2011 Predictions: MU Goes Tactical, ACO Strategic

In the Healthcare IT (HIT) market, 2010 was the year of meaningful use (MU). Healthcare organizations (HCOs) of all sizes developed plans, began making IT modifications and began adopting the technology they needed to meet Stage One MU requirements and subsequently receive incentive payments, some of which began being disbursed in late 2010. As we move into 2011, we will continue to see an extreme amount of activity and turmoil in the HIT market with the biggest elephant in the room being what will actually happen to the healthcare reform bill that was passed at the beginning of 2010.

Against this backdrop, we once again have prepared our annual top ten (actually we have 11 for after all it is 2011) predictions for 2011 which are as follows:

1) MU Initiatives Move to Tactical. Meaningful use is no longer of great concern to the executive suite, well except for maybe the CIO and his counterpart, CMIO. It has moved to the tactical implementation stage for enterprises insuring that systems are in place, clinicians trained and MU requirements met to reap incentive payments.

2) C-Suite Strategy Focuses on New Payment Models. Despite the turmoil swirling around healthcare reform, one thing that is unlikely to change is the move to bundled payment models and the migration to Accountable Care Organizations (ACOs). The train has already left the station on this one and this train does not have reverse. The repercussions of these new payment models have the potential to make or break a HCO and the C-suite knows this thus are focusing all of their attention on what is the most appropriate strategy for their organization. Strategy service firms such as CSC, Dell, Deloitte, PWC, etc. are going to make out like bandits.

3) RCM & Charge Capture Systems Require Overhaul. Moving from a fee for service (FFS) model to a bundled payment model will require a number of changes in current HIT systems but software that addresses payment, Revenue Cycle Management and Charge Capture software, are on the frontline. Vendors providing these solutions will need to invest heavily in R&D in response. This will likely push some of the weaker players out of the market are into the hands of an acquirer for relatively low multiples.

4) Mergers & Acquisitions Continue Unabated. We had this prediction down for 2010 and it certainly came true with one of the more recent mind-blowing acquisitions/valuations that being Aetna’s purchase of Medicity. Despite the activity of 2010, we have a long ways to go before this market begins to look like others. We’re still waiting for someone to deploy a “roll-up” strategy similar to what occurred in the Enterprise Resource Planning (ERP) market when Infor and SSA scooped up virtually all of the mid-market players. Why hasn’t this occurred among the multitude of EHR vendors? Puzzling.

5) Federally Funded State Initiatives Struggle. The Beacon Communities program is a good one and we’ll see some good case studies come out of it. Less convinced that funding for state-wide HIEs and RECs will see the same level of success. Still seeing far too many state HIE programs looking to create large, all encompassing HIEs to serve every need of the state. States need to reassess their HIE initiatives for anything beyond lightweight, “network of networks” approaches will increasingly run into conflict with local, privately led enterprise HIEs, many of which are already multi-stakeholder in a given community. As to RECs, the only comment to make here is that if HIT companies and consulting firms are struggling to fill their ranks, what type of person is left to staff a REC and provide HIT expertise to their community?

6) Changing of the Guard at ONC. Do not be surprised if ONC head David Blumenthal decides his time in public office is up and returns to the hallowed halls of academia. He has tenure at Harvard and is unlikely willing to trade that in for an extended stay at ONC.  And frankly, he has done his job setting direction for ONC and the investments they are making to digitize the healthcare sector. Hearing him speak two weeks ago at the eHealth Initiative conference Blumenthal spoke of the US entering the “era of meaningful use.” This may be part of his swan song that we’ll hear repeated at his joint keynote at HIMSS’11 with Sec. Sebelius.

7) Physicians will continue to go Ga-Ga over the iPad and the fast-following touchscreen tablets much to the chagrin of CIOs. At least 40% of all physicians will be using a touchscreen tablet as a companion device to their smartphone by the end of year – and the iPad specifically will continue to replace medical textbooks among med students.  Due to the respectable screen size of these new tablets, physicians will 1) begin to place increased pressure on the enterprise CIO, asking for access to the HIS while mobile, and 2) will look beyond clinical reference Apps (Epocrates, Lexi-Comp, Medscape, Skyscape), and towards rich imaging, patient education, and remote monitoring Apps as well pushing the market into the next phase of mHealth functionality delivered at the point-of-care.

8) Apps Proliferate: Consumer-facing First, Private Practice Second, Enterprises Dead Last. The conceptual framework of how we buy and use software is changing and changing fast. Sure, there has been plenty of buzz on this topic, how can there not be when the Apple App Store now has well over 300,000 Apps, Android is hovering at 100,000 and Apps are moving from the smartphone to touch-tablets, TVs and with the latest OS release from Apple to the traditional computer itself. This will change how we consume software, period. The consumer market is leading the charge but we predict the healthcare sector to be a close follower, especially among small practices as physicians continue to rapidly adopt touch-tablets and smartphone adoption reaches near saturation. Enterprises, well they’re stuck with big monolithic systems and will struggle to move to an App-based model despite physician demands. This will make for some lively internal discussions.

10) The Poor Man’s (doctor’s) HIE Takes Hold. With much fanfare and the announcement of two trials begun in January 2011, the NHIN Direct Project has been formally launched. The Direct Project has its fair share of challenges moving forward (e.g., physician directories that are current) but it is an elegant solution. While not meant to accomplish a multitude of information sharing challenges in healthcare, leave that to the HIEs, the Direct Project will provide the ability to simply push patient information from one doctor to another replacing the ubiquitous fax machine. What is a little troubling, however, is that among the 29 vendors who have signed on to support the Direct Project, very few are HIE vendors. Hmm, maybe they are feeling a little threatened.

9) Analytics & Business Intelligence Perceived as Nirvana. Once healthcare enterprises get their internal houses in order, or at least their internal IT systems they’ll be looking to take their systems to the next logical level; making sense of all the data they are amassing to more effectively and efficiently run their operations. This will become increasingly critical as the industry moves to bundled payment models with shared risk. Calculating that risk will require data and lots of it. It may also require healthcare organizations to develop closer partnerships with payers for if it is one thing that payers understand, it is calculating risk, something that most healthcare organizations do a poor job of.

11) The Buzz at HIMSS’11? Everything ACO! Two years ago the buzz at HIMSS was all about how the multitude of HIT vendors exhibiting would help one meet Meaningful Use. It was all quite silly as at the time we still did not know exactly what MU requirements would be and secondly, there was this sticky little issue of EHRs needing to be certified but no one knew what that meant and who would do the certifying. Last year it seemed that every HIT vendor had an HIE play. It was surreal. You walk into a booth, start reading their poster/banner on HIE capabilities and walk away shaking your head. This year will see the same level of boisterous announcements, banners, sales talk about how such and such’s solution will help a healthcare CIO meet the promised land of ACO. Keep your checkbook in your pocket for now.

That’s our list for 2011. Do any of these resonate with your own organization and its view of the market?  As always, welcome your comments, input and of course critique which only helps us to become better analysts.