Ongoing federal program to encourage providers to adopt EHRs is not without its critics who contend the market is dominated by nation’s biggest health IT companies

News reporters have finally begun to notice that it is boom time for vendors of electronic health record (EHR) systems. Over the past three years, revenue and profits have soared at the nation’s biggest health information companies.

Of course, pathologists and clinical laboratory managers had front row seats to watch these events as they unfolded in recent years. Since 2010, every clinical laboratory and anatomic pathology group has been working to interface their laboratory information systems (LIS) with the EHR systems of parent hospitals and client physicians.

Gold Rush Is Filling Coffers of Nation’s Largest Vendors of EHR Systems

Trigger to this gold rush was the authorization of 2009’s federal HITECH legislation to fund financial incentives of as much as $25 billion. The money will be paid to those providers who implement and use EHRs. No less an authority than The New York Times has observed that it is the nation’s largest vendors of EHR systems who are getting rich from the deal, as described in a recent story that the newspaper published.

Annual sales at Chicago-based Allscripts Healthcare Solutions (NASDAQ: MDRX), doubled from $548 million in 2009 to $1.44 billion in 2012. Allscripts is a provider of clinical, financial, connectivity and information solutions, including the Sunrise Enterprise clinical suite.

To promote the federal incentives for implementing and using an electronic health records (EHRS) system, the Centers for Medicare & Medicaid Services developed logos like the one pictured above. In recent years, most clinical laboratories and pathology groups have been kept busy with requests to develop interfaces between their laboratory information systems and EHRs at their parent hospitals and referring physicians. (Logo by CMS.gov.)

During the same three-year period, sales rose 60% at Kansas City, Missouri-based Cerner Corporation (NASDAQ: CERN). Along with its various software systems for hospitals and physicians, Cerner sells a popular EHR system.

EHR vendors’ newfound wealth is the result of the multi-billion dollar incentives contained in the American Recovery and Reinvestment Act of 2008 (ARRA). Better known as the economic stimulus legislation, ARRA was passed after years of behind-the-scenes lobbying by Allscripts and others, reported The New York Times.

Politics of Health Information Technology

News outlets have reported on the access health IT executives have had to the current administration. For example, Allscripts former CEO Glen E. Tullman had close ties to President Obama. He served as health technology adviser to Obama’s presidential campaign in 2008. He also was a major contributor to the campaign and a frequent guest at the White House during 2009.

For its part, Cerner contributed heavily to political campaigns and doubled its lobbying dollars to nearly $400,000 between 2006 and 2012, according to the Center for Responsive Politics, a nonpartisan research group based in Washington, DC.

Consequently, the big players–Allscripts, Cerner and privately held Epic Systems Corporation (EPISYSP) of Verona, Wisconsin—have reaped the majority of rewards from this legislation, according to industry executives.

“Nothing that these companies did in my eyes was spectacular,” stated John Gomez in the New York Times story. He is former head of technology at Allscripts and currently is Executive Vice President and Chief Technology Strategy Officer at Eclipsys (NASDAQ: ECLP). “They [these companies] grew as a result of government incentives.”

Meanwhile, executives at smaller companies offering EHR products contend that the federal legislation was designed to favor the big players due to their lobbying. As written, they say the current legislation makes it difficult for other companies to break into the business and innovate. Among them is Jonathan Bush, co-founder of Athenahealth, which sells one of the nation’s few cloud-based EHR systems.

“These companies that should have been dead were being put on machines and kept alive for another few years,” Bush told The Times. “The biggest players drew this incredible huddle around the rule-makers, and the rules are ridiculously favorable to these companies and ridiculously unfavorable to society.”

How Clinical Laboratories Are Affected by Events

Domination of the market for digital health records by a few big corporate vendors is stifling innovation, say critics. That makes it tougher for smaller, entrepreneurial companies. It may also slow movement towards a nationwide health information exchange (HIE), as some of the systems offered by the big vendors operate on a closed platform. This presents interoperability issues for universal connectivity.

For example, Epic is a closed EHR system. It is in use at major academic medical centers across the country. Among them are Cedars-Sinai Medical Center in Los Angeles, the Cleveland Clinic, Johns Hopkins Medicine in Baltimore, and University of California San Francisco Medical Center (UCSFMC).

It is also in use at large healthcare organizations, like Kaiser Permanente. Kaiser expects to spend a total of $4 billion on software, equipment and employee training to fully implement its EHR solution across all its hospitals, clinics, and other facilities.

Comments About EPIC’s EHR System

One market advantage for EPIC is its single, integrated patient database. But critics contend the software is difficult to use, the system has a closed platform and thus cannot easily share patient information with other systems, and it requires doctors to spend extra hours updating patient care records, noted The New York Times article. “On a really good day, you might call the system mediocre, but most of the time it’s lousy,” said Michael Callaham, M.D., Chairman of the UCSFMD Emergency Department of the Epic EHR system launched by his hospital 10 months ago. By contrast, Michael Blum, Chief Medical Information Officer at UCSFMD, told The New York Times that a majority of doctors there like the Epic system.

Additionally, a Forbes report pointed out that digital health entrepreneurs complain that Epic’s dominance in the hospital market and its closed system shuts out third-party cooperation. In turn, this hinders their progress at supporting tighter integration of health informatics.

Noting national interoperability standards, Epic Systems Corporation COO Carl Dvorak refuted the industry perception that the system is incompatible with others. “That couldn’t be further from the truth,” he told Forbes, contending that one-third of Epic electronic health record transactions are with non-Epic systems.

That includes rivals Greenway Medical, NextGen, Cerner, and Allscripts. In the Forbes report, however, it was noted that connections with the latter two companies are more in theory than practice.

But despite their criticism, in a survey conducted by venture capital firm InterWest Partners, these same health IT entrepreneurs ranked Epic as a company they’d wish as their own, along with Google.

EPIC Holds a Market Share for EHRs Estimated at 50%

As noted by Forbes, some hospital executives are not thrilled with EPIC’s EHR system either, but they are willing to shell out millions to buy it. In fact, Forbes noted that, despite the system’s drawbacks, Epic has captured nearly half of the nation’s market for electronic health records, generating $1.5 billion in revenues last year.

Mark Laret, CEO of UCSFMC, explained at a conference last year why Epic is the market leader: “Epic is not successful because it’s so good, but because others are so bad.”

What is noteworthy for clinical laboratory managers and pathologists is the recognition, by such respected media sources as The New York Times and Forbes, that federal EHR incentives are enabling the nation’s biggest health information companies to grow rapidly and concentrate market share. This gives these companies both the cash flow and the market clout to further increase their dominance. How this may shape future consolidation within the EHR marketplace has yet to be determined.

—By Patricia Kirk

Related Information:

A Digital Shift on Health Data Swells Profits in an Industry

Cerner Corporation Enters the Clinical Laboratory Automation Market by Acquiring Labotix Automation Inc.

Epic Systems Or The Love-Hate Relationship

Epic Systems Says Alliance Between Electronic Health Records Vendors Caught It By Surprise

Digitizing Health Records, Before It Was Cool

Centers for Medicare & Medicaid Services: Medicare and Medicaid Incentives and Administrative Funding

HIE 2.0 Approaches as HIE Connectivity Delivers More Value for Patients and Providers