Looking to 2017: Our Baker’s Dozen Forecast

future12016 is heading for the doors, 2017 readily awaits. But what will this New Year bring? One thing for sure, a new president and administration that appears intent on rewriting the rules, be they foreign policy, environmental or healthcare.

But in the grand scheme of things in healthcare IT (HIT), what can we truly expect of this New Year? Collectively, we put our heads together here at Chilmark Research and came up with our annual baker’s dozen of 2017 predictions.

Risk-based contracting for HIT solutions accelerates. 2017 will see HCOs be much more conservative with their HIT spend. The care and feeding of their bright and shiny new EHR will continue to draw the vast majority of resources. What’s left to spend will increasingly be tied to shared-risk contracts between vendor and HCO.

HCOs demand clear ROI on their HIT spend. The billions of dollars spent over the last several years to digitize the healthcare sector has shown little, if any demonstrable ROI – call it healthcare’s own “productivity paradox”. HIT vendors will be put to the test to clearly articulate and stand behind ROI, something that athenahealth just announced. Expect many more to follow suit in 2017.

Progressive HCOs admit – their patient portals suck. With the potential unwinding of portions of the ACA and policies that push more responsibility on the consumer, HCOs will finally come to realize that they are not just an HCO but a health service addressing a wide array of consumer health needs. Houston-based Memorial-Hermann gets it and are launching a completely new consumer experience during the Super Bowl, which coincidently is being held in their hometown of Houston.

Despite the hype, healthcare Internet of Things (IoT) stays on periphery. IoT in healthcare has slid into the trough of disillusionment. HCOs have been unable to scale-up pilot efforts, which often had promising results. Simply put, workflow for a patient panel of 50-200 is significantly different than that for 10,000. Until that issue gets resolved, IoT will stay stuck in neutral.

Artificial intelligence (AI) and machine learning will remain outside of the clinic. AI, machine learning, cognitive computing and the like are getting a lot of attention. Yet, despite the aggressive marketing by some, we will not see any of it at scale in the clinical setting. Even the much-ballyhooed efforts in radiology will only see limited pilots in the coming year.

Consumers find AI avatars as valuable as they are personal. 2016 saw the limited launch of such consumer-centric tools as the Medtronic-IBM diabetes app Sugar.IQ. Many more will come to market in 2017 as these personal, virtual care coaches show efficacy and lower utilization costs. The level of “personalization” that these avatars are capable of will define their success.

21st Century Cures Act interoperability provisions a dead letter. Without enforcement, regulations are worth about as much as the paper they are printed on. Do not expect much follow-thru from the new administration in enforcing new regulations passed during the waning days of the Obama administration.

EHR vendors get serious about API programs. Savvy, EHR vendors are quickly realizing that they must migrate to a platform play, building an ecosystem to extend their value to an HCO. Allscripts and athenahealth have been ahead of the pack for years. Cerner just launched its API program (limited release) in October. More will follow in 2017.

Precision medicine fails to grow substantially outside of oncology. Despite the promise, precision medicine is actually a very tough thing to do in practice. We simply do not have enough data for a broad swath of diseases. Oncology is the exception where gene sequencing – often the keystone to precision medicine – is quite common. NantHealth is one company targeting the oncology opportunity for precision medicine.

Blockchain moves from hype to traction. By its very nature, Blockchain is nearly impossible to hack making it possibly the best cyber-security tool in the market today for personal health information. 2016 was the year of Blockchain hype. 2017 is the year Blockchain-enabled solutions start arriving in the market – maybe even one from a major HIT vendor. The relatively young start-up PokitDok had a good write-up earlier this month on the subject.

HCOs continue to expand regionally via M&A. In 2017, expect to see several M&As as HCOs move outside their traditional market(s) to build multi-State, super clinically integrated networks CINs. Example: Boston-based Partners Healthcare moves to acquire Maine Health and/or Dartmouth Hitchcock

Best-of-Breed PHM and analytics vendors continue to stay one-step ahead. EHR vendors are aggressively looking to penetrate this market and have made significant R&D investments. Yet, best-of-breed still have a leg-up on innovation – for now. 2018 may be a very different story.

HIMSS’17 will be far calmer and less frenetic. The EHR market has plateaued, the PHM market is still by and large in pilot phase, a new administration wants to repeal the ACA – the list goes on. With so much in flux, 2017 will be a lackluster year for most HIT vendors and the first sign of such will present itself in a month and a half in Orlando.

Stay up to the minute.

“As biometric data becomes cheaper and easier to collect through smart sensors, devices, and mobile apps, expect to see more innovations in consumer health.”

-Alicia Vergaras

Annual Review: 2015 Predictions

predictionWhat good are predictions and the prognosticators who make them if they never go back and assess those predictions later?

A big fat goose egg, or worse, if you set some aspects of your strategic plan in alignment with those predictions.

The annual predictions that we and other industry followers author this time of year are honestly a pretty mixed bag. Some are completely nonsensical, others laughable, some plausible and a rare few downright prophetic. Here at Chilmark, we truly strive to not be either of the first two and more of the latter two.

For 2015, we made a baker’s dozen of predictions. Our batting average remains above .500, though we did not hit as many “out of the park” predictions as I would have liked. There’s always next year and our 2016 Predictions will be released in next week or so.

But for now, let’s focus on our “hits” and “misses” for 2015.

Hit: Hospital Alliances Shift to ‘Preserve and Extend’ vs ‘Rip and Replace’ as M&A Slows
Many an HCO are finding that it is simply too expensive to migrate everyone on to the same single EHR platform. Geisinger’s recent acquisition is a perfect example wherein Geisinger will continue its use of Epic, while AtlantiCare will remain on Cerner. Extending these two disparate platform capabilities will happen with Cerner’s relatively EHR neutral Healthe Intent PHM platform.

Hit: One Fifth of all Healthcare Visits will be Virtual
Over half of the state governments across the US now mandate that payers must cover telehealth visits. Employers are certainly on-board with this as well as telehealth increases employee productivity. We see nothing but continuing strong growth in this service.

Hit: Provider-driven Care Management Remains Manual and Painstaking
This situation is even worse than we thought based on our recent research for the Longitudinal Care Plans Report and our forthcoming Care Management Report. Of course, this creates a lot of opportunity for those that can solve what appears to be a nearly intractable issue. Paraphrasing that famous quote from The Graduate: Just one word: Workflow

Hit: Direct Secure Messaging Expands Greatly and Disappoints Mightily
Pretty much a no-brainer on this one. We’ve had our doubts about Direct from the moment it was first proposed as a stop-gap to the horrible performance of state HIEs despite over $500M of investment by the Feds. Thus, no surprise that if anything defined IT issues in 2015, it was interoperability, or lack thereof. Direct does not, cannot and will never address interoperability.

Hit: EHR Vendors Make Further Inroads in Analytics
Cerner released its PHM-centric EDW in late 2014 and has already far outstripped its original forecast by 300%. Epic is less forthcoming with their Cogito wins, but word has it that they are finally gaining some traction. Other EHR vendors are also getting into the game, notably athenahealth, eClinicalWorks and McKesson. But despite the gains of a few, market need far outstrips what the vast majority of other EHR vendor can provide. A lucrative market still exists for best of breed vendors such as Arcadia, Conifer, Geneia, Health Catalyst and numerous others.

Hit: Big Bang EHR Go-lives are Over, Market Slows
Cerner’s Q3 numbers caught more than a few Wall St. analysts off-guard. NextGen/QSI continues to struggle, Allscripts is not really winning much of anything of size in U.S. market. Even Wall St darling athenahealth has come under close scrutiny. The U.S. EHR market has plateaued. Future growth in the US will be at the expense of another. Expect some very competitive pricing in the acute, mid and lower market sectors that will increasingly squeeze margins.

Mixed: CommonWell Must Scale in 2015 to Survive
CommonWell gained a modicum of traction in 2015 and participating vendors by and large are offering it free to their customers. Despite this, CommonWell has not hit the accelerating curve of adoption and one has to wonder if not now, when? Similarly, the Sequoia Project has really gone nowhere.

Mixed: Forty Percent of ACOs Adopt New “Post-Portal” Tools, but Still Fail to Craft Global Engagement Strategy
Nowhere near forty percent of ACOs have adopted “post-portal” patient engagement tools at scale. Market is still in testing mode as it makes the transition to new care delivery models. Crafting a global engagement strategy is still several years out.

Miss: Low Eligible Provider (EP) Attestation for Stage 2 MU (MU2) Forces Major Program Redesign
Despite the grumblings of EPs across the country, the Feds by and large held their course on MU2 requirements and throwing providers a concession to extending timelines.

Miss: Biggest M&A News of the Year – Allscripts Goes Private
We knew this one was a stretch but still believe it is not completely out of the picture. Allscripts leadership have slowly but surely stabilized this struggling EHR vendor but its still large customer base (with lucrative maintenance contracts) makes it a ripe target for leverage buy-out.

Miss: Enrolled Lives Under ACOs Grow, Number of ACOs Does Not
Oddly, the reverse occurred wherein ACO growth was almost sixteen percent growing from 640 in 2014 to 740 by Sept 2015. Despite growth in ACOs, enrollment held steady at 24M. It appears that large ACOs are giving way to smaller, tightly focused ones.

Miss: Price Transparency Spreads to 5-7 more States and Begins to Impact all Healthcare Markets
While almost all states have some form of legislation for reporting on pricing, very few if any have gone to the lengths of what Massachusetts has tried to accomplish. Providers in Massachusetts are really struggling to meet this requirement. Other states are sitting on the sidelines.

Too Early to Tell: Rapid Market Changes Force Out 50% of Healthcare CIOs
This is still up in the air as this prediction extended out to 2020. Currently, I’m a little uneasy about this prediction as there seems to be a significant amount of calcification in the IT departments of many an HCO. Rather than replace the CIO, seems that many HCOs are simply leaving the CIO in place to address tactical issues and moving more strategic initiatives to program business owners.

Next week we will present our collective predictions for 2016, a year that promises to hold many surprises.

Health 2.0 Grows Up

IMG_7512Nine conferences later and finally, the Health 2.0 event is showing signs of maturity. Sure, there remains plenty of cheerleading for all those fabulous little start-ups that claim they will be the ones disrupting healthcare. And the Health 2.0 event is only to happy to oblige in giving these start-ups their few minutes of fame up on the big stage. After all, with some 80 odd sponsors, almost all vendors, Health 2.0 organizers are not going to bite the hand that feeds them.

But what we are happy to see is that the event has tempered this hype with a certain amount of reflection and pragmatism. This partly reflects an industry that has grown tired of hype and wants to see results.

So what are some key take-aways for Brian Eastwood and myself…

  • The loci of interest has shifted from almost exclusively the consumer, to consumer-provider interaction and collaboration. There is a tsunami of solutions entering the market that attempt to combine education, collaboration and action to drive patient/physician (or consumer/clinician) activation – all circling back to care management. This is leading to a blurring of the lines between traditional domains of care management, patient engagement and clinician alignment. I was particularly impressed by the demos of CareSync, Conversa and RoundingWell.
  • In past, majority of start-ups demoing their wares at Health 2.0 were targeting the consumer market, only to find no ready market. Now they are targeting providers, which at first glance appears quite lucrative. Not so fast you healthcare entrepreneur. They are running into a significant barrier here as well – extremely long sales cycles. Even if a start-up offers their product for free as part of a pilot, proof-of-concept initiative, it can take up to a year to get it through “the approval process.”
  • Healthcare organizations want to bring new innovations into their organizations and are beginning to realize that they are a part of the adoption problem. Several providers are now looking to band together and develop common best practices that will facilitate adoption of new innovations going forward, e.g. tackling the IRB approval process.
  • Low-acuity care is the low-hanging fruit. Much of the consumer-facing technology on display addressed the inefficiencies of receiving care for minor aches and pains, from the care itself to the administrative burden it places on patient as well as providers. While this is poised to further exacerbate what the American Medical Association sees as the degradation of the provider-patient relationship, it’s also poised to provide convenient care options for patients who don’t have a relationship with a provider at all.
  • Allscripts, one of the vendors rated in our recent EHR PaaS report, was there promoting their Developer Partners program. They have done a good job here – honestly leading virtually all other EHR vendors and now have some 132 third party vendors in this program. Their API, Unify, is built with JSON and they currently have some 500 service call profiles for across various Allscripts products (EHRs, PMS, etc.).
  • Messaging still rules. For every one next-generation wearable device in the expo hall (with growing use cases for monitoring chronic conditions, it’s worth noting), there were several apps centered on messaging. This year’s Health 2.0 gave us tools for asking questions of a real doctor and not Dr. Google (Curely), coordinating caregivers (see first point), and communicating with a wellness coach (too many to count). In addition, the most effective interventions in the Clinton Foundation’s pilot programs to bring healthcare services to rural and urban underserved communities involved SMS messaging. And that’s in part because…

…the digital divide still persists. Yes, smartphone and Wi-Fi adoption continues to climb, but the digital health industry cannot assume that every healthcare technology consumer – or physician, for that matter – has an iPhone 6, an iPad Retina, and a MacBook Air (all of which were easy to find at Health 2.0). Putting digital health in the hands of those who need it most – the chronically ill, the poor, the uninsured, the elderly, or a combination therein – means building solutions that they can use right now.

The event remains an outlier in the world of Health IT. There is little if any representation of other major HIT vendors (Allscripts and athenahealth were the exceptions). This is not necessarily a bad thing, but it does lead to an audience that is self-selecting and not very representative of the HIT sector in totality and most importantly, few if any of those that ultimately make key purchasing decisions for their organizations were in attendance.

While I never thought this event would make it past 5 years before drifting off into the sunset, here we are approaching a decade and this event continues to draw a big crowd with some 1,900 in attendance. Clearly there remains strong interest in this field and the Health 2.0 organizers are just about the only game in town for most start-ups to gain some modicum of visibility in a very noisy market.

 

 

 

What Cerner’s DoD Win Means to Industry

tricare-flag-600So much ink, so little insight.

Quite a lot has been published on the awarding of the large Dept. of Defense (DoD) EHR contract, but almost all articles are simple rehashes of the press release and occasionally including some basic, on-the-record, public comments made by those in the upper echelons of the DoD selection committee. Once you have read 3 or 4 of these one gets frustrated with the lack of analysis, which I guess is a good thing for folks like us analysts, as that is our bread n’butter and keeps us in business.

So what is our take on this big win by Cerner, Leidos and Accenture…

  • Price played an important role as the winning bid came in roughly 20% lower than what was anticipated.
  • Leidos was a huge factor in that DoD, for better or worse, knows Leidos well and as the saying goes: “Better to work with the devil you know than the one you don’t.” Margalit did one of the better analyses of this factor.
  • Software vendor’s perceived position on interoperability was important, but likely tertiary to previous two.
  • Good PR win for Cerner and Epic’s golden glow has faded just a tad.

But it is that third bullet point where the healthcare industry may see the biggest impact from this contract award.

Background:
The three EHR vendors bidding for the DoD contract where Allscripts, Cerner and Epic. Allscripts was never really in the running as their solution suite has had issues, especially on the acute side. That left Cerner and Epic duking it out for the contract and the war of words began.

That war of words centered on the relative “openness” of these two vendors’s solutions and in this case openness was not about open source software, but how easy did these solutions interoperate with solutions from other EHR vendors. Neither had a stellar record in this regard, but Cerner has worked hard to reposition itself as an advocate of open, interoperable systems and was a key founder and architect behind the CommonWell Health Alliance.

While Cerner was joining with several other vendors in the founding of CommonWell, Epic held fast to its integrated, ambulatory/acute solution strategy, encouraging customers to forgo the headaches of interoperating with other EHRs and simply go all in on Epic. This has been a very lucrative strategy for Epic. Even here in Massachusetts, senior officials at Partners Healthcare, which recently went live on Epic, have said that they intend to have all physicians working with Partners, including affiliates, on Epic. If those affiliates balk at moving to Epic, Partners will remove them from future contracts with payers. Talk about tough love. Epic also had some notoriety for not playing well with other EHRs and basically holding hostage patient data by charging hefty transaction fees for access to such, which Epic, under public pressure, rescinded this Spring.

What is particularly interesting is that our latest research on EHR vendor platform strategies found both Epic and Cerner to be roughly equal in providing access to their systems for third party developers, which is to some extent a proxy for interoperability. Who was one of the better ranked vendors? Yup, the third man out, Allscripts.

But we digress.

Looking ahead:
Epic may not have gotten a black eye from this loss, but they certainly took one on the chin. For the last several years, it appeared that Epic could do nothing wrong and was simply rolling up all the large academic medical centers and integrated delivery networks across the country. They were invincible. This loss will take away a little of their luster.

Cerner certainly gets big PR points for this win, but it is unlikely to be a highly lucrative contract for them. They won’t lose money (Cerner is extremely disciplined when it comes to finances) but they won’t make a lot either.

The contract will not significantly drain Cerner resources and existing and future customers of Cerner should not be too concerned. Leidos and Accenture will be doing the heavy lifting, Cerner just needs to provide the software capabilities that the DoD needs, and for that matter the industry.

The biggest impact on the market will be building out interoperability capabilities to support some fairly significant DoD needs. While the DoD has its own facilities, some 400+ located on military bases around the globe, 50%+ of care provided to military personnel and their dependents is from local healthcare providers via Tricare. The new system that Cerner will provide the DoD, must be able to interoperate with systems outside of DoD (those Tricare providers) to create a longitudinal patient record. Certainly Cerner will leverage the work it has done to date with other vendors that are participating in CommonWell but there are a number of EHR vendors that are still not a part of CommonWell, chief among them, Epic.

How Cerner addresses the interoperability needs of the DoD will have broad reaching implications across the industry and bears watching. Our long-term prediction is that Cerner, with DoD’s assistance, will successfully overcome many of the interop challenges we face today. No, it won’t happen overnight, but it will happen and it will be the biggest impact (and contribution) to the healthcare sector writ large.

Can Mirth Revive NextGen?

Last week, NextGen’s parent company, QSI, acquired open-source tools vendor Mirth for $59M. While a relatively small acquisition, it nonetheless will have an impact on the broader HIE market. Mirth’s toolset has an array of HIE components, notably its well-regarded Mirth Connect integration engine, the cornerstone of its commercial and open-source success to date.

The acquisition confirmed two critical points we made in our 2013 HIE Market Trends Report:

1) EHR vendors need new and better ways to support clinical interoperability in an increasingly heterogeneous EHR world and
2) that consolidation in the HIE market will continue unabated.

Mirth, was never a full-bodied HIE vendor, but has been a steady presence in the market as a component supplier to HIEs and HIE vendors, notably Harris and Covisint among others. Its open-source tools get potential customers in the door who can then convert to a commercial license. In a call with Mirth executives, post acquisition, they stated that today, there are nearly 650 commercial licensees of Mirth Connect – for clinical interoperability projects.

Mirth’s integration engine, Mirth Connect, is not as widely deployed in production environments as most of its competitors (i.e., Orion Health, Corepoint, InterSystems or Infor). However,, Mirth Connect has found its way into a variety of prototyping and testing environments for HL7 messaging and EHR integrations. For many developers and healthcare systems, its no-cost, initial cost has been irresistible to desperate HL7 developers around the industry with Mirth claiming some 25,000 active open source licenses out of the 100,000 plus downloads of Mirth Connect.

While Mirth Connect is the cornerstone of Mirth’s product suite, the company does offer other tools that are commonly found in HIE deployments including a data warehouse and master patient index (MPI).

Like other open source vendors, Mirth has grown by selling wrap-around services to healthcare organizations (HCOs) that use its solutions for more extensive and complex deployments. Accordingly, Mirth pops up on our radar screen in discussions with public and enterprise HIEs. Mirth has also been very active in the efforts of the EHR Vendor Affinity Group for the Beacon Community, convened by ONC. But despite its well-received tools and commitment to better clinical interoperability, Mirth has always been somewhat hamstrung by its organizational reach, resources and delivery capabilities.

With this acquisition, NextGen will now use Mirth products for the 90,000 physician users of its community EHR offerings. In speaking with a senior executive at NextGen, she informed us that NextGen plans to preserve Mirth’s independence, retaining the Mirth brand, staff, offices and existing partner relationships and software licensing terms.

We see this acquisition of Mirth as a relatively low cost way for NextGen to accomplish two goals:

1) Do what it could not accomplish internally; develop a cross-enterprise interoperability platform for its current and future customers.
2) Reinvigorate the company and its market luster.

Main Street Realities and Wall Street Expectations
Quality Systems is under pressure to change for two sets of reasons: the dynamics of the community EHR market and the requirements of Wall Street.

These are unsettled times in the community EHR market as physicians gain more day-to-day experience with EHRs, leading inexorably to heightened expectations for EHRs. While the giants of the community EHR market boast like Roman emperors about their offerings, single-digit market shares and rumors of mass EHR replacements have vendors looking over their shoulders. NextGen, like all community EHR vendors, has customer retention concerns and must take product actions so its customers can participate in new models of care at both the patient and population level.

The acquisition of Mirth is also a tacit admission that NextGen’s EHR Connect has not been entirely equal to the complex task of providing cross-enterprise EHR interoperability for its customers. NextGen EHR Connect, like similar offerings from most EHR vendors, does not readily support interoperability in a heterogeneous EHR environment.

While the company is making all the right noises about how Mirth can help provide more interoperable data to support new payment models and population health management, it is unclear why NextGen took this specific product action: buying – rather than partnering with – a company to achieve this goal. After all, plenty of HIE vendors, EHR vendors and HIT integrators thrive using partnerships to get any or all of the tools that Mirth sells.

The explanation probably lies in Quality Systems, Inc.’s (QSI) relationship to Wall Street. The company is now “dead money” in Wall Street lingo. It certainly has fared less well than some its competitors (see chart for an unflattering 1-year comparison with Cerner, athenahealth and even down on its luck Allscripts). A hedge fund owner forced QSI to take on three new board members this summer and reevaluate the company’s “strategy”.

This acquisition could be more related to how the company is perceived by Wall Street than Main Street HIT customers and partners. Buying Mirth was relatively cheap – $59 million reportedly – and, in the Wall Street worldview, a way to burnish NextGen, with its roster of captive physician customers, thereby making it a more attractive target to the usual roster of larger, acquisitive HIT and private equity companies.

Licensing Caution for Mirth Customers and Partners
For existing Mirth customers, product licensing could become problematic over the long term. While NextGen is committed to preserving Mirth’s existing open-source and commercial licenses, the pressure to deliver better revenue results is on at NextGen and the company will eventually turn its attention to increasing the revenue yield of solutions built with Mirth tools that are now spread across many HCOs.

For Mirth’s open-source customers, the transition to some kind of NextGen master license from Mirth’s Mozilla-derived license could introduce unwelcome changes in the form of decreased deployment flexibility or increased direct or indirect costs. These customers could experience higher than expected costs and contractual complexity as they expand their deployments to support new needs or more users. All Mirth customers risk being stranded on existing software as NextGen evolves the software and licensing terms of future versions of Mirth tools to suit its needs. NextGen’s commitment to or interest in preserving the licensing rights or upward compatibility of existing customers is a question mark over the long term. If QSI itself is acquired, that uncertainty multiplies.

For Mirth partners, the foregoing concerns could be more significant. We know that HIE vendors Harris and Covisint have relationships with Mirth under which they use a variety of Mirth tools. We can only hope that these and other partners contemplated that Mirth could be acquired – and its new parent could in turn be acquired – when negotiating the terms of their partnership agreements and licenses. If not, they and their HCO customers could be surprised as Mirth’s licensing terms change to meet the business needs of its new owners.

Granted, all Mirth customers have the current source code should NextGen indeed change terms and conditions in unacceptable ways, this may put some of these companies in the position of directly supporting the code base going forward.

Consolidation Continues and EHR Vendors Interoperate

The bottom line is that this acquisition is more evidence of consolidation in the market for clinical interoperability and for the technology stack found within HIE solutions suites. NextGen is not the only EHR company to acquire HIE technology with Allscripts having acquired dbMotion earlier this year and Siemens acquired MobileMD nearly two years ago. It is also evidence of EHR vendors’ need for better interoperability technology and the inadequacy of existing EHR vendor solutions for connecting care communities in the new world of payment reform.

If history is any guide though, HIE-related acquisitions by EHR vendors do not bode well for this acquisition of Mirth. Over the last several years several HIE vendors have been acquired by EHR vendors. In all cases, these acquisitions have led to the former independent HIE vendor to be but a shadow of its former self.

 

Siemens Jumps into HIE Waters

Acquisition fever has set in and they’re dropping like flies, independent HIE vendors that is. Earlier today, Siemens announced its intent to acquire enterprise HIE vendor MobileMD. So in little over a year we have seen IBM snag Initiate, Axolotl fall into the hands of Ingenix/United Health Group (Ingenix is now known as OptumInsight), Medicity tie the knot with Aetna, Harris pick-up Dept of Defense clinician portal darling Carefx and Wellogic, a damsel in distress, being rescued by Alere. Elsevier also announce an intent to acquire dbMotion for a whooping $310M, but nothing came of that other than a substantiation of the rumor that dbMotion was being shopped.

That does not leave many small, independent HIE vendors that have some traction left in the market. Following is our list of such vendors and what might become of them:

4medica: A relative new comer to the HIE market, 4medica will be profiled for the first time in the upcoming HIE Market Trends Report which is scheduled for release in early 2012. 4medica is quite strong on lab information exchange. Future: 4medica still remains under the radar screen as it completes its platform to truly serve all HIE needs. Once that process is complete, the company is likely to gain increasing attention and will be acquired in 18-14 months.

Care Evolution: Privately owned and self-funded, founder has every intent to stay independent. As he has told us on more than one occasion, I’ve already made plenty of money and this is not about cashing out to the highest bidder. Future: Everyone has a price but this company may be one of the last to fall into the arms of another.

Certified Data Systems: Appliance (think small router with embedded HIE functionality) HIE vendor that has close, yet non-exclusive partnership with Cerner. Would not be surprised if they struck a similar deal with Epic as Epic struggles to connect to EHRs outside its system. Future: Fairly new to the HIE market but gaining traction. Will stay independent for next 12-18 months, after that, anyone’s guess.

dbMotion: One company already made a bid, but pulled back, thus pretty clear this company will be acquired, question is how much and we suspect it will be significantly less than what Elsevier was planning to pay. Future: If price is right, could be acquired at anytime.

HealthUnity: Small HIE vendor from the Pacific Northwest that made a big splash when with Microsoft (Amalga UIS) they won the big Chicago HIE contract. Future: With Microsoft cozying up close to Orion, HealthUnity will be looking hard for other partners and/or to be acquired. Will give them 12-18 months as an independent.

ICA: Another small HIE vendor that has had a few wins here and there but will come under increasing pressure from larger, better funded HIEs. Future: Likely to be acquired in next 6-12 months, maybe even earlier.

ICW: InterComponent Ware is a German HIT company and a sizable one at that with over 600 employees. To date, ICW has a very small presence in the US HIE market so an acquisition, if there were one, would have little impact.  Future: Their foreign ownership, size and interests in several health related markets make them an unlikely candidate for acquisition.

InterSystems: Arms dealer to all, InterSystems Cache and Ensemble are widely used in the market and the company has built upon these core technologies to get into HIE market. Future: Fiercely independent and senior team is basically the same since founding this company will remain independent.

Kryptiq: Having signed a strong partnership deal with Surescripts, Kryptiq is unlikely to be interested in any acquisitions talks. Future: Will remain independent for time being and if Surescripts’ Clinical Interoperability solution gains significant traction, Surescripts will likely acquire Kryptiq outright.

Orion Health: New Zealand-based, privately owned with good prospects in markets beyond America’s shores, this company will likely want to stay independent (future IPO) unless of course a very large software company (think IBM, Microsoft, Oracle etc.) gives them an offer they can’t refuse. Future: Will stay independent.

Getting back to the Siemens/MobileMD deal…

While we have not had an opportunity to talk with either Siemens or MobileMD (will provide follow-on update once we do) here are some quick take-aways:

Siemens has chosen to buy. This is unlike other EHR vendors who have either built their own HIE solution (athenahealth, eClinicalWorks, Epic, NextGen) or have partnered with others (Allscripts, Cerner, GE).

Existing partner doesn’t cut it. Siemens has an existing partnership with NextGen for ambulatory but NextGen’s HIE is a closed system. This prevented Siemens from being able to leverage this partnership to serve their client needs, which most often includes a multitude of EHRs in the ambulatory sector to interface with.

Lacked sufficient internal resources. By buying into the market, Siemens has signalled that it does not have the development resources to respond quickly enough to customer demand (not too surprising, Siemens has been struggling in the North American market for sometime). This also signals that they could not find the right partner outside of their NextGen relationship, which is a tad puzzling as we are quite sure they paid a premium for MobileMD.

Paid a premium. We estimated MobileMD sales in 2010 just shy of $8M in our 2011 HIE Market Report. HIE vendors are selling at a premium, even second tier ones such as MobileMD. Assuming industry average growth in 2011 (we peg it at 30%) that would give MobileMD sales of ~$10.5M for 2011. We put the final strike price for MobileMD at $95-110M.

Existing MobileMD customers relived. Unlike the acquisitions of Axolotl and Medicity, which both fell into the hands of payers, MobileMD is going to a fellow HIT vendor which must assuage the fears of more than a few MobileMD customers and prospects. Siemens intends to keep MobileMD whole, bringing on-board MobileMD’s president and founder, again contributing to continuity.

ADDENDUM: Please excuse our lack of posting on industry trends in a more frequent manner. Like many in the healthcare sector, Chilmark Research is struggling to keep up with demand and recruit top-notch resources. We seem to have hit our stride in this market, are receiving countless engagement inquiries and engaging in most of them. All good problems to have, but you dear reader are the one who ultimately suffers from our lack of posts. Thank you for your patience to date and know that we are doing our best to keep you informed with some of the best research and analysis of this critically important and meaningful market.

Orion Strengthens Portfolio & MSFT Gains HIE Partner

On Monday, New Zealand based Orion Health announced that it would acquire the mothballed Health Information Services (HIS) assets of Microsoft, Amalga HIS. In the same announcement, Orion and Microsoft also announced a partnership for Microsoft’s healthcare analytics solution Amalga UIS.

Microsoft, during its HIT buying binge days a few years back had picked up the Thai-based HIS company, Global Care Solutions. Global Care Solutions was credited with building the HIS for medical tourism destination Bumrungad hospital in Thailand. While Microsoft tried to quell EHR vendor fears in the US that this HIS solution suite, later rebranded as Amalga HIS, would only be sold overseas and not it the US, most EHR partners chose to put some distance between themselves and Microsoft. Needless to say, this created far more challenges for Microsoft and its still budding healthcare sector initiatives and the company decided to discontinue further investment in Amalga HIS in July 2010, effectively putting it on the market.

Now, over a year later, Microsoft has finally found a buyer for this asset in Orion Health, who, like Microsoft, has stated that it does not intend to sell this solution suite in the US but instead focus on the Australian and Asian markets. Would not be at all surprising if Orion further extended that reach to all Commonwealth countries, which has been the company’s Go-to-Market (GTM) strategy to date. In speaking with Orion yesterday, they reiterated their intentions to not sell this solution suite in the US market.

Seeing as it took Microsoft over a year to unload Amalga HIS, one has to wonder: Was this solution suite poorly architected or was Microsoft asking far more for it than what others were willing to pay? Having been demo’d the solution on a couple of occasions, likely the latter. Which then makes one wonder, so what kind of deal was actually struck? Our guess is that it had a lot to do with the second portion of this press release, that was overlooked by most in the press, the future partnership surrounding Amalga UIS.

Our latest research on the HIE market is pointing to a significant increase in interest in combining the basics of an HIE (getting clinical data flowing) with analytics to deliver better, more informed care and equally important, optimize the operations of a healthcare organization. As the healthcare sector moves from a transaction-based reimbursement model (fee for service) to one based on outcomes (value-based contracts), analytics will play an increasingly critical role. Thus, we are seeing a number of moves in the market, both acquisitions and partnerships, that look to more closely tie what have been two disparate offerings into one cohesive package.

Orion Health does not have a robust analytics solution. Microsoft does not have a robust HIE solution. Bringing the two together could create a powerful offering and potentially put Orion on equal footing with other HIE market leaders that are currently a step ahead of them with regards to analytics, including OptumInsight (former Axolotl + Ingenix), Thomson Reuters and Care Evolution and their HIEBus platform and IBM, who acquired Initiate in 2010. For Microsoft, this also could be a significant win for to date, they have struggled to find a strong Tier One HIE partner – with Orion, they have found such a partner that could juice sales for Amalga UIS.

But this is far from a done deal for as with any partnership, the devil is always in the details. Based on our conversations with both companies, they do appear to be cognizant of the challenges that lay before them. The biggest challenge will be getting Amalga into a form factor that accelerates time to value for those who adopt this solution. To date, the Amalga solution has seen more than its fair share of challenges in the field in this regard. Couple that with the Orion customer base, which is weighted towards public HIEs, and one can foresee some significant GTM challenges for these two companies in the future. Allscripts faced a similar challenge with HIE partner dbMotion. Orion and Microsoft would be wise to look closely at how Allscripts successfully addressed this challenge for their target market.

 

Dipping Into the Waters of Mobile Health

Introductory Remarks: Chilmark Research is pleased to welcome a new addition to our staff, Cora Sharma.  Cora will be leading our research efforts in the mobile health app market (mHealth) and below is her first post on the subject.  Cora has a great background having received a BSc in Computer Science, worked in the software sector for several years and recently graduated from MIT’s Sloan School of Business. While at Sloan, Cora did an internship with McKesson where she found her calling, HIT and the desire to become an analyst.  She’s a great addition to Chilmark Research and I’m confident she’ll produce some excellent research. – Stay tuned.

The concept of mobility in healthcare is nothing new to providers, vendors, and to Chilmark Research alike.  The current media and investor buzz surrounding mHealth stems from the belief that: 1) mobile technology has finally matured to a point where age-old healthcare processes can finally be revamped; and 2) mobile technology has not only matured but has actually been adopted en-mass by physicians and shows no signs of abating.

Doctors Love Smartphones, but are GaGa over the iPad
Recent reports from SpyGlass Consulting and Manhattan Research show that the vast majority of physicians already use smartphones. Pamela Dolan at the AMA has a nice commentary on these latest numbers. Chilmark Research’s recent talks with industry folks shows that the iPad is also gaining significant traction with physicians.  At a recent conference in Denver where Chilmark Research attended and spoke, the CIO of Catholic Health Initiative (CHI) sees providing their doctors with mobile apps (in CHI’s case on the iPad) as critical to the success of complying with meaningful use requirements.

mHealth Apps in Acute Care
Given that physicians have now ‘gone mobile’, does this imply that they will no longer be satisfied with computers-on-wheels (COWs), demanding mobile access to every piece of data buried in Health Information Systems (HIS)?   If yes, providing doctors with mobile access to patient and hospital data could be just the perk needed to attract more affiliated physicians, satisfy existing ones and ultimately drive the adoption and use of HIT by clinicians.

Here is a brief look at the mHealth acute care vendor landscape:

  • Pure play inpatient mobile solutions companies like PatientKeeper and MedAptus have built their businesses on providing clinicians with mobile apps, each having started with charge capture and quality measures.  PatientKeeper expanded into CPOE with a limited roll-out that is scheduled to go GA in 2011. As the mHealth market continues to gain momentum, it will be interesting to follow the fate of these two companies.
  • The big boys of HIS (Cerner, Eclipsys/Allscripts, Epic, GE Healthcare, McKesson, MEDITECH, Siemens) all have mHealth stories, albeit weak ones that revolve mostly around mobile browser access to their core EHR.  Early this year Epic released the Haiku app to Apple’s AppStore, resulting in some fanfare from the tech community.   Also, the Citrix Receiver app makes it possible to run Windows-based apps like McKesson and Cerner securely on the iPhone/iPad and Android, though with obvious usability issues associated with being a non-native app.
  • Potential entrants/disruptors from outside the industry face a battle with the big boys, who seem to want to reduce mobility to an extra feature on their systems.  Diversinet is making a play in secure doctor-doctor and doctor-patient communications for the enterprise. The company has made extensive investments to the tune of some $80M spent over the last decade developing IP in encryption and identity management.

mHealth Apps in Ambulatory
There are a multitude of physician content and productivity apps in the AppStore, from anatomical diagrams to medical calculators to ICD-9 lookup and arguably the most successful category, medical content apps.

Mobile medical content companies such as Epocrates and Medscape have had a presence on physicians’ phones/PDAs for years.   We are closely following Epocrates’ expansion into the SaaS EHR market.  If mobile EHR access is a truly compelling value proposition for ambulatory physicians (we aren’t convinced it is), then Epocrates may be able to leverage the brand’s mobile association and large, existing installed base to stand out from the 400+ competing EHR vendors.

A number of ambulatory EHR vendors (AllScripts, eClinicalWorks, Greenway and NextGen) have recently introduced their own EHR mobile apps, most built for Apple’s mobile OS. Currently, it appears that little is on offer from EHR vendors for Google’s Android mobile OS, though that may change as Android becomes an increasingly compelling alternative to Apple.

Onward Ho!
Dipping our research fingers into the mHealth market, Chilmark Research is launching a new initiative that will culminate in the report: Enterprise Adoption of mHealth apps: Trends, Issues and Challenges. Over the course of the next couple of months (target release date is in advance of NIH’s mHealth Summit in DC) we will interview executives from the major HIS vendors, best-of-breed vendors, tech entrants, and leading Hospitals/IDNs. Through both primary and secondary research we will answer such questions as:

  • What top mobile apps are currently being adopted in the enterprise?
  • What are the priority unmet needs among leading Hospitals/IDNs?
  • What challenges are currently hindering adoption of mHealth apps in the enterprise?

In the meantime we will be posting every other week specifically to give updates on our mHealth research.  Onward Ho!

Healthcare Reform, Payment Models & Acquisitions

Today, GE announced the release of Centricity Advance, their solution for the ambulatory market. Centricity Advance is basically a build-out/rebranding of MedPlexus an SaaS EHR solution vendor that GE acquired in March 2010.  GE now joins others (see below) in the EHR market who are striving to provide a complete acute to ambulatory EHR portfolio.

AllScripts’ acquisition last week of Eclipsys.

NextGen, a traditional ambulatory EHR vendor whose parent, Quality Systems Inc. acquired Sphere Health Systems and Opus Healthcare Solutions to target rural acute care facilities.

While some may argue that the HITECH Act and meaningful use requirements are core drivers for these acquisitions (e.g. tap future incentives payments in new markets), the real reason is the need for large healthcare organizations to more closely align smaller affiliated practices to their operations in anticipation of healthcare/payment reform (bundled payments, patient-centered medical home, etc.). These large institutions are increasingly seeking out such fully integrated acute to ambulatory solutions and is one of the core reasons that EPIC (they started in ambulatory and grew organically into acute) has seen success in the market.  It remains to be seen if those pursuing an acquisition strategy will be as successful as EPIC for it often takes years for two systems to be combined in a truly integrated fashion.

Looking to the future, one has to wonder what will be the fate of those who remain in either just the acute or ambulatory sector.  Our quick assessment of a few of the ambulatory vendors…

athenahealth: athenaclinicals is new to the market and the company has an opportunity to tap its existing customer base. Short-term, they’ll stay independent but likely to be acquired in 3-5 years.

eClinicalWorks: Fiercely independent and will likely attempt to pursue a strategy similar to EPIC’s and grow organically and stay independent. Will make some niche app acquisitions where needed to accelerate time to market.

Greenway: Will be acquired in next 1-2 years.

Sage: Like Greenway, acquired in near future.

Practicefusion: Will stay independent, may be rolled-up into a larger offering from a bigger entity that comes from outside healthcare sector, e.g., minority investor Salesforce.com

Now this is only our educated guess (and we certainly welcome yours in the comment section below), but in our conversations with numerous stakeholders in the market, this guess is one we’d be willing to bet on.

AllScripts+Eclipsys, Who Loses?

Today, leading ambulatory EHR vendor AllScripts announced that it will merge (it’s really acquire) with one of the larger acute care EHR vendors, Eclipsys creating one of the largest EHR vendors in the market with some 180,000 physicians using their solutions.  This acquisition is being driven not by ARRA and all the taxpayer dollars flowing into healthcare, but by healthcare reform and the trend towards bundled payments, patient centered medical home models and the move by hospital networks to become Accountable Care Organizations (ACOs). Large healthcare organizations will increasingly be looking to HIT vendors who can provide the full suite of solutions for both acute and ambulatory requirements. This merger is simply an acknowledgement of that need.  It will be interesting to see what impact this merger will have on other ambulatory EHRs, such as NextGen and eClinicalWorks.

Now there will be plenty of others writing about this merger and its implications to the market so rather than focus on the obvious issues regarding EHRs, rationalization of product portfolios, go to market, etc., Chilmark Research will look into one small and important piece:

What might this acquisition mean to these companies’ respective HIE partners, dbMotion and Medicity?

We’ve spoken to both HIE vendors and are on track to release our HIE Market Trends Report (includes in-depth profiles of the twenty leading HIE vendors in the market) by the end of June so we are uniquely positioned (at least we think so) to provide an educated assessment.

AllScripts+dbMotion:
In April 2009, AllScripts and dbMotion announced a go-to-market partnership wherein dbMotion would be AllScripts go to partner for all things HIE.  This partnership is both marketing and R&D with both companies working together to deliver what is called the AllScripts Community Record powered by dbMotion solution.  This partnership did not make a lot of sense to us as dbMotion is a fairly sophisticated solution that is more suitable for large IDNs and academic medical institutions like its US lighthouse customer, UPMC, which also happens to have a significant equity stake in dbMotion.  dbMotion is also not exactly an inexpensive solution.  So how does this fit in the ambulatory market that is the sweet spot for AllScripts?

Speaking to Peter McClennen, dbMotion’s North American President, Peter stated that he is both “excited and humbled” at the thought of this merger. Excited in the future prospects, humbled in its implications to the broader market. Peter went on to state that to date, the partnership has seen a number of market successes such as that at UMass Medical Center, and most recently the win at Thomas Jefferson University.  Today, AllScripts/dbMotion have about a half dozen customers that are leveraging the dbMotion suite to enable, as Peter put it, “actionable semantic interoperability” between an acute care facility and affiliated ambulatory practices.  What Peter means by actionable semantic interoperability is basically an ability to create an on-demand view of a patient record (drawing from all data sources in a dynamic fashion), which is quite similar to Microsoft’s Amalga platform.  This is an important factor which we’ll come back to later.

So getting back to the question: How does dbMotion fit in the ambulatory market that is the sweet spot for AllScripts?  Looking at those joint sales, large mothership institutions (UMass, Jefferson, etc.) are making the investments in dbMotion to more closely tie affiliated practices who are on AllScripts.  These large institutions have the need and the resources to make this happen.

Eclipsys+Medicity:
In June 2009, Eclipsys and Medicity likewise announced a a go-to-market partnership.  Unlike the AllScripts/dbMotion partnership, the Eclipsys/Medicity partnership is far deeper wherein Medicity is the underlying technology powering the Eclipsys’s branded HealthXchange.  This requires a deep level of technology integration between the two respective platforms.  It also requires a higher level of sales and marketing investment by Eclipsys as HealthXchange is on the price sheet that their sales force takes to market.  It’s no easy task to back-out of such a deep integration.

In speaking with Medicity’s CEO, Kipp Lassetter earlier today, Kipp stated that Eclipsys informed him that they remain “fully committed to the partnership.” Kipp went on to state that in addition to several wins to date, the partnership has a “number of deals in the works.”  As with the AllScripts/dbMotion partnership, the objectives are the same, help large IDNs and hospital networks better link acute to ambulatory.  HealthXchange is based more on Medicity’s MediTrust and layered in their some of their Novo Grid technology.

AllScripts+Eclipsys, Who Loses?
In any acquisition/merger there is a natural rationalization process, rationalization of staff, products and of course partnerships.  The combined entity will now have two HIE partners and some rationalization may occur with one HIE vendor remaining at the alter, while the other walks away with the groom.

In their investor slidedeck, AllScripts, on slide 22, clearly shows HealthXchange in the Eclipsys solution portfolio stack.  Looks like AllScripts certainly acknowledges the importance of HealthXchange, though it is curious that they have the solution under the columns of financial and administrative transactions and not clinical. Evenmore curious is that there is no mention of dbMotion and the AllScripts Community Record solution on this slide.

So does this mean dbMotion is the one that will be left standing alone at the alter?

Well, if anyone was left standing alone, it would likely be dbMotion, however, we do not believe this will happen for a couple of reasons:

First, though the relationship is barely a year old, AllScripts and dbMotion have benefited from landing a number of key wins, so why stop now?

Secondly, dbMotion has one of the more technologically advanced HIE solutions in the market today. It’s not cheap, but it does provide some pretty impressive capabilities that are not easily matched.  And remember what we said earlier, dbMotion is more akin to Microsoft’s Amalga than it is to the traditional HIE solutions in the market today, including Medicity’s solution suite. Thus, there may actually be more opportunities to create synergies between these two companies and their offerings.  The wildcard in this scenario is Microsoft’s partnership with Eclipsys wherein Eclipsys is now offering modular apps on top of the Amalga platform.  Will this have any influence on the dbMotion partnership?  That’s anyone’s guess today.

In closing, we see polygamy occurring with both Medicity and dbMotion playing a role in the combined AllScripts/Eclipsys organization.  If done properly, everyone will benefit, especially customers.  If done wrong, a major cluster f*ck in the making.  These are capable companies with capable leadership, our bet is on a successful polygamist relationship.

Apple Targets Healthcare Enterprise

While the Apple iPhone was first targeted at the general consumer, Apple has been taking the necessary steps to bring this device into the enterprise, directly competing with RIM’s Blackberry.  Unseating the Blackberry in many sectors, such as finance, may be near impossible but healthcare is another story.  Within healthcare, Palm, with its Treo was extremely popular as it was not only a communication device (cell, email, etc.) but also supported other apps such as the very popular Epocrates.  Palm lost its focus, sat on its laurels, the Treo became dated, barriers to entry lowered.  Enter the iPhone, its intuitive interface, a touch screen, an ever increasing number of medical apps and Palm is basically out in the healthcare.

The iPhone was first adopted by physicians independently of the organizations (hospitals) they worked for to do simple communication and access numerous apps that helped them in their day-to-day activities.  Seeing this adoption trend. some of the EMR vendors also started to get on-board offering iPhone access to their app (AllScripts introduced theirs at HIMSS’09). But this adoption, for the most part, remained separate from broader enterprise (hospital) initiatives as early versions of iPhone’s operating system (OS) were simply not enterprise ready.

But this is changing.

Apple’s iPhone OS, which has seen significant improvements since its introduction and now has robust enterprise features, including security ( HIPAA compliance), integration to the ever popular Microsoft Exchange Server (calendar, email, etc.), and an SDK to build apps for internal purposes.

To showcase the iPhone in enterprises, Apple now has a section of their website dedicated to showcasing customer deployments of the iPhone in an enterprise.  Of the 15 enterprise case studies presented, 20% of them are dedicated to the healthcare market; Mt. Sinai in Toronto, Memorial Hermann in Houston and Doylestown Hospital in Pennsylvania. Of all the enterprise verticals to profile, dedicating 20% of case studies to one market, healthcare, signals Apple’s intent to invest in this market.

Common threads in each story:

1) Security features of iPhone OS insure HIPAA compliance.

2) Ability to use Microsoft Exchange ActiveSync for email and calendaring features.

3) iPhone’s intuitive interface minimizes training requirements.

4) iPhone is readily portable and can deliver the right information at the right time to the right individual.

5) iPhone’s ecosystem of applications allows a hospital and its clinicians to tap a wide range of applications to customize the iPhone to their particular needs. Many of these apps are free thus not a drain on ever tight IT budgets.

As Hermann Memorial’s CIO, David Bradshaw stated:

Healthcare is a real-time business.

And as we’ve said before:

Health is mobile.

The combination of an ecosystem of relevant applications with enterprise connectivity in a secure, easy to use, mobile construct is the future of healthcare IT, at least for clinicians.  The next step is bridging the divide between clinician and consumer through the use of such technologies. We’re not there yet, but hopefully, Apple is working with a healthcare organization (or at least will uncover one) and present such a case study in the near future.