EHR market consolidation and the impact on physicians

January 2, 2019

What does the shrinking market mean for physicians?

Russell Libby, MD, selected his EHR system because it has the features and functions that best fit the needs of his practice.

He worries, though, that the features that make this EHR work so well for him and his practice colleagues could be eliminated if his EHR vendor merges with another-as so many other vendors have done.

“Not enough doctors pay attention to what’s happening with healthcare technology. But there are some who are worried, and they’re worried because they’re aware of the ramifications,” says Libby, president of the Virginia Pediatric Group and a board member of the Physicians Foundation.

Libby’s concerns are well-placed. The number of EHR vendors has dwindled in recent years following numerous mergers and acquisitions, dropping from 1,000-plus 10 years ago to approximately 400 now, according to KLAS Research, an Orem, Utah-based health IT review firm.

Libby and others say they expect more vendor consolidation in the future, a fact that could leave physicians with a host of problems, such as reduced levels of tech support, increased fees, and the need to migrate to a new system.

Health IT experts say physicians should keep an eye on EHR industry news and take steps to safeguard themselves to ensure practice continuity should their vendor merge with another.

“There’s only so much a practice can do about vendor consolidations, but physicians can be vigilant and make sure they do all they can to protect themselves and their practice. What they don’t want as a practice is to be unprepared and not know what their options are,” says Robert Tennant, MA, director of health information technology policy at the Medical Group Management Association.

Market dynamics favor consolidation

The EHR market expanded rapidly in the past 20 years, with technology advances and government incentives spurring physicians and healthcare institutions to move from paper-based to electronic records. The percentage of physicians using EHRs jumped from 18 percent in 2001 to 57 percent in 2011 to 87 percent in 2015, according to the Office of the National Coordinator for Health Information Technology (ONC).

ONC figures from 2017 show that most physicians – or 64% -- use one of seven major vendors; Epic Systems Corp. and Allscripts lead the way with about 33% of the physicians as customers. 

But tens of thousands of physicians use EHRs from other vendors, from well-known makers such as Practice Fusion and eMDs to dozens of niche companies that cater to the unique needs of medical specialists or small independent practices.

However, consolidations in recent years have shaken up the market, as various vendors bought up others to gain market share, break into specialty practice areas or bolster their financial prospects, says Aaron Gleave, director of research for the ambulatory market at KLAS Research.

Much of the acquisition activity has involved small EHR vendors being bought up, but plenty of mid-size and larger vendors were acquired as well. For example, health IT vendor eMDs bought several tech assets, including EHRs, from McKesson Business Performance Services in 2016. And in 2018 Allscripts acquired Practice Fusion for $100 million.

Joel White, executive director of Health IT Now, a nonprofit group promoting the use of information technology in healthcare, predicts more consolidation in the future. He says EHR vendors are seeing fewer customers needing new implementations, as most physicians and healthcare institutions have EHRs by this point.

As a result, vendors are looking for other ways to grow their customer base and revenue streams while positioning themselves to compete. White says vendors are looking at acquisitions as one strategy to reach those objectives.

Gleave, White and others say small EHR vendors and those servicing niche markets are most likely to be targeted for acquisition, as they typically are weaker financially than the larger players in this market. But industry experts say even major EHR vendors could be bought by even larger companies within the health IT space as well as by large companies outside it.

“Everyone is making acquisitions of some kind, whether they’re adding additional EHR players to their portfolios or acquiring companies that would be considered ancillary products as a complement,” Gleave adds, explaining that an EHR vendor may see a strategic advantage to buying a company that makes patient outreach systems or a revenue management software vendor may want to buy an EHR vendor as a way to grow marketshare.

Implications for physicians

Many physicians are nervous about these market dynamics because they fear that consolidations could negatively impact their practice.

Physicians could see changes to the monthly fees charged by their vendors and tech support levels, Gleave says. Worse, they could see their EHR system phased out, forcing them  to migrate to another product.

Libby says some physicians worry that the functions they like in their existing EHR could change and that the niche offerings within their existing EHR might disappear. “That could really impact [the practice] and create some significant long-term problems,” he says.

Gleave says mergers among EHR vendors do not always lead to problems for the physicians using those systems; he says many vendors work hard to take care of their customers before, during and after the consolidations. However, he adds, even if a transition between vendors goes smoothly for a physician, such mergers still generally result in some changes to the EHRs, service level agreements, and fees.

Physician preparation

Although physicians can’t stop consolidations, they can take steps to limit the potential for negative impacts to their own practices.

Gleave says physicians should have a good handle on their data –where it is and how to transfer it. “Make sure your data is ready to grab and go. Know very specifically what the process is to migrate your data from your existing vendor to another-what’s the timeframe for the work, what’s the cost, and what format is the database in,” he says, noting that each vendor has its own procedure and associated costs for transferring the data.

He says EHR vendor contracts typically spell out this information, so physicians should start by reviewing their contracts (on their own or with a lawyer) and then discuss with their vendor any details that remain unclear.

White says the federal 21st Century Cures Act, passed in 2016, could provide some help. He says the law incents vendors to make it as easy as possible for physicians to export their data out of the vendors’ systems-although other health IT experts say they’re not sure this new law will do much to reduce the challenges or costs of transferring data.

Gleave says physicians should have a list of a few vendors with products that could fit their needs so they can move quickly if they must find a replacement.

Meanwhile, physicians who find themselves with a vendor being bought by or merging with another should contact their vendor immediately to ask several key questions, Tennant says. These include how the merger will proceed, the timeline for consolidation, and what support the vendor will provide during any transition from one EHR version to another.

In addition, they should ask how fees, service and support will change as well as what features, functions, templates and other user interfaces could change and when. And physicians should work with their existing and new vendor representatives to determine whether changes resulting from the merger would impact any of the new EHR’s integration with other systems.

Market consolidation pros and cons

White says mergers among EHR makers could bring many positives to physicians. “When I think about vendor consolidation, I’m thinking about products becoming more usable, more functional and more customer friendly,” he says.

He says the consolidations could yield economies of scale for vendors, giving them more capital to invest in developing innovative capabilities. He predicts vendors will want to focus more on developing additional functions and more user-friendly features to better compete in the marketplace moving ahead.

“The vendors will need to compete in delivering value,” he adds, noting that as EHR vendors have seen a drop in the number of new customers implementing EHRs for the first time they now must compete on better usability to retain and attract customers.

Libby, too, says market consolidation could yield benefits such as increased interoperability among physician office systems as there will be fewer systems with unique integration requirements. 

But Libby says consolidations could bring challenges for physicians. Physicians who have to switch to a new EHR as a result of a consolidation may face unexpected costs as well as lost productivity as they learn to navigate a new system-both of which are particularly hard blows to small practices struggling to survive financially. And physicians could lose the strong relationships that they built with their vendors, should they be acquired by bigger companies. 

Those negative impacts could hurt practices, Libby says. “Those ripples [from EHR consolidation] can become waves that overwhelm practices,” he adds.

Gleave likewise says market consolidation could hurt practices, as acquiring EHR vendors could raise fees, change service levels and eliminate features that individual physicians rely on.

“Support is a big concern, particularly for small practices. They don’t have deep pockets and they feel vulnerable in the marketspace,” he says.

Libby also says there’s the possibility that market consolidation could lead to near monopolies, which have traditionally meant lower levels of innovations and higher rates charged to customers.

“That’s a fear that many of us have,” he says.White, too, says he sees potential for consolidations to create difficulties for physicians, such as when their EHRs are discontinued following mergers. White says the government entities should oversee consolidations to ensure such scenarios are kept in check and to ensure a near monopoly doesn’t emerge in the EHR market.

“There’s no guarantee that this will all be positive; I think there’s risk of harm to the consumer with consolidation. That’s why we need oversight,” White says. “But my expectation is we’ll see a lot more innovation as a result and that’s good for doctors and, more importantly, it’s good for patients.” 

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