Hospitals, clinics and standalone physician practices factor a lot of things into determining which electronic health records (EHR) vendor to choose, including the ease of use, look and feel, and price of its software.
But providers should not overlook another important facet of the buying decision -- the overall financial health of an EHR vendor -- in order to gauge its odds of staying around to support HIPAA and HITECH Act compliance needs for years to come. Making the wrong call could mean the costly mistake of having to start over from scratch with another EHR system.
The software business can be volatile, and with many vendors new to the EHR 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, said Chris McCord, principal at Healthcare Growth Partners LLC, an investment banking advisory company.
McCord said EHR adoption will take longer than many people think, because federal authorities still have not finalized meaningful use rules. Once that does happen, he said, regional extension centers (RECs) will help the market sort out winners and losers as they help providers select EHR vendors.
“I think, once you see some of those funds work their way into the system and regional extension centers 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 REC endorsement, market forces such as stock offerings and mergers and acquisitions can be an indicator of a company’s health or future prospects.
Epocrates canceled an initial public offering (IPO) in late 2008. That 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 company dealing with patient data management, Initiate Systems Inc., withdrew an IPO in mid-2009; IBM acquired Initiate Systems about two quarters later.
IPOs alone do not predict whether a company will be around for the long haul, McCord said. But the fact that a company makes it through the federally mandated filings and a stock offering in this 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Even a withdrawn IPO, though “usually a disappointment for investors,” is not necessarily a cause for concern, McCord said.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? An established EHR vendor that has been around for several years might be a safer bet, as well as a smaller vendor with institutional backing such 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 those for the average startup. Anyone considering installing an EHR system from a relatively new vendor might want to research the company’s track record, financials and customer references.
Chris McCordprincipal, Healthcare Growth Partners
While this information might not be public in some cases, it’s fair game to directly ask the EHR vendor how strong its balance sheet is, how it’s financed, and how many customers it has installed. Some vendors participate in KLAS performance rating reports; those, too, can yield information helpful for making EHR buying decisions.
Tom Moore, a technical manager at NYCLIX Inc., a New York health information exchange that works with providers as small as solo physicians and as large as Bellevue and Beth Israel hospitals, recommended that providers exercise the usual precautions when selecting an EHR vendor that they would for any purchase. That being said, he emphasized adherence to Healthcare Information Technology Standards Panel standards more than the depth of the vendor’s experience and customer base.
“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 ASP/SaaS-based product that complies with standards so that they can migrate fairly easily to more sophisticated products 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.