Finishers, not pacesetters, sought in healthcare IT race
By ARTHUR GASCH
Healthcare InfoTech Contributing Editor
ATLANTA This year’s Healthcare Information and Management System Society (HIMSS; Chicago) conference has come and gone, and one of its underlying themes again was that it really is about managing risk.
Investments in healthcare IT are large, and mistakes range from just costly to enterprise-disabling, whether Y2K contingencies or simply IT buyers making a commitment to a vendor who has no commitment to them. It’s not easy to select a vendor who will finish the race with a customer. It’s easy to be a bit overwhelmed by the number and diversity of vendors that exhibit at the HIMSS convention each year. At this year’s gathering, there were two exhibit floors for nearly 500 companies, and 100 more couldn’t exhibit for lack of space. Even with more room, which may be available when HIMSS moves on to Dallas next year, exhibiting companies will represent only about one-third of the medical information system vendors offering products to hospital and alternate-site healthcare providers.
Not all of these vendors are going to be on the floor in five more years. Some will be consumed by larger companies hoping to get a jump on a new technology. Others will simply fail, leaving their customers wondering what happened to the investment they made. There also will be some new faces among the vendors, each hyping its products as the best solution to a buyer’s IT challenges.
The trick is figuring out in advance which companies are in which groups. But how? The conventional wisdom is that bigger is better and more stable. But is this sound advice? Consider HealthMatics (Cary, NC), a company that was the child of two large parents Glaxo Wellcome and Physician Computer Network (PCN). Both of these companies were large and stable and had deep pockets. Therefore, HealthMatics should have been a good choice. After all, it had the politically correct Windows GUI and was open-system compliant another must-have requirement on current IT checklists. In spite of these advantages, Health Matics failed, and failed suddenly. After booking exhibit space at HIMSS, the company didn’t set up its booth. It announced Monday that it had folded its tent, released most of its employee base (except for a small support contingent), and left three dozen or so customers who made up its nearly 1,000-seat client base wondering what to expect next.
The shutdown was not without its early symptoms. One key indicator occurred last fall, when Glaxo Wellcome purchased back the interest held by partner PCN, becoming sole owner of the HealthMatics venture. Glaxo quietly let it be known that Healthmatics (formerly HealthPoint) was for sale, and when there were no suitors willing to pay the price Glaxo wanted (to recoup its investment in buying back the PCN interest), it simply shut down the operation, took the loss and exited the market. Dazed customers and employees were found wondering around the HIMSS convention floor, looking either for more reliable vendors or new jobs. Glaxo said all 100 HealthMatics employees will receive severance packages.
Is bigger better? One example doesn’t disprove the conventional wisdom. After all, what about HBOC, or SMS, or Hewlett-Packard, all seen as "safe" vendors from which to purchase systems? HBOC has acquired more companies and is bigger than any other medical software company (with the possible exception of SAIC, if you can figure out how much of that company is medical), but does that make it a stable supplier? HBOC has grown so quickly that its own personnel don’t all know what it owns, how or when these products will interoperate, or what will happen next now that McKesson has purchased HBOC.
With SMS, one wonders when its 200+ legacy software platforms, spread across at least three major hardware platforms, will all talk to each other, interoperate, be Y2K-compliant, and merge into a common GUI interface. Is the company for sale, about to be acquired by someone in the industry? Will we soon learn that someone else’s name Cardinal, for instance is in front of SMS, like McKesson now is in front of HBOC?
Then there is Hewlett-Packard large and well-established, a multibillion-dollar force in electronics and medical electronic equipment and information systems. More than a decade ago, HP entered the healthcare information system business in Canada, and after five or six years, exited that segment. It entered the point-of-care clinical information systems business with the Carevue 9000, then a couple of years ago seemingly softened its commitment by rolling that division back into its patient monitoring business unit. More recently, HP announced its intention to provide a perioperative information system, but then never introduced its own product to the U.S. market at least and quietly dropped it in favor of the new Saturn information system from its new perioperative partner, Drager (Telford, PA). And, of course, HP sold its cath lab recording and information systems business to Quinton a few years back.
The healthcare market is undergoing major and increasingly rapid consolidation of vendors and it will continue to do so. This is being driven by the consolidation of the healthcare providers, and formation of "super" buying groups like Premier, which then contract for 1,800+ hospitals at once, with only two or three vendors in each product area. This trend, when followed for years or decades, forces consolidation of the supplier side, as there are only a few winners in such procurement schemes. Many of the losers are smaller, innovative companies with products superior to those that purchasing groups end up buying. These small companies either exit the market or become consolidated into larger competitors.
One can, of course, debate the merits and deficiencies of such policies, but there is no denying that they are occurring. Consolidation of medical suppliers is occurring at every tier in the market, from those vendors with the smallest market shares, to those with the largest. It truly is a sign of the times.
You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
- Award-winning Medical Content
- Latest Advances & Development in Medicine
- Unbiased Content