athenahealth was taken private on Monday, Nov. 11th by Veritas Capital and Evergreen Coast Capital (the PE arm of Elliot Management) following a long, drawn-out process. The real story is Veritas, who has deep expertise in the healthcare IT sector and adds athenahealth to several other recent acquisitions, including GE Healthcare’s IT assets, Cotiviti and former Verscend. There are potential synergies between these assets though few will be easy.
Key Takeaways
Contact us to request a copy of this premium content. For more analysis on major EHR vendors, see our 2018 review of user meetings here.
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The Rise of APIs and App Stores In Healthcare
Two years ago, we published a report on the promise of open APIs in healthcare. In APIs for a Healthcare App Economy: Paths to Market Success (available as a free download), provider organizations told us that developing and using APIs was low on their list of priorities. Modern REST-style APIs were still not on the radar for most providers and payers.
Back then, HCOs large and small said they expected their EHR vendor to build an API infrastructure for them. Two years ago, only Allscripts and athenahealth offered an app store along with a comprehensive developer support program. At that time, the other EHR vendors were slow-walking FHIR support and had vague plans for app stores and developer support programs. We found that:
Since then, market conditions have continued to change. EHR vendors are now more vocally rolling out the API infrastructures that will bring healthcare into the mainstream of 21st century computing. Every major EHR vendor has delivered a variety of proprietary, HL7, FHIR, and SMART APIs along with the ability to leverage REST to improve their products.
Each of these companies sponsor, or will soon sponsor, an app store for third-party innovation. This has seen a concurrent rise in interest for using APIs within provider organizations. A recent Chilmark report, Healthcare App Stores: 2018 Status and Outlook, examines some of these platforms and the progress that has been made to date in more depth.
That said, some things have not changed. EHR data remains the most valued data resource in healthcare. All but the largest provider organizations are dependent on their EHR vendor for API enabling technologies. Small and independent developers struggle to participate in app stores and EHR developer support programs, despite great ideas for better apps to improve care delivery. And physician frustration with EHRs continues to grow.
Developing and using APIs is a priority for healthcare stakeholders who want to get more from their EHR investments as they identify opportunities for workflow improvements, real-time analytics dashboards, and more. While EHR vendors are leading the charge, our more recent research suggests that many other stakeholders hold or control access to other key data sources that could underpin such efforts.
The opportunity to capitalize on data already collected to provide advice and predictions is too big to ignore, and the easiest way to do this efficiently will be with integrated apps that can pull data from any relevant resource to provide the necessary insights at the right time.
The number of apps in EHR app stores grows monthly. To date, the idea of the potential role and benefits of an independent certification body has not entered the discussion about APIs and app stores since the collapse of Happtique’s efforts in 2013. Currently, EHR vendors certify apps for their customers based on rigorous internal evaluations, but the process varies by vendor. An independent and impartial body could do more than just provide information for prospective users. Instead, it could deliver tremendous value if its assessments were multi-pronged and supplied information about the ongoing use of the app, as well as a consistent way to think about safety, security and dependability. While a certification authority could make it easier for decision-makers, the real value could be in delivering users more information about how the app delivers value across its install base.
Sometime in the next few months, the ONC will issue new rules on information blocking and what constitutes an API that does not require “special effort” to access and use. While these actions may seem like a watershed moment for health IT, the provider market has moved perceptibly since ONC began its rulemaking. Just two years ago, providers were curious about APIs and app stores but they weren’t ready to make any commitments.
Slowly and inexorably, healthcare is embracing the downloadable app as a tool for innovation and improvement. One-size-fits-all platforms are not meeting the needs of the industry and apps can do more to assist with care provision needs than just provide supplemental functionality – to read more about opportunities for apps to have significant impact, take a look at the infographic we developed to accompany our more recent report, or read more in this deep dive post from June.
The opportunity to capitalize on data already collected to provide advice and predictions is too big to ignore, and the easiest way to do this efficiently will be with integrated apps that can pull data from any relevant resource to provide the necessary insights at the right time.
Healthcare App Stores Moving to Mainstream
Update, 9/4/2018: This post was based on research conducted for the report, Healthcare App Stores: Status and Outlook, which is now available.
Apple’s early and fantastic success with its app store spawned imitators. App stores are a relatively new wrinkle in healthcare IT vendor’s approach to relationships aimed at better serving existing customers or finding new ones. Most major IT vendors to payers and providers have partnerships with other companies that provide complementary technology or services. These arrangements allow the partners to reach markets, users, or use cases that either vendor would find challenging on its own.
In the wider economy, successful app stores rely on a widely-accepted set of Web technologies. Chief among these are REST-style APIs offering programmers simple and uniform access to data and functionality across organizations and systems. REST APIs provide the data fuel that transformed consumer and enterprise apps. Most API programs are open in that documentation is available to anyone. Programmers can often use the APIs without any interaction with the API publisher. In other cases, they can use them after getting an API key, usually a simple online process while many API program sponsors monetize access at certain call volume thresholds. Health Level 7, the standards organization, created Fast Healthcare Interoperability Resources (FHIR) to enable modern, REST-style APIs that will be far less unwieldy for programmers than traditional HL7, IHE, or C-CDA APIs. The advent of FHIR-standard APIs and SMART’s use of OAuth supplies the crucial building blocks for effective app stores in healthcare.
While the challenges are daunting, the opportunity to improve healthcare is vast. Healthcare users are eager to discuss their unmet needs. Small and independent developers are eager to address these needs.
App stores facilitate the distribution of applications that add value to some base platform or brand. On the strength of the large volume and variety of data these companies collect for their HCO customers, the EHR is that platform. EHRs also have strong brand recognition among clinicians. The vast majority of HCOs lack the resources to develop their own applications, relying mostly on their EHR vendor for new and better functionality. Ironically, most EHR vendors recognize that they lack the resources or bandwidth to be the sole source for new and better functionality.
Other categories of companies could be the platform that establishes and hosts an app store. Payers and providers have the strongest brand name recognition with patients and their caregivers. Medical equipment vendors have large data volumes and established brands among healthcare workers that could provide visibility and attention from users. Companies that provide healthcare transaction or data services have amassed stupendous data volumes but remain mostly unknown to patients and are not top-of-mind for healthcare workers. In theory, any entity that holds large inventories of patient data or has a strong brand could sponsor an app store.
The technical potential already exists to access data or services from any combination of provider, payer, data aggregator, or another source. For now, the willingness to make such capabilities a reality is lacking, given that healthcare’s financial incentives almost demand that organizations hoard, monetize, or closely control the use of their data. While the challenges are daunting, the opportunity to improve healthcare is vast. Healthcare users are eager to discuss their unmet needs. Small and independent developers are eager to address these needs.
While better applications for clinicians and patients are a priority, the demand for more effective use of IT in healthcare is not limited by user category or use case. Some specific examples include:
The recent and widespread adoption of EHRs highlights the need to supplement or enhance the EHR itself. EHRs are not the only opportunity, since only a minority of the healthcare workforce uses an EHR regularly. The need to activate and engage patients with more effective applications is also important for most healthcare stakeholders. Patients have only ever known a disjointed “customer experience” with healthcare. Ideas such as convenience, price transparency, or predictability would never enter into the average patient’s expectations of interacting with any aspect of the healthcare system. But patients are beginning to expect a more conventional “consumer” experience with healthcare. The proliferation of high-deductible plans and rapidly increasing out-of-pocket costs could eventually produce a market or regulatory response that could impose a different approach and processes for consumers.
In theory, an app could discover patient data at multiple organizations using a network-based record location service’s APIs. It could access that data directly from as many organizations as the application and use case demand. It could match pertinent records using an API-accessible master patient index service. It could access workflow from yet another network-based service to support part or all of a patient encounter. This kind of orchestrated functionality using distributed data is increasingly commonplace in consumer and some enterprise apps where the application uses REST-based access to data and functionality from multiple organizations. Healthcare is years away from being able to deploy such a scenario, but many in HIT would like to see it become a reality.
We are preparing a report on the status and outlook of healthcare app stores. For now, EHR vendors have shown strong interest in investing to reach new markets, users, and use cases. Most vendors recruit third-party developers and companies into their developer programs outside of their clinician user base. Third-party experiences with EHR vendors such as Epic, Allscripts, and athenahealth have varied in terms of support, costs, and allowed functionality. This report not only inventories the ways that EHR vendors are expanding functional and organizational app coverage; it also looks at the outlook for some of the other potential app store platform hosts.
Looking to 2017: Our Baker’s Dozen Forecast
2016 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.
Health 2.0: Ten Years On
For my young daughter, 10 yrs is nearly a lifetime – but for myself, nary the blink of an eye. So it felt this week while attending the 10th annual Health 2.0 conference, one part so much time has past, another just a flash. Over those ten years I have had the pleasure and at times frustration of attending nearly every Health 2.0 event.
The pleasure comes from the excitement of seeing so many dedicated people all trying to do their part, in some innovative way, to improve the healthcare system. The energy they exude is contagious. As a result, Health 2.0 often feels like the antithesis to the staid and conservative annual HIMSS conference. I come to this event to see what lies on the horizon, I go to HIMSS to see what is happening now.
But that excitement and a certain naiveté has also been frustrating. Frustration comes from having seen a profound lack of reality among a significant percentage in attendance. Is it the Silicon Valley effect? Too often start-up companies seemed oblivious to the countless challenges present in this convoluted market and lacked a deep understanding of what is needed. But being altogether all in the same place, these energetic founders of young companies all drank from the same fountain – the cheerleading was deafening. Come back two years later and most had fallen to the wayside.
In its early years Health 2.0 was heavily weighted towards frustration. Beyond the naïve-istic cheerleading, there was a lack of diversity, of heterogeneity in the audience. It was an event about, for and ultimately comprised of start-up health companies. There were few, if any providers – maybe a couple on stage at some point.
But as the HITECH Act took hold and federal dollars came in to encourage EHR adoption, broader interest in the digitization of healthcare accelerated. The floodgates opened and investment dollars came pouring in to the digital health space rising from the low $100’s of millions in 2007 to some $5B projected in 2016 much of it going to start-ups.
This investment influx led to more sophistication among the start-up companies attracted to Health 2.0. The organizers responded in kind with the content becoming more robust and the audience more diverse in the ensuing years. The hyperbole has also been turned down several notches. Health 2.0 is now a dynamic conference, with an excellent line-up of speakers and topics discussed. Sure, there remains a certain odd “campiness” to the event, but that is part of its charm.
While this event has matured and expanded, one thing does strike me as puzzling: Why are there so few of the mainstream vendors of HIT at this event? Is Health 2.0 seen as just some odd side-show to the grander market (e.g. HIMSS)? Is there a country club bubble that more traditional HIT vendors reside in with little desire to look down the street to what may be marching their way? Is it simply a lack of attention, wherewithal or interest to the dominant theme at Health 2.0 – consumer/patient/member engagement and empowerment? If it is the latter that is a sad commentary on incumbent HIT vendors.
As we articulate in our latest report and have done so elsewhere, the future success of population health management programs will be highly contingent upon far deeper consumer engagement. Thus, if I were leading strategy for one of those incumbent HIT companies, I’d surely send someone to Health 2.0 to ensure that my company gets out of the bubble to see what might be next and more importantly, who might be a target for partnership or future acquisition as we develop our consumer, patient or member engagement strategy.
Like the Health 2.0 event, Chilmark Research also got its start in 2007. Together, in our own ways, we are each trying to move the needle in healthcare to ultimately improve the consumer experience. Much has transpired in this brief decade that makes it seem long upon reflection but short in action. The industry is going through a profound transformation. Just as we are moving to digital health, the industry may indeed be slowly pivoting, as athenahealth’s Jonathan Bush stated: to “network health.” Looking ahead, I wish Matthew, Indu and the broader Health 2.0 team another decade of success, joining us in pushing the boundaries to ensure that the this sector meets the promise that a truly network model of health may offer.
Annual Review: 2015 Predictions
What 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.
The Future Evolution of the HIT Market
The healthcare IT market is not much different than other software markets. It has its own particular nuances such as regulatory oversight and a recent, massive infusion of federal funds to drive adoption of EHRs. Beyond that, however, the basic mechanics of how this market will evolve in the next five years will reflect what has occurred in other software markets, particularly the enterprise ERP market.
athenahealth Acquires RazorInsights: Can athenahealth Succeed Where Others Have Failed?
On Wednesday, January 14, athenahealth announced it will acquire the cloud-based EHR & RCM company, RazorInsights. RazorInsights’ target market is rural, critical access, and community hospitals (25-50 beds), which aligns well with athenahealth’s strategy to move upstream into the inpatient market. As a part of the acquisition, athenahealth gains ~25 hospital clients currently running RazorInsights’ ONE EHR solution. athenahealth did not disclose any transaction details although early estimates are for a $40 to $50 million purchase price.
Even though athenahealth is already working on developing additional services for the inpatient market, the RazorInsights acquisition represents an effort to fast forward this process. The acquisition opens up a new segment of the market, albeit one that has modest growth prospects that are far below athenahealth’s targeted 30% bookings growth goal. This market also has some well-entrenched competitors e.g., CPSI and Meditech, and others targeting this sector – Cerner with its own cloud-based solution, CommunityWorks. If athenahealth/RazorInsights is successful though in continuing to add additional small hospital clients at a steady clip and additional sales of their population health and care coordination solution (athenaCoordinator), it will present a compelling blueprint for other ambulatory EHR vendors and validates some of Jonathan Bush’s broader vision of what athenahealth represents.
