by Vince Kuraitis JD, MBA and David C. Kibbe MD, MBA
Most of the press coverage and attention to HITECH has been to the “buy” side of the market: The central question here has been: “Will doctors and hospitals buy and use EHR technology?”
Meanwhile — and much more quietly — the sell (vendor) side of the EHR market is already dramatically different than it was a year ago. We observe change occurring at at least three levels:
- HITECH as Policy Change
- HITECH as Mindset Change
- HITECH as Technology/Business Model Change
1) HITECH as Policy Change
The HITECH legislation came in under the label “Stimulus”, but make no mistake that it’s far more than that. It’s major policy change which President Obama referred to as a “downpayment” on broader health care reform legislation. (In post #6 of this series, we’ll go a bit deeper into synnergies between HITECH and health reform legislation.)
2) HITECH as Mindset Change
Here are some representative quotes from EMR vendors:
What we’re telling our customers is, “We will be ready for you….We will be ready because we began the process of making the necessary changes to our products quite awhile ago. McKesson Provider Technologies, Sunny Sanyal, President
…(we) design interoperability into every portion of our solution portfolio. Eclipsys, Tom Cooke, VP and GM of Eclipsys Practice Solutions
…it’s important to note that the legislation wisely rewards, not the installation of EHR technology, but the effective use of that technology. MED3OOO, Jay Anders M.D., Chief Medical Information Officer
The only people in the market who are fighting connectivity are Epic, and their strategy is to say, “Sure, you’re connected as long as everybody’s on one system and it’s the same version.” …Epic is not only against connectivity, but they’re anti-innovation. From that standpoint, they’re kind of exactly the opposite of the connectivity model that the rest of the industry is working toward. Allscript-Misys, Glenn Tullman, CEO
Almost all health IT vendors are going along with the changes required by HITECH. We sense little resistance and even we are surprised how vendors have shifted their mindsets along with major aspects of their technology and business models.
3) HITECH as Technology/Business Model Change
We view EMR/EHR technology as migrating through different phases:
a) Yesterday: Monolithic EMRs
b) Today: Walled Gardens for Proprietary EHR Technology Platforms
c) Tomorrow: Open EHR Technology Platforms with Plug-and-Play Modular Applications.
The boundaries of these phases will be blurred and overlapping.
a) Yesterday: Monolithic EMRs. We’ve previously described the EHR technology industry as migrating from a monolithic, non-modular EMR 1.0 structure to a platform/application structure (see slides 11–17 of this PowerPoint presentation for a recap and visual depiction).
While monolithic EMRs are still a predominant offering in today’s market, its clearly yesterday’s technology.
b) Today: Walled Gardens for Proprietary EHR Technology Platforms. The term “walled garden” refers to business models that have been prevalent in the media and telecommunications industry. A walled garden controls users’ access to content and services; it restricts the user’s navigation within particular areas (applications). Walled garden business models are not all alike — there are differing heights and levels of permeability to the walls.
How “open” is a walled garden business model? It’s generally far more open than a monolith, but far less “open” than a platform COULD be. (The term “open” has many dimensions and its meaning is not generally agreed upon in the technology community; we’ll save a broader discussion of openness in health care for another day.)
The iPhone is one example of a highly successful walled garden business model. Apple has opened up its application programming interface (API) to outside developers, yet it maintains tight control over it’s proprietary platform through factors such as:
- Integrated hardware/software platform. The iPhone hardware and software are bundled together — you can’t buy the phone or the software separately.
- Non-swappable applications — iPhone apps must be programmed for the iPhone platform.
- Exclusive distribution. You can only buy apps through Apple’s store.
- Restriction on carrier choice — if you want an iPhone you have to get AT&T.
- Restrictions and controls on developers
Over 140,000 applications have been developed for the iPhone platform. The iPhone is praised for its tightly integrated user experience.
So — the iPhone is “open” in the sense that it allows outside developers to build apps, but it is closed in almost every other sense.
We see a similar pattern of walled garden proprietary EHR technology platforms emerging in health care TODAY:
Allmost all of these proprietary EHR technology platform models have been announced just within the past few months. There aren’t many details yet available, but one commonality is that similar to what Apple did with its iPhone, the vendors have opened up their APIs to outside developers.
We also note that these walled garden business models retain many aspects of the monolith business model — they are geared toward high pricing, high switching costs, and customer lock-in.
We believe the walled garden EHR technology platform model will be highly competitive in the near future. Similar to the iPhone, the need to tightly integrate the healthcare user experience is vital.
Our main points here are:
- To note the sheer number of walled garden proprietary EHR platforms emerging
- That we expect these to be more open and innovative than yesterday’s EMR 1.0 model
Should we expect to see even more open EHR platforms and business models emerge? Yes.
c) Tomorrow: Open EHR Technology Platforms with Plug-and-Play Modular Applications. Is the walled garden proprietary EHR platform the endpoint of evolution for EHR technology? We don’t think so….we see the probability of one or more open EHR technology platforms breaking through in the near future.
Why? To quote Willie Sutton, “…because that’s where the money is”.
As we’ve learned from platform/application business models in other industries, there’s a tension in value creation opportunities between platform vendors and application vendors:
- Platform owners (e.g., Apple iPhone) want to capture the value by maintaining tight control over their platforms
- Application vendors are incentivized to commoditize the platform so that value creation and value capture can migrate to the applications themselves
Let’s look at a non-healthcare example — Google Android. Android is an open, free software platform for mobile devices; it includes an operating system, middleware, and applications. Android is supported by the Open Handset Alliance, a group of more than 30 companies. The majority of the code is licensed under Apache2, allowing developers to add additional proprietary functionality without giving anything back to the platform.
Android is an open platform that is highly competitive to the Apple iPhone and highly disruptive to the walled garden business models of telecomm carriers (Sprint, Verizon, etc.) See the references below for more info on Android.
We believe one of more EHR technology platforms could emerge in the near future; the opportunities to create disruptive innovation and shift value capture are huge. There are many market proponents and market forces pushing to create plug-and-play modularity on an open EHR platform:
…we believe that it will be common in the near future for Certified EHR Technology to be assembled from several replaceable and swappable EHR
Modules. Health & Human Services, Interim Final Rule on Standards, December 2009 p.41
Google Health and Microsoft HealthVault. While both of these were fashioned as consumer-focused personal health information platforms, we see them as potentially becoming open EHR technology platforms.
Free or freemium EHR offerings such as Practice Fusion
ONC SHARP Grant for Childrens Hospital Boston and Harvard Medical School
Again, more detailed discussion of these initiatives is warranted but will be left for another day.
Let’s summarize and get back to the initial question “Is HITECH working?”
Yes, HITECH is major policy change.
Yes, HITECH is changing long-entrenched mindsets.
Yes, vendor business/technology models are rapidly migrating to walled garden proprietary EHR technology platforms. We expect these to be more innovative than the monolith of EMR 1.0.
Yes, vendor business/technology models are likely also to migrate to open EHR technology platforms with plug-and-play modular applications.
Guerra on Healthcare: Vendors Vie for Platform Space
Information Week; March 9, 2010
Apple iPhone vs. Google Android: Machine vs. Platform
BNET; November 10, 2009
Inside Google’s Android and Apple’s iPhone OS as Business Models
RoughlyDrafted Magazine; November 10, 2009
Android or iPhone? Wrong Question
abovethe crowd.com; January 5, 2010
Table of contents for Is HITECH Working?
- Is HITECH Working? 7 Observations Mom Could Understand
- Is HITECH Working? #1: Hospitals are grumbling but are playing in the game; success is not guaranteed.
- Is HITECH Working? #2: Key physicians will sit on the sidelines (at least for now).
- Is HITECH Working? #3: ONC got it right on the 3 major policy interpretations: Meaningful Use, Certification, Standards
- Is HITECH Working? #4: While most attention has been focused on demand side incentives (will doctors and hospitals buy EHRs?), the supply (vendor) side of HIT is already transforming.
- Is HITECH Working? #5: “Gimme my damn data!” The stage is being set to enable patient-driven disruptive innovation.
- Is HITECH Working? #6: HITECH and Health Reform Objectives are Synergistic
- Is HITECH Working? #7: Where’s Plan B? Congress and ONC need to address major flaws in HITECH.