Despite a chaotic 2020, notable success stories are emerging.
Doom scrolling through the pandemic was easy to do, for doom was in abundance. Make no mistake, the pandemic wreaked havoc on society and American businesses of all sizes suffered. Healthcare is one sector that was particularly hard hit, as the Spring 2020 lockdown halted most elective surgeries, office visits and trips to the ER. Subsequently, many health IT companies (outside of telehealth) suffered as projects were shelved and the RFP pipeline shut-down so health systems could focus efforts on addressing the surge in COVID cases coming through their doors.
Most public health IT companies stopped providing forward guidance to Wall Street investors. Numerous smaller, private health IT companies saw significant reductions in revenue leading to staff lay-offs, being acquired or simply closing up shop.
But as always, there are exceptions to every rule. Two companies I recently spoke with broke from the ranks of others in having very successful results for 2020 – one a health IT stalwart and another, a more recent upstart.
Despite the pandemic, in 2020 MEDITECH was firing on all cylinders. The company reported 12 new accounts in 2020 taking market share from its competitors.
For many years I have felt that MEDITECH was seemingly asleep at the wheel. Sure, they did what was needed to comply with meaningful use requirements, but the overall EHR itself was stuck in a time-warp. At times I thought maybe this was just what their customers – typically smaller community hospitals — wanted. Other times, I imagined they were just resting on their laurels and simply unwilling to make the investments necessary to keep pace with their competitors.
Fast forward to today and boy, what a turnaround they have made.
Despite the pandemic, in 2020 MEDITECH was firing on all cylinders. The company reported 12 new accounts in 2020 taking market share from its competitors, even winning a hospital from Epic, which is almost unheard of. In total, the company had 31 net new sites for their latest EHR, Expanse.
So what has changed?
After years of development, the company finally released Expanse, a fully cloud-based, enterprise solution. Like its predecessors, Expanse offers the typical EHR/RCM functionality of most EHR vendors, but also includes ERP functionality as well. The company has greatly improved the user interface, also adding an integrated ambulatory solution, which is an area where they have struggled in the past. This is all provided at an attractive price point and is scalable well-beyond their typical targeted <250 bed hospital.
While all these features are important to operating a health system, there may be one other critical factor at play: the migration to subscription-based, SaaS pricing. The typical licensing model for enterprise software is a one-time, upfront cost — capital expenditure — and ongoing, annual maintenance fees. Such pricing can be difficult for health systems, especially smaller, rural systems, who continue to see a squeeze on margins, which were exacerbated by the pandemic.
SaaS pricing requires far less money upfront and can be claimed as an ongoing operating cost. This is a far better model for cash-strapped organizations. Secondarily, with a SaaS model, ongoing maintenance and upgrades are automatically delivered via the cloud, which may reduce internal support costs.
While there are some drawbacks to SaaS solutions, particularly reduced ability to customize the solution, MEDITECH customers seem to be perfectly willing to make that trade-off.
In my experience, the typical lifecycle of enterprise software in a given institution is roughly a decade. The healthcare sector is now entering that period, since the passage of the HITECH Act, which was largely responsible for EHR adoption nationwide. This bodes well for MEDITECH – their timing couldn’t have been better – as health systems begin reassessing their previously chosen EHR solution and look out into the market as to what others may be offering.
REDOX: Enabling the Developer Community
The rapid rise in use of telehealth in 2020 by health systems…was jet fuel for the company, igniting a doubling of health systems they interface with. In January 2020, REDOX interfaced with just under 500 systems. By January 2021, REDOX more than doubled th[at number] to close to 1,200.
REDOX is a VC-backed, integration infrastructure vendor providing API-based tools for developers to build apps that interface with clinical systems. When the pandemic lock-down hit last March, REDOX saw its sales opportunities evaporate. The company took “right-sizing” measures to preserve cash-flow and hunkered down.
However, the rapid rise in use of telehealth in 2020 by health systems to virtually engage with patients was jet fuel for the company, igniting a doubling of health systems they interface with. REDOX also assisted health systems in enabling such closed loop processes as lab orders, results and public health reporting. In January 2020, REDOX interfaced with just under 500 systems. By January 2021, REDOX more than doubled the number of health systems to close to 1,200, handling some 12 million messages a day flowing through their network.
Key to REDOX’s success is their two-sided network, wherein they provide app developers with the EHR integration tools they need to be enabled in clinical workflows. Large healthcare organizations are also using these tools to develop apps for internal use cases, as well as leveraging REDOX integration tools to interface with other systems outside their own. This dynamic will continue to fuel growth for REDOX due to the natural “network effect” of its solution and go-to market strategy.
These two profiled vendors are examples that even in a pandemic of epic proportions, there remains a need for proven IT solutions that address specific pain points within a given organization. These vendors’ success stories also point to broader trends in the market.
First, the continuing migration to cloud-hosted solutions and subsequently moving enterprise software costs from CapX to OpX to preserve cash flow. Virtually all enterprise software vendors now offer, on will in near future, a cloud-hosted version of their solution.
Secondly, organizations of all sizes realize that their enterprise solutions will only take them so far. To enable a multitude of internal and external processes and functions, other apps will need to be adopted or developed. The slow but steady migration to open API standards, such as FHIR, will accelerate over the next several years, providing a critical layer of functionality (Systems of Engagement) over the System of Record, which in healthcare today is the EHR.