U.S. Hospital EHR Market - Charting the Course for Dramatic Change

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An executive summary and forecast of the U.S. hospital EHR market from 2009-2016.

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U.S. Hospital EHR Market - Charting the Course for Dramatic Change

  1. 1. U.S. Hospital EHR Market 2009-2016Charting the Course for Dramatic Change Executive Summary N8A8-48 October 2011
  2. 2. Market Overview• This study pertains to the following region: • United States • Over the period • Base year – 2009 • Forecast period – 2010 to 2016• While approximately 90% of U.S. hospitals have implemented clinical IT systems to perform many of the functionalities that underlie electronic health records (EHRs), it is estimated that only 12% of U.S. hospitals were using either a basic or advanced electronic health record (EHR) system in 2009 and only 2% of those hospitals were using EHRs in a way that would qualify for Meaningful Use.*• Hospitals’ adoption of new software that qualifies as an EHR is projected to increase dramatically over the forecast period, increasing from the baseline 12% adoption rate to approximately 90% in 2016, a 650% increase, primarily driven by regulatory changes (HITECH and PPACA), payment reform, and advances in information technology.• Total revenues for the U.S. hospital EHR market are estimated at $973.0 million for the base year 2009. This figure includes revenue derived from software licenses, annual maintenance fees, and upgrades on existing systems. (All other revenues related to EHRs, like hardware and consulting services, are excluded.)• The majority of revenues for EHRs will come from new licenses through 2012. Starting in 2013 (when 75% of hospitals will have some type of EHR in place), the majority of revenues will be derived from annual maintenance fees on existing systems. *Hospitals in this instance are considered to be acute care, non-federal hospitals; baseline penetration rates are derived from an analysis by Jha, et al in Health Affairs (October 2010) based on the March-September 2009 AHA health IT survey (N=3,101)N8A8-48 2
  3. 3. Market Segmentation• The total EHR market is segmented by the setting of patient care, e.g. enterprise (hospitals and institutions) and ambulatory (office or clinics). This study focuses only on the hospital EHR market.• The U.S. hospital market is primarily segmented by ownership (state and local government, non-government non-profit, or investor-owned for-profit) or bed size. This study does not segment total hospital EHR market revenues by hospital ownership type or bed size.• For the purpose of this study, the hospital market consists of non-federal short-term general and other special hospitals.*• Total market revenues are segmented by type of revenue, e.g., new installations, annual maintenance, and software upgrades. Products included in study• Proprietary clinical software that comprises core electronic health record (EHR) systems, both basic and advanced, used in non-federal short-term general and other special hospitals Products not included in study• EHRs used ambulatory settings (physician offices), nursing homes, managed care organizations, long-term care facilities, or other non-hospital care settings• EHRs used in government-owned hospitals (namely VA and/or DOD)• Open-source EHRs• Software used in hospitals primarily for financial or administrative functions• Computer hardware and supplies used for EHRs• Consulting or outsourcing services used for EHRs*Baseline hospital demographics are derived from the American Hospital Association Annual Statistics 2011N8A8-48 3
  4. 4. Definition of Electronic Health Records for the HospitalMarket • An electronic health record (EHR) is the digitized medical record of an individual patient that is created and maintained within a professional medical setting, e.g. hospital or physician office and used by physicians, nurses, and ancillary medical staff • An electronic health record (EHR) used in the hospital setting consists of various functionalities related to the documentation of patient care; however, there is a lack of consensus among experts regarding which specific functionalities to include. Some definitions for EHR systems that are characterized as “comprehensive”, i.e., having features and functions that would qualify for Meaningful Use, include 24 separate functions. • In general, an EHR system contains a range of clinical data in comprehensive or summary form, including problem lists, medical history, medication and allergies, immunization status, laboratory test results, radiology images, etc • In general, an EHR system should have eight functionalities - four core functions and four “other” functions. The four core functions are : • Health information and data • Results management • Order entry and support • Decision support The “other” functions are: • Electronic communication and connectivity • Patient support • Administrative support • Population health reportingN8A8-48 4
  5. 5. Key Hospital Clinical IT Systems Connecting to andUnderlying EHRs Hospital Electronic Health Record System Outcomes Emergency Labor and Ambulatory Care Management Department Delivery Clinical Decision Registration Patient Support Auditing eMAR Accounting Dictation/ Cardiology Operating Room Transcription Systems Bar Coding Dietary Inpatient Clinical RIS/PACS Information Pharmacy Laboratories Utilization Pathology Electronic Charge Patient Management Capture Monitoring Source: AHA and Frost & SullivanN8A8-48 5
  6. 6. Medicaid and Medicare Timelines for HITECH Paymentsand Penalties Hospitals that adopt after 2017 not eligible for HHS develops Incentives begin incentives interoperability standards No payments to EPs after 2021 Setting of or >5 years standards EPs 1st year cost no complete later than 2016 MEDICAID 2009 2010 2011 2012 2013 2014 2015 2016 2017.... 2021 2009 Hospital incentives Phase down of EP Medicare begin Oct 2010 (FY incentive payments incentives end 2011) No incentives for EPs if 1st payment is EP incentives after 2014 begin Jan 2011 Penalties begin for lack of Meaningful Use – FY 2015 forMEDICARE hospitals/calendar 2015 for EPs Source: HIMSS, AHIMA, and Frost & SullivanN8A8-48 6
  7. 7. Technology and Market Trends Move away from fee-for-service to bundled payments based on quality of care LONG TERM Present Market Conditions Future Market Conditions Integrated delivery systems across a variety of care settings Greater need to document process of care and patient outcomes Health IT cost subsidies by government and commercial payers Physician realignment, health care workforce shortages, and SHORT hospital consolidation TERM Source: Frost & SullivanN8A8-48 7
  8. 8. Market Drivers and Restraints Hospital EHR Market: Market Drivers and Restraints (U.S.), 2010-2016 ARRA/HITECH – Compressed Time Incentive Funds/ Frames/Competing Potential Penalties Demands PPACA – More Patients, Cost Constraints/ New Payment Models, Market Restraints Concern about ROI Quality/Cost Initiatives Rise in HIE and Push Poor Macroeconomic for Data Exchange Conditions/Lower Market Drivers Standards Patient Volumes M&A and Rise of Regulatory Integrated Delivery Confusion/Political Systems and Uncertainty Coordinated Care ICD-10/HIPAA 5010 – Vendor Capacity/Lack of Need for IT Upgrades Qualified IT Staff Cultural Change and Concerns About Network Effect - Safety/Security Physicians and Patients Source: Frost & SullivanN8A8-48 8
  9. 9. Conclusion: So What?• While the hospital EHR market is mature in the sense that many of the functions that underlie EHRs are already in place with well-established vendors, opportunities do exist for new revenue streams around the addition of new features and functions as hospitals scramble to qualify for Meaningful Use (and avoid financial penalties) and prepare for coming significant health system change including payment reform.• The market has a unique, short-term (2 to 3 year) window of prime opportunity to capitalize on the flurry of activity taking place around EHRs at U.S. hospitals; this level of activity is expected to continue unabated even if the government tweaks HITECH and PPACA requirements.• Large established vendors already serving the hospital sector will be the primary beneficiaries of new revenue opportunities; smaller and/or marginal vendors will be acquired or disappear.• Structural changes resulting from across-the-board consolidation (hospital-hospital, physician-hospital, physician-physician) will favor vendors with robust and scalable solutions that integrate across all provider sectors as hospitals increasing choose single-solution vendors over “best of breed”• Opportunities for smaller vendors and/or new entrants with unique technology solutions or business models exist mainly around partnering with established hospital vendors although some displacement opportunities may exist in smaller or specialty hospitals with limited or significantly out-dated legacy systems.N8A8-48 9
  10. 10. Frost & Sullivan on Twitter Follow Frost & Sullivan on Twitter http://twitter.com/Frost_SullivanN8A8-48 10
  11. 11. For Additional Information Nancy Fabozzi Senior Industry Analyst Healthcare & Life Sciences (720) 328-1227 nancy.fabozzi@frost.comN8A8-48 11

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