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Investor Wants to Take Down Epic

Posted on October 13, 2014 I Written By

John Lynn is the Founder of the HealthcareScene.com blog network which currently consists of 15 blogs containing almost 6000 articles with John having written over 3000 of the articles himself. These EMR and Healthcare IT related articles have been viewed over 13 million times. John also manages Healthcare IT Central and Healthcare IT Today, the leading career Health IT job board and blog. John is co-founder of InfluentialNetworks.com and Physia.com. John is highly involved in social media, and in addition to his blogs can also be found on Twitter: @techguy and @ehrandhit.

I recently came across a really interesting comment from Chamath Palihapitiya, a venture capitalist (made his money working at Facebook), who commented on the healthcare industry and how he wanted to invest in a startup company that would take down Facebook. I embedded the full video below. His comments about EHR and Epic start at about 52:38 or you can click here to see it.

Here’s a great quote for those who can’t watch the video:

“Somebody has to go after the electronic medical record market in a really big way. Let’s go and take down this company call Epic which is this massive, old conglomerate. It’s like the IBM of healthcare.”

After saying this, he talks about how he and other VC investors like John Doerr could call people from Obama (for meaningful use stage 3) to Mayo Clinic to help a startup company try and take down Epic. He even asserts that he’d call Mayo Clinic and suggest that they should rip out Epic and go with this startup company.

Everyone reading this blog know that it won’t be nearly this simple to convince any hospital that’s on Epic to leave it behind. I agree with Chamath that it will happen at some point, but it won’t be nearly as easy as what he describes. Chamath also suggested that it might take $100 million and you might fail, but what a way to fail.

It certainly provides an interesting view into the way these venture capitalists and many startup companies approach a problem. However, I take a more nuance and practical approach of how I think that Epic will be disrupted. I think that it will require a mix of a new technology paired with a dynamic CIO that’s friends with the hospital IT leadership. You need that mix of amazing technology with insider credibility or it won’t be a success. Plus, you’re not going to go straight in and take out Epic. You’re going to start with a hospital department and create something amazing. Then, that will make the rest of the hospital jealous and you’ll expand from there until you can replace Epic. That’s how I see it playing out, but it likely won’t happen until after the MU dollars are spent.

Chamath’s comments were also interesting, because it shows that he doesn’t know the healthcare market very well. First, he said that meaningful use was part of ACA, but meaningful use is part of ARRA (the HITECH Act) and not ACA. This is a common error by many and doesn’t really impact the points he made. Second, he said that Epic is a big conglomerate. Epic is the farthest thing from a conglomerate that you can find. Has Epic ever acquired any company or technology? Cerner, McKesson, GE, etc could be called conglomerates, but Epic is not. Again, a subtle thing, but shows Chamath’s depth of understanding in the industry. It makes sense though. He isn’t an expert in healthcare IT. He’s an expert in seeing market opportunities. No doubt, disrupting Epic and Cerner would make for a massive company.

HFMA’s ANI Conference in Las Vegas

Posted on June 4, 2014 I Written By

John Lynn is the Founder of the HealthcareScene.com blog network which currently consists of 15 blogs containing almost 6000 articles with John having written over 3000 of the articles himself. These EMR and Healthcare IT related articles have been viewed over 13 million times. John also manages Healthcare IT Central and Healthcare IT Today, the leading career Health IT job board and blog. John is co-founder of InfluentialNetworks.com and Physia.com. John is highly involved in social media, and in addition to his blogs can also be found on Twitter: @techguy and @ehrandhit.

I’ve been gearing up for the big HFMA ANI (HFMA National Institute) conference happening in Las Vegas June 22-25. This conference is largely focused at hospital CFOs, but all of the solutions being offered are now leveraging some form of technology. So, I certainly have a learning curve when talking to many at the conference, but it’s a great place to see where hospitals really plan to spend their money.

I think this will be my third time attending the event and it’s quite the experience. While not as large as the enormous HIMSS annual conference, the booths are just as big and I think that more cash flows at ANI than at HIMSS.

I like to describe it this way. All of the deals being talked about at ANI are a question of whether the organization can save them $5 million or $100 million. In fact, a lot of the contract discussions at ANI have some form of performance metric in order for the vendor to get paid. It makes for a really unique experience.

You can see from the keynote speakers that they’re heavy on leadership. I always enjoy a professional leadership speaker, so I’ll do what I can to cover them. Plus, I’ve never heard Atul Gawande, MD in person and so that should be interesting.

My schedule at ANI is really filling up, but if you’re planning to attend I’d love to meet up if we can. We can at least hang out together at one of the evening receptions or parties. I always love to meet readers and learn from them.

Hospitals Need to Diversify – What’s It Mean for EHR?

Posted on May 27, 2014 I Written By

John Lynn is the Founder of the HealthcareScene.com blog network which currently consists of 15 blogs containing almost 6000 articles with John having written over 3000 of the articles himself. These EMR and Healthcare IT related articles have been viewed over 13 million times. John also manages Healthcare IT Central and Healthcare IT Today, the leading career Health IT job board and blog. John is co-founder of InfluentialNetworks.com and Physia.com. John is highly involved in social media, and in addition to his blogs can also be found on Twitter: @techguy and @ehrandhit.

In a recent article on Health CXO, they made the following comment:

In the report “Building Value: Investments Aimed at New Priorities Create Opportunities for Not-For-Profit Hospitals,” experts at the New York-based financial firm note that the decline in inpatient volumes seen over the past several quarters is no fluke but rather a long-term trend driven by health reform. This means that hospitals that want to remain successful need to look beyond just inpatient services and become full-service health systems that are able to follow the patients to the lower cost and frequently higher value outpatient setting. [emphasis added]

This trend is definitely worth noting. We’ve discussed the acquisition of outpatient clinics a number of times, but never the trend of declining inpatient volumes. The article suggests that the key to viability for a hospital will be to diversify into outpatient services. I’m not sure all hospitals want to become full-service health systems and so it will be interesting to see how this plays out.

Assuming this trend continues, I’ll be interested to see what this means for a hospital’s EHR strategy. Will they go with the one big EHR across their hospital and ambulatory environment? If you look at these recently posted EHR market share statistics, you can see that this method is happening a lot. As the deals get larger, I think we’ll see push back against moving to one unified EHR software. That presents an interesting opportunity for what Alan Portela and Airstrip are doing. Not to mention the need for a private HIE.

Epic Implementation Problems Lead To Lower Hospital Credit Rating

Posted on November 7, 2013 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

Of late, stories have begun to crop up about troubled Epic implementations and the financial problems that these shaky implementations can cause. In fact, we’re aware of at least one Epic investment which may have led to the departure of a CIO from a Maine hospital.

Now, we’re told that a troubled Epic implementation has led to the lowering of a hospital’s credit rating. Standard & Poor’s has lowered Winston-Salem, NC-based Wake Forest Baptist Medical Center’s debt from AA- to A+, primarily due to the problems Wake Forest has had in rolling out Epic, according to Becker’s Hospital Review.

According to a statement from Wake Forest, the EMR implementation had a bigger impact on the hospital’s finances and operations than it had anticipated, leading to poorer overall fiscal performance than expected for 2013. Earlier this year, the CIO for Wake Forest resigned in the wake of the Epic debacle.

Wake Forest spent about $13.3 million to bring Epic on board, and roughly $8 million on Epic-related expenses, but that doesn’t seem to have been the main reason the install caused financial problems. We know from a report in the Winston-Salem Journal that since the Epic rollout, the hospital said that it had lost $26.6 million in margin due to volume disruption caused by Epic-related problems.

The Epic implementation wasn’t the only reason for the downgrade. It came partly due to cuts in NIH research funding, lower volume growth, a lower provider tax and sequestration cuts, according to hospital CFO and vice president for finance Edward Chadwick. But clearly, the disruptions caused by the Epic install have been major.

S&P did show Wake Forest some mercy, changing its financial outlook from “negative” to “stable.”  The agency is predicting that the hospital should rebound financially in 2014 as the disruptive effect of the Epic install decreases.

EHRs Can Generate Meaningful Return On Investment

Posted on September 27, 2013 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

Well-implemented EMRs can certainly generate Meaningful Use incentive payoffs, but that’s far from the only way that they can help a practice generate return on their EHR investment.

According to “Return on Investment in EHRs,” a whitepaper sponsored by GBS, HP, Intel and Nextgen, properly implemented EHRs can do a great deal to generate ROI for medical practice above and beyond qualifying them for MU payoffs.

The paper notes that many practices have achieved a return on investment in their EHRs without receiving external incentives. As it points out, a Health Affairs study from 2005 found that while initial EHR costs averaged $44,000 per full-time equivalent, and ongoing costs averaged $8,500 per provider per year, the average practice paid for EHR costs in 2.5 years and generated a profit after that.

Eleven of the 14 practices studied by Health Affairs had “tightly integrated” EHR and practice management systems, a factor the paper contends was highly relevant to their success with their EHR implementation. Not only did providers use the EHR for common tasks, almost all used it to help with billing. Ten of the practices no longer pull paper charts at all, the study noted.

EHRs also improve efficiency and productivity in the following ways, the paper argues:

* More appropriate coding: Properly-designed EHRs help physicians with coding by displaying the appropriate code based on the documentation entered during a patient encounter. This avoids costly undercoding.

* Greater efficiency: The use of point-and-click templates lessens and in some cases eliminates transcription costs, which can be up to 11 percent of collections.

* Reduction in soft costs: Fully-enabled EHRs also remove many “soft costs” that practices occur, such as the time it takes to call in prescriptions. Also, once doctors learn how to use the EHR, they can complete most of the notes during or between patient visits, leaving them with time to either see more patients or go home earlier.

It’s great to think that medical practices can generate ROI on their EHR investment, but given that the sponsors of this paper have their own agenda, I’m not taking everything they say at face value. What do you think, readers? Have you seen situations in which practice EHRs generate significant ROI independently of what they take in in Meaningful Use dollars?

Hospital IT Investment Shoots Up

Posted on August 26, 2013 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

Struggling to keep up with the demands of Meaningful Use and ICD-10, hospitals are investing a disproportionate amount of money in health IT, according to a story appearing in Healthcare IT News.

It’s not that hospitals have been on an overall spending spree. Capital investment for medical equipment overall (including non-IT technology) dropped from 30.4 percent to 27 percent in 2013, while medical equipment costs fell from 44.5 percent to 13.8 percent, according to Advisory Board Company figures.

But capital spending per bed for IT grew 62 percent between 2010 and 2011, while total capital spending grew only 2.6 percent, according to Chantal Worzala, director of policy at the American Hospital Association, who spoke with the publication.

What makes these big-dollar investments particularly galling is that CIOs aren’t sure whether all of this IT spending is going to produce a return on investment, according to Healthcare IT News. According to a January 2013 survey by Beacon Partners of more than 200 hospital CIOs, only 40 percent of them measure ROI on EMRs implemened, and even less (36 percent) are confident that their ROI calculations are accurate.

That being said, many CIOs have taken the position that ROI is less important than “strategy enablement,” according to Jim Adams, executive director of research and insights at the Advisory Board Company, who spoke with the magazine.

One key purpose for making these investments is to make sure they have the right infrastructure in place to shift from fee-for-service to accountable care, Adams said. Added IT infrastructure is being  used to prepare to manage the greater financial risk hospitals will be facing under ACO-type models, he suggested.  And at least some of these dollars are being spent on EMR optimization which can help meet that goal.

Another major area of spending within health IT is data security, including mobile device management software to support BYOD, data loss prevention tools and encryption software, HIN reports.

We should know pretty soon whether hospitals made the right IT bets, as the forces pushing them to spend are cresting. But if they find that they need to rethink their strategy, let’s hope they didn’t bet the farm on what they have;  as my colleague John points out, there’s a myth floating around out there that the more expensive an EMR is, the better it is.

Hospitals’ Bankruptcy Fueled By EMR Complications

Posted on June 7, 2013 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

In theory, after they get through their growing pains, hospitals should be able to leverage EMRs and new billing systems to improve their financial condition.  In the following case, however, the installation of these new technologies seem to have been the straw that broke the camel’s back.

A group of New York hospitals is $200 million in the red, and owes debts to about 3,000 creditors, a fact which came out in the hospitals’ recent bankruptcy filing. Sound Shore Medical Center of New Rochelle, Mount Vernon Hospital and five related entities have only $159.6 million in assets, according to the Healthcare Renewal blog.

Rather than go out of business completely, the hospitals have found a savior in Montefiore Medical Center, which is offering to buy the group for $54 million plus furniture and equipment.

What’s interesting here isn’t another sad hospital bankruptcy, which are all too common these days, but the reasons for the hospitals’ unfortunate financial condition.

One cause is financial bleeding which began way back in 2006, when the hospitals began seeing falling patient volume and a negative change in their case mix.  In recent times the hospitals have been seeing “significant” losses, negative cash book balances and bills  paid more than 225 days late, the blog notes.

All of that being said, the real kiss of death seems to have come in 2011, when the hospital did an EMR and billing system conversion.  Rather than helping matters, the conversion “caused major delays in billing and cash collection that still haven’t been fully solved” two years later.

I didn’t write this story up to trash EMRs or billing system  upgrades, of course. But it is worth noting that EMR installations aren’t just an expense, they’re a threat to a hospital’s financial well-being if things don’t go well.

Do We Need To Allow Hospitals To Donate EMRs?

Posted on May 28, 2013 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

Today I was looking through my Twitter inbox and found this complaint, by @lee_ritz:

EMR systems are putting private physician groups out of business–we can’t afford to compete with the big hospital groups.

Certainly, it’s hard to argue that some EMRs can put a big strain ( as much as $50K+ per doctor) on medical practices . And for those in low-margin specialties like primary care, perhaps that could be the death-blow financially. But are we at a point where we need to somehow pay for EMRs for small practices above and beyond Meaningful Use incentives?

One way to address this problem comes straight from the loving arms of the American Hospital Association.

Right now, the HHS Office of the Inspector General has proposed a rule which would extend the EMR safe harbor  — allowing hospitals to donate EMRs and health IT to practices and not face a kickback investigation — from the end of this year until December 31, 2106.  Looked at one way, that’s a pretty good offer, as it and gives both hospitals and medical practices the change to get those donated EMRs in place and situated while both sides iron out Meaningful Use issues.

The AHA is arguing that safe harbor protections should be made  permanent. Its executives argue that the safe harbor is a valuable tool for getting health IT into the hands of rural physicians; that with the donations, hospitals can provide the tech support, training and maintenance medical practices need to use EMRs properly; and that hospitals can donate EMRs to physicians across entire areas, ensuring interoperability.

The AHA also notes that not all providers are eligible for Meaningful Use incentives, and that new physicians, presumably needing hospital help to get their EMRs rolling, will begin to practice after the deadline has passed. And on top of all of this, the AHA letter to the OIG states, changes in interoperable technologies will require new donations going forward if doctors and hospitals are to stay connected.

Is this the solution to the problem of making sure cash-strapped smaller practices can afford to have powerful EMR technologies that connect with hospitals and peers?  It’s hard to say, but I do think there’s some merit to at least extending the protections further and keeping a close eye on what happens.

In this day and age, when getting EMRs into medical practices is such a key federal objective, it does seem to me that the hospitals deserve a generous turn at bat.  After all, the money has to some from somewhere.

Again, With More Gusto: Could Meaningful Use Incentives Be Slashed?

Posted on March 15, 2013 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

As readers of this publication know, your editor has previously held forth on the issue of whether Meaningful Use incentive funds could be cut in the current rush to snip budgets.

With the sequester seemingly moving forward, though, and continued budget-cutting fights underway, it seems a good time to address the matter again.  So I’ll plow on, partly in response to a nicely-detailed editorial by Tom Sullivan, editor of Government Health IT.

In his editorial, Sullivan notes that 40 percent of its readers expect health IT’s bipartsan support to continue, while 25 percent argue that opposition to health IT spending is brewing on the Hill. (Another 36 percent of his readers argued that health IT momentum would continue whether or not government keeps on doling out incentive funds.)

But are his readers right about the political climate?  To get more insight, Sullivan speaks to some authorities on the subject of health IT spending, including Scott Lundstrom, group vice president of consultancy for IDC’s Health Insights Unit.

In his comments, Lundstrom points out that while there’s probably enough support for health IT capabilities — notably improved processes and quality and controlling healthcare costs — there’s a catch.  He suggests that funds from HITECH which pay for the incentives, $10 billion of which still haven’t been disbursed, are a tempting target for budget shrinkers, possibly under the mantle of clawing back stimulus funding.

Lundstrom’s on to something there. Given that the stimulus was not a bipartisan project, it does seem to me that health IT fans may finally have something to worry about. That’s especially true given the letter four congressmen wrote to HHS in September arguing for a halt in Meaningful Use disbursements until better interoperability was achieved.

I’m not a political junkie and have no access to Capitol Hill chatter on this subject. But as a supporter of Meaningful Use payouts generally — if not every detail of their execution — I’m troubled by Lundstrom’s analysis, as I do think the lack of progress on  interoperability to date gives MU foes a toehold.

Cutbacks on EMR incentives would probably do little to stop the automation of hospitals.  But I think it’s fairly clear that market momentum would not push the reluctant small group practices which are still health IT challenged to pick up costly, confusing, hard to use EMRs without some reward for their efforts.  It’s that sector we should be worrying about if the budget cutters’ eye turns to that $10 million incentive reserve.

Accenture: Five Questions Hospital Boards Should Ask Before EMR Buys

Posted on January 24, 2013 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

As we’ve noted in the past, hospitals are on not only an EMR buying binge, they’re doing a lot of switching from one EMR to another. Check out these stats from Accenture:

Accenture research shows that 4 to 4.5 percent of hospitals plan to make an EMR buying decision each year. This
could exceed 110+ EMR contracts or 200 to 250 hospitals per year. This trend is expected to continue well into the
future. In fact, in 2012, 50 percent of EMR deals [were] replacements, up from 30 percent in 2011, according to KLAS Research.

Whether your hospital is a switcher, a late adopter or  planning some kind of EMR upgrade, it’s making a decision of grave importance. So what are some of the key considerations boards should bear in mind? Here’s Accenture’s list of five key questions boards should keep front and center as they consider (more)  big EMR investments and plan for the future:

*  Does your current system offer enough functionality to meet up and coming Meaningful Use requirements, such as the ability to make patient family health histories and imaging results available? Does your current or contemplated EMR vendor have plans in place to keep up with future requirements/changes?

*  Is the EMR vendor’s development strategy in line with your strategy? “Boards should ask of the EMR vendor: do they have adequate resources…to help complete the business roadmap on time and successfully?” Accenture asks. And just as importantly: “Can the vendor help ensure that future product functions are strategically aligned to the healthcare [system's] key initatives?”

* Is your hospital currently on track to meet ICD-10 adoption and Meaningful Use Stage 2 requirements?  Is your vendor going to be able to help support you in these efforts as your hospital works to meet these multiple goals, or does it lack the resources to do so?

* If we decide to switch EMRs, do we have the internal resources needed to support such a bandwidth-sucking effort? Given competition for healthcare IT labor today, will you have the ability to hire on additional resources if needed? And while you’re at it, is your C-level and IT leadership solid enough to make such a treacherous journey?

* Can your hospital afford to switch EMRs, bearing in mind not only direct costs such as licensing, implementation and new technical support, but also ongoing support costs in the neighborhood of 20 percent per year?

To answer these questions, Accenture recommends you conduct an independent analysis of EMR vendors (presumably, rather than relying on analyst firms or peer feedback exclusively).  This sounds like a very good idea to me.