Big vendors don't plan to cut prices

March 23, 2007
Ken Terry

The author is a former senior editor of <i>Medical Economics</i>.

Despite the rising competition from companies offering certified EHRs for half of what the name-brand vendors charge, some of the latter say they have no plans to lower their prices.

Despite the rising competition from companies offering certified EHRs for half of what the name-brand vendors charge, some of the latter say they have no plans to lower their prices.

Glen Tullman, CEO of Allscripts, points out that the ambulatory EHR market is "enormous" and "under-penetrated." Based on Allscripts' research, he says, less than 5 percent of practices with one to three physicians have EHRs, compared with 18 percent of practices with four to 24 doctors, and 35 percent of groups of 25 or more physicians. So there's plenty of room for the Allscripts and eClinicalWorks of the world to coexist and thrive, he says.

Tullman notes that Allscripts spent $300 million to buy A4, a vendor whose Healthmatics EHR is aimed at small and mid-sized practices. Ninety percent of A4's customers, he says, are in groups of fewer than 10 doctors. A4 doesn't do much business with really small practices; but it could, he says, if more physicians in that category were ready to purchase EHRs.

What will bring prices down for the end user, Tullman forecasts, is that "somebody else will pay for it." By "somebody else," he means hospitals. At the recent HIMSS conference, he notes, dozens of hospital executives approached him to discuss the new possibilities they have to help physicians acquire EHRs because of the Stark rule changes.

There will be some "inherent price compression" in the market, predicts Tullman. But physicians will continue to buy more sophisticated—and expensive—products that will help them compete for pay for performance rewards, he concludes.

Patrick Cline, CEO of NextGen, also foresees that hospitals will subsidize EHRs for certain physicians affiliated with them. "We've seen an uptick in demand from hospitals for product because of Stark," he says.

Despite competition from low-cost EHRs, he says, "It's not NextGen Healthcare's intent to reduce our price to meet a low-end vendor's price. We feel that at our price point we deliver far better value.

"Our system might cost a small practice $10,000 more than one of those products. But if our system has a feature that automatically pulls in Medicare and other third party payments and automatically posts it to patient accounts and rebills secondary insurance without significant operator intervention, and a low-cost vendor's system doesn't have that feature, the practice needs a full-time employee to open the mail and post all those third-party payments. Our system costs $10,000 more; theirs takes an extra employee. Which is a better buy?"

With regard to the EHR portion of NextGen's system, Cline cites the advantage of being able to collect data for P4P programs. He notes that, starting July 1, CMS will pay a 1.5 percent bonus to practices that submit quality data, "and our system can handle that. Most of the low-end systems can't do that." Some of these vendors, he adds, might not be able to keep up with new EHR certification requirements. NextGen plans to seek 2007 certification, he notes.