The U.S. market for new sales of enterprise health information technology (HIT) in large hospitals is dwindling, despite the incentives heaped upon the market by the Health Information Technology for Economic and Clinical Health (HITECH) Act. While buying has picked up a bit, this uptick is universally acknowledged as a short-term blip which will run its course as timelines expire and federal funds are depleted. For U.S. vendors of HIT, a logical question arises, “where do we go next?”
The Middle East garners some attention, but Europe is a natural choice for market expansion given the comparable standard of living and adoption of technology. Yet, despite years of effort and millions of dollars invested there, U.S. companies struggle to gain a real foothold in Europe.
All Politics is Local
Each country in Europe has its own healthcare climate due to differing approaches to healthcare administration. For example, France would seem to be an inviting market due to its size, amount of money dedicated to the healthcare system, and relatively high proportion of private hospitals. However, U.S. companies unexpectedly struggle to make inroads due to the strong French preference for a local company with local staff. If foreign companies want to sell there, whether American or European, the company must have a local office with local executives, at the least.
Italy also represents a large market, but does not represent a single HIT market. The healthcare governance system has, in effect, created twenty regional markets where each administrative zone has authority to set unique rules and guidelines, thereby influencing vendor selection criteria and funding capacities. Vendors which decide to build a presence in Italy will need to create regional strategies for each administrative zone.
The Right Price
Compared to their counterparts in the U.S., hospitals in Europe typically purchase enterprise HIT at a significantly lower cost. These prices range widely depending on geographic region and hospital type. Also, because of political issues with local, national, and European Union tender processes, the sales cycle can take two to three times longer than even the largest IDN deals in the U.S.
Hospitals in the Netherlands expect to pay a price that is nearly on par with what a comparable hospital in Canada would spend on an enterprise solution. Yet, across the border in next-door Germany, that same product would have to be priced nearly eighty percent lower for consideration.
Relative HIT Prices for Large Hospitals
HIT Priorities Vary
European hospitals have a set of functional priorities which diverge from the priorities which U.S. hospitals have. The following are a few of the more prominent examples:
- Nursing: While CPOE is a huge priority in the U.S. and a centerpiece of meaningful use initiatives, European hospitals and vendors have focused more attention on automating nursing functions. That is not to say they do not have physician ordering tools, which they do, but nursing has been more of a priority.
- Closed-loop medication administration: U.S. vendors would be treated as second-rank if they did not have closed-loop capability with tightly interwoven pharmacy functionality. Not so in Europe where lack of closed-loop is fairly common and is not a high priority during the tender process.
- Connectivity: Beyond robust data flow within a hospital, sharing clinical information regionally within countries has long been a priority in Europe. Several countries have constructed digital spines to which vendors must connect in order to allow client hospitals to share clinical patient information with other hospitals, regions and government agencies.
Who has crossed the pond?
No U.S. firm has yet to find cross-national success in Europe with enterprise clinical solutions. The best-selling large-hospital vendors in the U.S., Cerner and Epic, have found very limited success in promoting their clinical application suites to European hospitals. Cerner initially won business with the NHS Trust in the UK, but those implementations were not particularly successful. Epic seems committed for the long haul in Northern Europe but its growth has been modest thus far. McKesson seems to be withdrawing from certain European markets, and Meditech isn’t spoken of much in Europe. Some U.S. companies may decide to acquire their way into Europe, like CSC is doing via the acquisitions of Scandihealth and iSOFT. Despite the challenges, this much is certain: U.S. HIT firms must continue to explore and expand in Europe as the U.S. matures into a total replacement market. The key, as always, is to do it right.
Chris O’Neal is Managing Partner at KATALUS Advisors, a strategic consulting firm focused on the healthcare vertical. We help vendors grow, guide hospitals into the future, and advise private equity groups on their investments. Our clients are found in North America, Europe, and Asia. www.KATALUSadvisors.com