make records accessible to patients, labs, specialists and pharmacies via HealthVault, then they would really be on to something. This synergy with its other products would just be an added bonus to having its own EHR.

So what would Microsoft prioritize as its key acquisition criteria when evaluating EHR targets? They would certainly want target vendors who possess the following:

  1. Large market share and name brand recognition. Microsoft usually likes to be the largest name in the business, so they would definitely want to sell a “big-name” system with which most buyers are already familiar.
  2. A scalable product for small and large practices. Microsoft would need to be able to cover a wide range of medical customers. While its bread and butter is always in the small and mid-size market, they would want scalability into the largest organizations.
  3. A .Net architecture to drag along infrastructure sales. Reinforcing the position of .Net in the medical software marketplace would be important because it would drive further sales of Microsoft infrastructure while squeezing out Unix, Oracle and IBM.
  4. An established, indirect sales channel. Microsoft historically favors selling through partners, including the existing Dynamics dealer network. An EHR vendor with a large dealer network would provide Microsoft an easily transferable sales channel and process.

So which EHR vendor should Microsoft acquire? This is where it starts to get interesting. We decided to examine Microsoft’s ten most logical targets in detail. Two very popular products, GE Healthcare’s Centricity and McKesson’s Practice Partner, did not make the top ten list. While these systems meet many criteria, the parent companies – General Electric and McKesson – are not really acquirable by Microsoft. The remaining ten are outlined below.

  • NextGen – One of the “biggest names” in EHRs, NextGen focuses on medium to large enterprises. However, its system is certainly able to scale down to smaller practices. While it is often too expensive for groups with less than ten physicians, it has a strong position in the sweet spot of the market. Its .Net-based system is sold both directly and through a channel network, so NextGen is a good fit for Microsoft.
  • GreenWay – GreenWay has a nice product, but is toward the smaller end of the companies on this list. It sells primarily directly and has some channel partners. PrimeSuite 2008, its EHR and practice management sytem, is .Net-based and is popular among small and mid-sized groups. Microsoft could leverage its resources and Greenway’s technology to become a major force in the industry. Moreover, Greenway doesn’t come with any legacy of old architecture or acquired customers.
  • Pulse – Pulse has quickly climbed its way into the ranks of bigger EHR vendors and will likely stay here for some time. They were one of the first vendors to achieve 2011 CCHIT certification and are receiving a lot of buzz as a result. While the system is scalable and .Net based, Microsoft would likely want to pursue bigger fish for now.
  • Aprima – Aprima (formerly known as iMedica) has focused on its .Net framework and N-tier architecture from the beginning. As a result, its modern platform and interface make it widely received among physicians across a broad range of specialties. While Microsoft would likely focus on larger companies first, Aprima could be a nice additional partner to champion .Net.
  • AllScripts/Misys – A large brand and a publicly-traded company, it is a logical first place to look. After all, the company claims to have 160,000 physicians using its products. However, the 2008 merger between AllScripts and Misys presents the usual integration challenge, which might keep this firm busy for quite a while. Although we think the future of AllScripts/Misys is very promising, Microsoft probably wouldn’t get involved at this point.
  • eClinicalWorks – This system is probably the most ubiquitous of the list, especially among smaller practices. The recent deal to sell eClinicalWorks through WalMart will definitely increase its brand recognition and share of the market. However, the system is built in Java, an open programming language that is the traditional enterprise alternative to Microsoft .Net. Microsoft would most likely rather acquire a pure .Net system or one that is at least close to it, especially with Oracle, IBM and SAP all embracing Java.
  • Eclipsys – Eclipsys acquired MediNotes in 2009 in an attempt to move users to its Peak Practice EHR. While Eclipsys is fairly popular among hospitals, Peak Practice has not achieved similar success among small to mid-size outpatient practices. Existing MediNotes users are not thrilled about being forced to purchase Peak Practice and we’ve seen quite a few seeking a new solution from a new vendor. We think the success of the MediNotes deal is unclear and Microsoft would steer clear for now.
  • Athena – The youngest company on this list, Athena’s product offering is slightly different from the others. Its system is offered via software as a service (SaaS) and is combined with outsourced billing and revenue cycle management services. This offering is indeed unique, but not a suitable target for Microsoft due to its SaaS offering and labor-intensive service component.
  • Epic – This company possesses an interesting niche in the market. It has only 190 clients, but 150,000 physicians using its products. This is due to its focus on only the largest healthcare organizations in the United States. While this focus is great for Epic, it wouldn’t be effective for Microsoft. Epic will never be able to achieve the ubiquity in the small to mid-sized market where Microsoft dominates. It also sells direct, contrary to Microsoft’s traditional indirect sales mode.
  • Cerner – Cerner’s cash cow is Millenium, a product designed primarily for hospitals. PowerWorks, its outpatient EHR, does not possess the market share among physician practices that Millenium enjoys among hospitals. While Cerner is a recognized name, few practices consider PowerWorks. It is also an older system. Cerner would need to improve its PowerWorks offering before becoming a suitable target for Microsoft.

Although NextGen is not currently dominant amongst small practices, Microsoft could bring them downmarket. NextGen is unable to serve these smaller buyers for two reasons: 1) small practices cannot afford an enterprise expenditure; and, 2) NextGen does not want to (and maybe cannot) devote resources to chasing smaller deals. If Microsoft owned NextGen, they could double down on pursuing smaller practices, perhaps through their channel partners. They may even lower prices to buy market share and make up the difference with revenue from services, SQL licenses, and maintenance.

Which EHR do you think Microsoft should acquire?

AUSTIN MERRITT is a VP at Software Advice.com. A graduate of Princeton university, he is based in Austin, Texas.

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19 replies »

  1. In a time in healthcare , when the words EMR make you cringe, one small community hospital appears to be ahead of the game. North Metro Medical Center in Jacksonville,AR, a small community based hospital has EMR documentation in all departments, except for the Emergency Room. According to staff, this has been the case for the large part of the last decade. A small cross trained I.T. staff consisting of 3 employees a Clinicals Analyst, Network Administrator, and a I.T. director seem to make it look easy. Clinicals Analyst, Harold Anderson, Meditech trained and certified and also a nurse for the last two decades, has had the opportunity to work with EMR software giant Meditech for the past 15 years. Harold Anderson states, “The proof is in the implementation process, our QA has improved in every area where we have computer documentation.” When most slightly dread a new project, or implementation, he seems to flourish and thrive during these times. When asked what it is he likes about his job, he states, “There’s just no time for burnout, I learn something new every single day, and I love a good challenge. I work with a great group of nurses and in a good positive environment.” So with all us struggling with funding, implementation, and major decisions concerning the EMR, just remember, a bigger staff is not always a better staff.
    Eric D. Marshall
    Health Information consultant

  2. Justin B’s comments couldn’t be further from the truth. Microsoft’s R&D spending in healthcare outpaces that of any other vendor in the field (most notably, with the recent acquisition of Sentillion).
    MSFT leadership understands the benefit/risk of ‘entering’ the EHR market. Why buy another vendor’s headache (e.g. Eclipsys, AllScripts)? Why threaten an industry that makes use of your other products for development and day-to-day operation?
    Finally, when will everyone realize that the Google Health dream is a thing of the past? Have they shown anything in the past 2 years?

  3. There are plenty of advantages of a hosted/SaaS but why do people constantly keep mentioning that a hosted/SaaS EMR solution is cheaper than a client-server solution for a standard 5-year contract? Its not – At least for a single EMR vendor I know in the market place today that offers both a client-server and a hosted ambulatory EMR solution. In fact, the client-server solution is usually about 10-15% cheaper if you price anything in and do an apples-to-apples comparison.

  4. This is kind of a hodgepodge list of vendors for a couple of reasons especially because the primary purpose of the acquisition would be supposedly to target physician practices. Microsoft already did seriously consider purchasing an ambulatory EMR vendor about ~3 years and passed at the time.
    If they were going to do it, they should have made their move already. All the mains strategies have already been set in motion by the ambulatory EMR vendors including targeting channel partners, RECs, etc. Why something like the Medplexus acquisition by GE was a dollar short and day late. Something they should have done over a year ago.
    I don’t think a Microsoft acquisition in the HIT arena is unlikely in the next 12-18 months but I would be really surprised if it is driven by purchasing an ambulatory EMR vendor.
    The most likely companies on this list would be Aprima (because it would be likely had at a discount rate because they are a second tier/third-tier vendor and have a .NET framework) or Greenway (finally starting to make some in roads into a handful of larger clients, it has moved from being a regional player to a national player, and they chant .NET, .NET, .NET like it is some kind of company mantra).
    Best bet for a company like Microsoft in the ambulatory EMR market is like an old spaghetti Western. Let the gunfighters/vendors duke it out over the next 18-24 months and see who if left standing when the dust settles.

  5. Surprised no mention of Medical Manager… big PMS install base in small practices, scaleable EMR (probably being shopped by current owner…)seems like potential for synergy…

  6. Is the author a shill?
    Is he conflicted?
    The timing of this is consistent with a new hire starting at Microsoft.
    Donna-Bea Tillman left a strategically lofty position at the FDA to ring the cash register at Microsoft. She is starting about now.

  7. “I’ll wait for Google to beat them all.”
    Typical myopia from a physician. It fits in the “I’ll implement an EMR system when I get around to it” category of reasons for not doing anything.
    Google will not produce an EMR system, so that is one physician who will wait forever apparently.
    Google will likely stick to further developing and offering enhanced electronic interfacing to its existing PHR. Given that advertising as part of an EMR or PHR system is certain avoidance of the product or service by most of the target audience, i.e. most patients and those representing patients in some way, Google still has to figure out a way to generate revenue from a PHR. It probably can, but I for one have not thought about how it might do that.
    Microsoft will fail if it attempts an acquisition. Several years back when Microsoft was investigating a means of entry into the healthcare field Microsoft representatives, reputedly including the CEO, talked to at least a few of the current dedicated EMR system vendors, but to my knowledge the only result has been the development of the HealthVault. What role that is supposed to play in Microsoft’s strategy and how it generates revenue are unknown to me, but perhaps there is a current, operating revenue model.
    In any case the overall trend in software development, including in EMR and PHR systems, will continue to be through FOSS, anathema in general to Microsoft, but embraced by Google. Microsoft however products will undoubtedly continue to maintain substantial market share for many years to come, but I frankly do not see it having much of a presence in the healthcare market.

  8. Microsoft clearly doesn’t have enough research in the medical field. I really think they should start developing for public service, rather than profit.

  9. Let’s see what SalesForce.com has to show when they put out the EHR they have been developing. There is still a huge market for EHRs that are web-based and have much lower cost than most of the brands mentioned in this article. Most physicians are still in small practices with <5 docs. These practices are struggling with fee cuts from Medicare and many large commercial payors and cannot take the risk of buying an expensive EHR from one of these big vendors that may not get them to "meaningful use" without going broke. Read David Kibbe's recent post on THCB and the latest issue of Health Affairs for two cautionary tales on EHR implementations in small practices. Web-based, SAAS model EHR and/or modular products are a much more cost-effective solution for small practices.

  10. They all have placed advocates in key positions in the FDA, HHS, ONCHIT, and others to enable their care record systems to be sold without sufficient vetting. The best strategy for doctors is not buy theses pigs in pokes.
    Is this health care or Hellth Care? The latter is what I am hearing.

  11. Keep in mind The development of IT-based healthcare management has been international, but Eclipsys’s global expansion efforts have encountered limited success

  12. I don’t think there can be one correct conclusion, since this is all speculation. HISTalk for example is reporting a rumor of an alliance with Allscripts and Eclipsys http://histalk2.com/page/2/
    I think Microsoft has an affinity to the consumer market considering that their OS and software is to be found in practically every household. Selling to just docs, may not be a big enough market for them, but selling (or providing) a real consumer application that connects to the physician EHR directly, not interfaced like HealthVault, may be worthwhile, if only to maintain a competitive advantage for Windows.

  13. Either I am not reading the icons correct or this writer really doesn’t know anything about this market. Epic already has 1 in 4 docs on their systems so that would obviously be scalable but they are also privately held and not for sale..
    NextGen one of the biggest names? You must be kidding right? What large system uses it? They have less then 80 million in quarterly sales when a single hosptial system implementation can easily run over 100 million..
    The author clearly doesn’t understand how critical the implementation and services are to healthcare. This is where Microsoft fails.. They already have over 600 people in their health solutions group and not a single large win.. I expect them to try and focus instead on the health information exchanges and not the retail market..
    Also wasn’t this posted elsewhere recently with different conclusions? Someone should vet the authors..

  14. The answer to the question of ‘Who’ is, one who can pay. That would be- government, insurers, foreign hospitals, pharmaceuticals,lab & ASCs. Maybe super retail chain of doctors also might emerge as another consumer. It does not seem that traditional hospitals, doctors and patients have great deal of surplus to invest on new technology.
    If only age old question could be answered as to owns the EMR. Nothing wrong in pushing EMR. Hopefully one day we will start spending as much time on finding best treatment as much as we spend on shopping for best dress and then we might take ownership of the EMR.

  15. The premise of the article above is that Microsoft is not currently playing in the EMR market, but there are certainly EMR companies making great use of Microsoft software. At gloStream, for example, we’ve developed the only EMR and practice management software on the market with Microsoft Office built right in. In fact, our note templates are built using Microsoft Word so they are familiar, flexibile, customizalbe and very easy to use. Microsoft may not own an EMR company, but their technology is being used in tremendously unique and exciting ways.

  16. The author has essentially ignored the fact that Microsoft already does own a full-line EHR product that encompasses both inpatient and outpatient workflows – the Hospital 2000 system developed at Bumrungrad Hospital in Thailand. The analysis here ignores this fact entirely (one assumes from the text that the author was only familiar with the UIS component of Amalga).
    I’ve seen the EHR in action in Thailand and was impressed – more so than I’ve been by many of the other products mentioned here. There are certainly other reasons why Microsoft would want to acquire an additional company in this space to reach the small practice market, but their existing IP shouldn’t be ignored. Microsoft does not need to buy brand recognition from NextGen.

  17. Given the experiences I’ve had working with Cerner and Epic in large hospital settings as a healthcare IT person, I would take issue w/ your chart showing that Epic is less scalable than Cerner. Cerner has shown over & over that it has scalability issues at critical times while Epic did not seem to have those same issues. The institution where we had Epic was easily larger than the institution that had Cerner by a multiple of 5, if not 7 times.