Federal ARRA ‘stimulus funding’ subsidies starting in 2009 for fast EHR adoption and ‘meaningful use’ cushioned premium pricing for the primary care practices most likely to adopt (Medicaid and Medicare). EHRs proliferated–hundreds in the practice market alone, with perhaps two or three nearing 5% market share each with the rest having perhaps a few hundred practices. The move to cloud-based systems increased profitability–then collapsed pricing as companies could undercut each other on factors like automatic updates and service packages. One EHR, Practice Fusion, now offers a bare-bones system for free with advertiser support. Reportedly, doctors currently wanting to switch from their current EHRs is as high as 50%.
Unlike the article writer, Editor Donna’s 2013 prediction is that the current pack of EHR systems will either merge or die off quickly, as the well-financed, well-integrated (into true practice management and patient engagement), certified (ONC, Surescripts) and trusted systems increase their market share. This brings healthcare tech developers both good and bad news on the investor front. The good news: the money that was diverted to EHRs can go to more effective technologies. The bad news: investors, once burned, may be very shy on investing strategically up front only to wait for returns over a longer time frame, which is what most health tech requires–and doctors, burned by their EHR experience or if not an adopter, distrustful–will be cautious of adopting another bit of ‘all-solving’ technology. As one EHR company shuts its doors, is it too soon to think consolidation? (MedCity News)
Update. More on the slowing pace of EHR investment from a long-time observer, Anne Zieger, writing in Hospital EMR & EHR. According to market analyst Mercom Capital Group, there was exactly one EHR funding in 3rd Q 2012–for $1 million, with two M&A deals and one refinancing of debt (pages 7, 11). Only four deals involving $52 million in financing for EHRs have been completed to date this year. While up from 2011, it is now only a small percentage of other HIT deals–and dwarfed by other financings in mHealth (Telcare), health insurance exchange automation (Connecture) and business analytics. And VC funding in HIT has been up for five quarters, which further confirms the reallocation of investment. But telehealth is a fraction of all funding, and quite variable every quarter (page 6). EMRs Snag Just One VC Investment Last Quarter. Mercom Capital Group Healthcare IT Funding and M&A (link to PDF)