Athenahealth, thanks to its planned purchase of RazorInsights, can bring a new electronic health-record business model to the small-hospital segment just as that sector is searching for alternatives to current vendor offerings, say health IT market watchers.
“If Athena comes in with a revenue model that doesn't require a lot of capital outlays, and Athena makes it easy for them financially and their vendors don't use the time to catch up, there is a huge opportunity,” said Colin Buckley, director of research strategy for clinical IT systems at Orem, Utah-based KLAS Enterprises.
The time Buckley refers to is the time Athenahealth needs to get up to speed on the small-hospital market. So the deal “is not about quick sales or buying market share,” Buckley explained. “In some ways this is Athena going to school. This is going to be their inpatient university.”
The major difference between Athenahealth and other EHR vendors is that Athenahealth uses a cloud-based system. What that means in dollars and cents is no software site licenses. Indeed, Athenahealth's sales pitch for the Web-based practice-management and EHR systems for office-based physicians it sells is to save docs more than the fees Athenahealth charges them.
That could appeal to cash-strapped small hospitals smarting from outlays they've already made for their first generation EHRs.
“There are a lot of organizations (in this small-hospital market) that are on their first or second EHR,” Buckley explained. Those initial purchases were funded, in part, with federal EHR incentive payments. With that money spent, and with frustration about systems currently marketed to small hospitals, according to KLAS research, they may be ripe to listen to Athenahealth's pitch.
“There is a lot of frustration,” Buckley said.
The deal for RazorInsights, which specializes in Web-based EHR and financial systems to hospitals, could allow Athenahealth to shave two or three years off of its development curve for an inpatient EHR, said Erik Bermudez, research director for ambulatory-care systems at KLAS.
About 2,000 rural hospitals, most of them small, operate across the country, according to federal estimates, along with about 1,330 federally supported critical-access hospitals, which, by definition, have 25 or fewer beds.
Athenahealth's road ahead won't be without challenges, however. The small-hospital market, once an exclusive preserve for developers of EHR products designed specifically for this niche, has in recent years become a hot landing zone for invading large-hospital system developers such as Epic Systems Corp., Verona, Wis., and Cerner Corp., Kansas City, Mo.
Medical Information Technology, better known as Meditech, is a pioneer developer of hospital EHRs based in Westwood, Mass. Founded in 1969, the privately held firm is the dominant vendor for hospitals with 200 and fewer beds, holding roughly 19% of that market niche, according to a June 2014 KLAS report.
Meanwhile, Computer Programs and Systems Inc., or CPSI, Mobile, Ala., has a market-leading, 22% of hospitals with up to 25 beds, according to the same report.
Privately held Epic and publicly traded Cerner also are among the top five vendors in both of these niches, KLAS' research shows.
In addition to pushing its cloud technology, Athenahealth could have another sales pitch to make.
With practices either being purchased by or more tightly affiliating with hospitals, having an integrated health IT system that serves both hospitals and ambulatory care is a way to boost overall sales, said health IT consultant and market watcher Vinson Hudson, of Jewson Enterprises, Dunedin, Fla.
By offering a Web-based EHR, sold as a service with little to no upfront costs, Athenahealth could attract smaller hospitals just as it did office-based physicians, Hudson said.
In addition to having access to federal funds since 2011 under the EHR incentive-payment program, small hospitals have been the targets of federal efforts to address a feared “digital divide” between small and rural hospitals.
The feds have had some success at it.
Follow Joseph Conn on Twitter: @MHJConn