EHR Drivers - the Frost & Sullivan report is interesting but perhaps things are more straight forward?

DWillcutts - 09/01/2010

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A recent Frost & Sullivan report predicts the EHR market will double from $1.3 billion to $2.6 billion between 2009 and 2012 before market saturation occurs and revenues level off at $1.4 billion. Information Week spoke to one of the authors of the report and highlighted what they felt are the drives of this change. While I think the points are valid they seem on the one hand a bit obvious and on the other they perhaps miss the larger picture. The drivers they highlighted include:

(#1) changes in reimbursement
Well OK, I think this can go into the obvious category, except for the fact that by reimbursement changes they are actually referring to models beyond the current fee-for-service. I'm not sure I agree this is truly a driver today. They do not mention the “reimbursement” penalties, which I believe are the stark reality truly driving adoption, at least if you plan to have a medicare patient population. New payment models are always being discussed but I don’t believe organizations see this as the compelling reason to launch such massive efforts. I also doubt the incentive payments would push providers if they didn't know there was a heavy stick eventually.

Older systems not able to keep up with the new ICD-10 and HIPAA 5010 requirements
I agree that this is a likely driver to purchase newer systems.  Why struggle to adapt to all of the regulatory changes when you have an opportunity to leap frog the migration path.  Although I agree it is important I still don't see it as a major driver.  Most smaller sized organizations are just getting up to speed on these requirements so I think it is a driver to the newer systems, but not actually the driver to jump into EHRs.

Physician Practice Ownership
I think this issue may be the most interesting point. All of these pressures - IT investment, reimbursement pressure, regulatory compliance - may be driving smaller practices to join larger organizations. If this consolidation does occur (as many have predicted now and at other times) the impact to the market will be significant.  Certainly it will impact the 300+ EHR vendors, but more importantly it will change the overall landscape.  How would provider pricing leverage change?  Would this be good for potentially new reimbursement models or will it hold those efforts back?

Drivers of EHR adoption are interesting to debate, but when considered within the larger health care reform landscape it can really open possibilities.  Regardless of the drivers, most see these changes coming.  Some will join kicking and screaming, some will fold into larger organizations and still others will lead. What comes out of this new market dynamic will almost certainly create new winners and new losers.