3.9.09 Start spreading the news


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We’ve shelved our previously scheduled column in order to comment on an interesting story: the Wal-Mart announcement about the deal with Dell and eClinicalWorks to offer a bundled hardware/healthcare software -- electronic ambulatory medical/health records (EMR/EHR) and practice management systems (PMS) -- solution targeted at small physician practices through Sam’s Club.  Wal-Mart EMR-PMS consortium 
 
As an aside, we like getting comments (jhlangworthy@healthios.com) about what we write.  On this story, we’d love to hear your views particularly if you end up disagreeing with our take or have an orthogonal view. We expect to re-visit this after HIMSS or sooner.  We’ve spoken to one CEO today who views this as a tectonic shift / sea change and another who yawned her ho-hum response that this was much to do a bout nothing.
 
The New York Times article quotes a common industry stat: “only 17% of the nation’s physician’s are using computerized patient records” according to a mid-2008 survey published by The England Journal of Medicine.  Large physician groups tend to use EMR-PMS, small physician groups don’t.  Small physician groups resist because: (1) they don’t see the value (code for it’s not free); (2) high cost of a complete system (code for it’s not free); and (3) complexity (code for it’s not free and no one wants to come in and teach them how to use it for free).  To paraphrase Triumph The Comic Insult Dog, “We kid, we kid, we kid” but cost is a determining factor for non-adoption as healthcare reform, reimbursement scale-backs, legislation, litigation, and market forces have put the damper on physicians’ ability to print money.  But the relevant statistic is that 75% of the nation’s doctors work in practice groups of 10 or fewer physicians and those folks haven’t been buying the electronic dog food that’s been put in front of them for a while. Vendors have been talking about pent-up demand, undeniable ROI, market forces, inevitability, but if the change is gonna come, it ain’t come yet.
 
Depending on its final form, the administration’s healthcare plan appears as if it will heavily subsidize the cost of acquiring EM/HR – PMS systems which will in and of itself accelerate adoption.  There are already vendors offering basic, entry-level PMS and EM/HR systems for free. Those vendors are getting some traction, but we think physicians will want more functionality and we’re not sure whether the freebie folks can keep up once public subsidies become available.
 
Wal-Mart’s initiative – and BTW we view Sam’s primary value-add as mind share, national brand, a 200,000 physician customer list, and a widely geographically dispersed distribution channel in the heart of heart of where the small physician groups reside – will highlight the wide availability, easy attainability, and relatively low cost of a very good bundled solution.  Unlike MSFT’s early “vaporware” product announcements for software that never came, we think this is very doable.  It’s almost spring, so we’ll see soon.
 
As to the eClinicalWork’s solution: we don’t want to endorse one product over another, but in this case we don’t have too. If you look at eCW’s Web site it has several of the features we outlined in our HIT 2009 Sector Snapshot (available upon request) that we think create sustainable, differentiable value: (1) it offers a PMS/EMR product suite versus point solution; (2) it has a significant and fast-growing revenue base (size counts); (3) it has a software-as-a-service (SaaS) offering (almost impossible to find new pure-play, enterprise-level, client-server offerings); (4) it uses scalable technology; and (5) it has multiple industry certifications and awards ranging from 2008 CCHIT to KLAS to TEPR to a 51 ranking on the 2008 Healthcare Informatics 100. The awards et al are akin to a Good Housekeeping Se al of Approval and we think the government will take notice in sterring money to end-users.  In any case, eCW puts out a good product.
 
The CEO’s tectonic shift comment must have been referring to the impact that the CEO thinks Wal-Mart’s announcement will make from a marketing perspective.  The prices quoted in the article (yes, the devil is in the details) are just not that compelling and certainly aren’t game-changers in and of themselves.  eCW’s Web site eClinicalWorks lists comparable prices to Wal-Mart’s,&nbs p;eCW doesn’t price out hardware,  but the all-in cost shouldn’t be materially different than Wal-Mart’s forecast prices, and eCW offers an ala carte selection of prices and services.
 
As to the Dell connection, Dell is …Dell.  Wal-Mart will be able to extract pricing concessions from both Dell and eCW, but the value of this arrangement to the HIT sector is that it spotlights an underserved, underpenetrated market.  If the administration can deliver on economic incentives, this entire market segment will benefit and not just Wal-Mart. Heck, even the patients may benefit.
 
As to the CEO with the ho-hum comments, “c’mon, don’t be a hater.” This is very good news for all the players and will have an impact. It’s not business as usual.  The pricing transparency, broadening geographic availability of a very good solution, and the coming subsidies may level-set the playing field and eliminate most of the pricing arbitrage opportunities for vendors who have gotten away with pricing above the market.  Then again, monopolistic and oligopolistic pricing isn’t consumer-friendly, and arbitrage opportunities aren’t supposed to be permanent.
 
Write me at jhlangworthy@healthios.com with comments.
 
See you next week.