Choosing an electronic health record (EHR) software vendor is a process during which hospitals, clinics and standalone physician practices consider a number of factors, including ease of use, look and feel, and price. Providers planning an EHR implementation should not overlook another important facet of the purchasing decision, however -- investigating an EHR software vendor's overall financial health in order to gauge its odds of staying around to support the purchaser's Health Insurance Portability and Accountability Act, or HIPAA, and HITECH Act compliance needs for years to come. Making the wrong call could be costly and force the buyer to start over from scratch with another EHR system.
The software business can be volatile, and with many vendors new to the EHR software market -- some as small as Epocrates Inc., others as large as Dell Inc., which announced an agreement with the American Medical Association to support an EHR system -- there will likely be an eventual shakeout as the weaker players get weeded out of the market, said Chris McCord, principal for Healthcare Growth Partners LLC, an investment banking advisory company in Elmhurst, Ill.
EHR adoption will take longer than many people think, because federal authorities still have not issued final rules for meaningful use, McCord said. Once that does happen, regional extension centers (REC) will help the market sort out winners and losers as they help providers select EHR software vendors, he said.
"I think, once you see some of those funds work their way into the system and RECs actually picking the vendors they're going to work with, . . . [RECs will be] a big factor, serving as kind of marketing extensions to a lot of vendors," McCord said.
Beyond endorsement by a REC, such market forces as stock offerings and mergers and acquisitions can be an indicator of an EHR software vendor's health or future prospects.
Epocrates had planned to go public but canceled an initial public offering (IPO) in late 2008. That decision could have been influenced by the generally poor economic conditions of the time that weren't favorable to even the strongest IPOs. Epocrates was contacted for this story but did not comment.
Another vendor dealing with patient data management, Chicago-based Initiate Systems Inc., withdrew an IPO in mid-2009; IBM acquired Initiate Systems about two quarters later.
IPOs alone do not predict that an EHR software vendor will be around for the long haul, McCord said. But the fact that a vendor makes it through the federally mandated filings and makes a stock offering in this present IPO-unfriendly market does reflect positively on its prospects for staying in business.
Even a withdrawn IPO, though "usually a disappointment for investors," is not necessarily a cause for concern, McCord said. "I wouldn't read too much into what [it] signifies about the company or its products."
The bottom line? Established EHR vendors that have been around for several years might be a relatively safe bet, as could smaller vendors with such institutional backing as private equity or venture capital. Even though nothing is ever guaranteed, when a large company like IBM is backing a vendor, its odds of long-term survival are probably greater than the average startup's. Anyone considering installing an EHR system from a relatively new vendor might want to research its track record, financials and customer references.
This information might not be public in some cases, but it's fair game to ask the vendor directly about how strong its balance sheet is, how it's financed and how many customer installations it has done. Some vendors participate in performance rating reports from KLAS Enterprises Inc. in Orem, Utah; those, too, can yield information helpful for making EHR buying decisions.
I think, once you see some of those funds work their way into the system and RECs actually picking the vendors they're going to work with, . . . [RECs will be] a big factor, serving as kind of marketing extensions to a lot of vendors.
Chris McCord, Principal, Healthcare Growth Partners LLC
Tom Moore, technical manager for NYClix Inc., a health information exchange in New York that works with providers as small as solo physicians and as large as Bellevue and Beth Israel hospitals, recommended that providers take the same precautions when they select an EHR software vendor that they would when they make any purchase. That being said, buyers should adhere more closely to Healthcare Information Technology Standards Panel standards than to the depth of the vendor's experience and number of customers, he emphasized.
"The important thing, in my opinion, is that the patient data is interoperable and that switching vendors does not mean starting over or a costly data conversion for patient data," Moore said. "For practices that are small and unsure about the future of the vendor market, I would recommend a lightweight application service provider/Software as a Service-based product that complies with standards so that they can migrate fairly easily to a more sophisticated product when they are ready. What they should pay careful attention to is how well the product features fit their workflow and requirements."
Let us know what you think about the story; email Don Fluckinger, Features Writer.