IDX Corp. sells an electronic patient-record system that can handle about every office function short of calling patients out of the waiting room. It's effective, it might well be essential to managing your practice, and it's all yours for about $200,000.
With a price tag like that, it's no wonder that access to technology is one of the many reasons small groups link with larger systems, whether by selling to a hospital or physician practice management company, or joining an independent practice association or other alliance.
Judging by the products and attitudes displayed at the annual Healthcare Information and Management Systems Society conference and exhibition, held Feb. 22-26 in Orlando, Fla., electronic patient-record software vendors are doing their part to push small practices closer to extinction.
Many vendors, even if they don't sell their computerized patient-record software for the price of a Rolls-Royce, concentrate their sales on integrated delivery networks with the assumption that small practices are disappearing into those systems. Others concentrate on large systems only because they figure the cost of selling and servicing products to hundreds of small practices isn't worth their time.
A 1996 survey by the American Medical Association, the most recent available, showed that out of 19,478 groups with three physicians or more, 46%, or 8,926, consisted of three or four physicians. Even vendors that consider selling to small physician groups say their CPR products may be too expensive for a three- or four-physician practice unless it is linked with a larger network willing to help foot the bill.
"When you get into small practices, how can you make money?" asks Terry Macaleer, who handles field operations support for Atlanta-based Eclipsys Corp. "The cornerstone of our strategy is, we believe that data has to be integrated across the integrated healthcare network, so selling to individual practices doesn't make sense."
To get an idea of how little return some companies get out of selling to smaller clinics -- and despite their desire to sell to large groups, most software vendors sell plenty of $25,000 to $50,000 CPR systems to smaller clinics -- take a look at 1997 CPR sales for Raleigh, N.C.-based Medic Computer Systems, a division of British software giant Misys.
Medic, which has systems used by an industry-leading 60,000 physicians, last year sold its CPR software to 600 clinics of five physicians or fewer, compared with 33 larger clinics and health systems. However, Medic collected more revenues from the 33 larger clinics and networks than it did from the 600 smaller ones, says Kenneth Howard, Medic's vice president of sales. He did not disclose specific dollar amounts.
Certainly there's more to sell in one fell swoop to a larger group. While there were only 434 groups of 50 or more, or 2.3%, recorded in the AMA's survey, they accounted for almost 80,000 doctors, or 38% of all group-based physicians. Groups of three or four, with 31,000 doctors, accounted for only 15%.
The disparity also reflects the greater amount of software sold and the greater detail of functions on high-end products, Howard says. A solo doctor could buy a system for $25,000, but the deluxe model for a larger group may run about $1 million. Howard says Medic only breaks even on software sales to smaller practices, although it can turn a small profit by selling them software updates and ancillary services.
The vendors of computerized patient-records systems aren't out to get small practices; their actions merely reflect business trends in their own industry, and what physicians themselves are demanding in their computer systems.
The software industry, like physician practices, is under pressure to consolidate. The number of CPR vendors is about 800, down from 1,400 only three years ago, Howard says. Medic itself has helped reduce that number, acquiring nine small, regional healthcare software companies in 1997 alone.
Smaller companies don't have the financial and technical resources -- like certified staff engineers and a large, on-call service force -- that a larger company like Medic provides, Howard says. And some companies, Medic not included, "sunset" their competitors' products, meaning that when one company buys another, it stops servicing and updating the acquired company's software.
Medic's Howard says his company has to compete against more vendors for small-practice sales, but it is those vendors that are fading away.
"You have to ask yourself, 'Is the company I'm buying from going to be in business (in a few years)?' " Howard says.
Doctors also help keep prices up. First, they have to buy much more technology right away, because for so long their expenditures were about 2% to 3% of their practice revenues, compared with 9% to 12% for nonhealthcare industries, vendors say.
And technophobia among doctors is still an issue. One session that filled a 1,000-seat room at HIMSS was titled "You Can Lead Physicians to Work Stations, But Can You Make Them Sign On?"
Manuel Lowenhaupt, M.D., a partner with Deloitte & Touche Consulting Group in Boston, tells the story of a survey taken about five years ago while he was a family practitioner. It showed that physicians would abandon a computer system if it required them to type more than five keystrokes in a row. Perhaps for that reason, most of the CPR systems presented at HIMSS used touch-screen and pen-based technology, rather than typing, to move from screen to screen.
Lowenhaupt says he knows one colleague who would not go near a computer. "It was worse than a drug allergy to him. It was Satan's spawn," he says.
But when doctors do decide to use a computerized system, they want a lot of "functionality," meaning the ability to handle as much of their practice management as possible. Even more important, doctors demand software customized for their practice, which drives prices up.
That demand is part of a culture of entitlement doctors have built around themselves for years, and it may be preventing smaller practices from finding affordable CPR systems, Lowenhaupt says.
"There is a bad trend that began when we put doctors' parking spaces up at hospitals," Lowenhaupt says. "It makes us feel we're special.
"Doctors should get more confident buying their clothes one-size-fits-all. If we want it both ways (customized and inexpensive), we're out of luck."
Still, smaller practices can't be ignored. Wang Healthcare Information Systems of Billerica, Mass., a recent healthcare spinoff of Wang Computing, says it may break its pricey, high-end CPR product into pieces small enough for practices to buy for individual needs like billing or scheduling.
Meanwhile, Microsoft Corp., with the help of comedian Bill Cosby, spent a night at HIMSS explaining the concept of scalability, which makes software flexible enough to handle the needs of all practice sizes without removing functions.
On the sales side, large companies like HBO & Co. of Atlanta say they're relying more on resellers to handle their small-practice business. Resellers buy software in bulk from a manufacturer, then go out to the practices to sell it. But resellers may not provide the same system support as manufacturers, some vendors say, because they don't actually create the products or have access to company engineers.
For Physician Micro Services of Seattle, it makes sense to sell to small practices. As the healthcare business continues to consolidate, small practices are growing bigger. The company already has big fish circling around its small bait.
The company in 1994 sold one of its practice-management systems to a single nephrologist at West Florida Medical Center in Pensacola. That doctor talked up the system to a few friends in the clinic, so a few more added Physician Micro Services' system. Last year the 150-doctor practice decided to link all of its physicians to the company's product.
Two months ago, West Florida Medical finalized a deal to sell its assets to PhyCor, the Nashville-based physician practice management giant. With its new system in place, West Florida Medical has the most technologically advanced physician network among all of PhyCor's 500 locations, says Physician Micro Services President Andrew Ury, M.D.
PhyCor is studying West Florida Medical to determine how to link its 21,500 doctors, Ury says. While Physician Micro Services isn't guaranteed that business, Ury says he thinks his company will be considered seriously.
Meanwhile, Physician Micro Services, whose system costs about $1,800 per physician (hardware not included), is in the running to install a CPR system for the 800-physician University of Wisconsin group because of its beachhead with two doctors in Eau Claire, Wis., Ury says.
Small groups "represent a proof of performance that can be brought into the largest transactions," says Bruce Kleaveland, Physician Micro Services' vice president of sales and marketing.
Even IDX, with its $200,000 system, believes small practices can be a means to a bigger end.
"We believe the small practices are important to the integrated delivery network," Pam Pure, vice president of marketing for Burlington, Vt.-based IDX, says in explaining her company's small-practice strategy. "We want access to hospital information."
