A Five Forces Analysis of Allscripts, An Electronic Health Records (EHR) technology company Robert A. Brinker GBA 530 – Management Information Systems Professor Billie Whitfield February 6, 2012 The purpose of this paper is to identify competitive forces at work based on Michael Porter’s Five Competitive Forces from his Competitive Analysis Model (McNurlin, 2009) and provide recommendations to Allscripts, an electronic health records (EHR) technology company, as to business technology related improvements.
Reviewing the United States healthcare industry would be a massive undertaking, so I will narrow my analysis specifically to an industry that has great momentum, the Health Information Technology (HIT) industry. The healthcare industry was said to be in a makeover year in 2010. (PwC, 2010) “The U. S. health care sector includes more than 780,000 hospitals, doctor offices, emergency care units, nursing homes, and social services providers with combined annual revenue of more than $2 trillion”. Hoovers, 2011) Many of these healthcare sector participants are very fragmented and information shared between them is either insufficient or non-existent. Most experts agree that the current spending on healthcare is unsustainable now representing 17. 3 percent of the nation’s gross domestic product. Many factors are driving the high cost healthcare, but one thing is certain in that the delivery of healthcare hasn’t changed much over the last century at the patient and physician level. The delivery of healthcare is an antiquated paper driven process and in much need of modernization.
The demand for HIT has been fueled by new Healthcare Reform legislation and incentives known as the Health Information Technology for Economic and Clinical Health Act or HITECH, passed by President Obama in 2009 as part of the American Recovery and Reinvestment Act (ARRA). The intent of the HITECH Act is to promote the modernization of the healthcare system to improve the quality of patient care and decrease overall costs by bringing technology to the practice of medicine. “More than $88. 6 billion was spent by healthcare providers in 2010 on developing nd implementing electronic health records (EHR), health Information exchanges (HIE), and other HIT initiatives”. (PwC, 2010) The HIT industry has incredible momentum and such high demand that HIT companies are entering the marketplace at an significant rate. Although this industry has become very competitive and saturated over the last 2 years, there are several prominent companies leading the EHR industry. Among them are Allscripts, GE Centricity, and eClinicalWorks, which have been researched for this paper. Below are specific areas where key competitive forces are at work relative to Porter’s Five Forces Competitive Analysis Model.
Threat of new entrants Suppliers of EHR systems and software to hospitals and physician practices were initially few in number earlier in the decade, but it has become a fiercely competitive industry. Privately owned small businesses now dominate the supply and demand for electronic medical records (EMRs) over the last several years. (Folino, 2009) As stated earlier government regulations have had a great impact on the threat of new entrants given the passing of new healthcare related regulations and proposed financial incentives issued to medical practices that implement EHR technology in their practices.
Also, the increase in new entrants is certainly due to the low capital investments required to produce EHR products to the marketplace. In the past significant investments in large servers and data storage was required, which has been replaced in large part by internet based cloud technology. This trend is very likely to continue as cloud technology grows in acceptance and prices decrease. Threat of substitutes Overall, with demand for EHR systems growing it appears to be a very lucrative industry with substantial growth potential.
As with most technologies cost will begin to fall as more and more suppliers enter the marketplace. As the prices begin to fall more hospitals and physicians will find it more cost-effective to implement EHR, however as of now the cost to implement an EHR system is prohibitive for many, especially for small medical practices that dominate the healthcare landscape such as in New Jersey. As technology evolves through innovations such as cloud based technology and prices drop it can have a positive impact on substitute EHR products by improving affordability and ease of implementation.
In short, there will be simple and lower costs alternatives available. Bargaining power of suppliers Supplier integration is becoming a trend in the EHR marketplace as well, such as a recent partnership between eClinicalWorks and Dell computers. Dave Garets, president and CEO of HIMSS Analytics, a Chicago based healthcare information technology company, is a healthcare analyst who has had 30 years of experience in the IT field. He said that “partnerships like the one between Dell and eClinicalWorks are strategic and a good idea for larger corporations. (Folino, 2009) These supplier integrations are important as most EHR systems are software based and of course need compatible hardware systems on which to execute the final EHR product to the end-user, the healthcare provider. Compatibility issues abound and have so far been a challenge, particularly with the iPad, a trendy device which is fast becoming the hardware tool of choice for many applications. Healthcare providers have to shop separately for EHR software offered by EHR vendors and the computer hardware, which is offered by computer companies. Bargaining power of buyers
Of Porter’s Five Forces, this one is quite evident. There is a large concentration of buyers in the EHR market, such as medical groups, primary care and specialist practices, hospitals, etc. and they have a lot of EHR vendors to choose from. Although buyers are not tremendously educated they can be selective. GE Healthcare markets its Centricity EHR system using a brand message that says, “Build new standards of Excellence, by building new standards of efficiency. ” (GE Healthcare, 2012) This messaging can help buyers perceive the value through increase excellence and efficiencies.
Online demonstrations are also a critical aspect of EHR companies attracting buyers. Features such as ease of use and medical practice application can be realized online very easily. This can help healthcare providers determine if an EHR system is worth further exploration. Intensity of rivalry Growth in this industry is very likely to continue as the need for modernization of healthcare continues and the a tipping point is reached where the adoption of EHR systems becomes a must for physicians practices and hospital systems.
Currently the adoption rate is low but federal incentives continue to fuel an intense rivalry amongst competitors in the health information technology arena and the degree of differentiation among companies in this space appears to be minimal. “Regardless of HIT’s potential advantages, clinicians in the country’s many small primary care practices can be overwhelmed by it and will need to be convinced that EHRs are affordable, enhance efficiency, and improve care. Then, they will need extensive, ongoing support. (O’Malley, 2011) Lyons Advisors, LLC, an IT consultant also states that “IT professionals will be most effective if they are helped to understand how a medical practice is different from other worksites…” (Lyons, 2011) It appears obvious to me that a clear differentiator for companies in the EHR market would be to increase the education, training, and ongoing support of healthcare providers through the implementation of the EHR system. This needs to be done so by IT professionals educated on the inner workings and needs of the medical community that are their customers.
As a result of this review and research, I submit the following recommendations to Allscripts: • Consider integration partnerships with hardware technology companies with tablet type computer products, as portability will be important for healthcare providers as they move throughout their practices, the hospitals, nursing homes etc. Once such partnership could be with Apple and compatibility with its iPad. This partnership would go far to elevate Allscripts as an innovator and differentiate itself from its rivals. Make online demos accessible to healthcare professionals so they experience the intuitiveness and application of the Allscripts EHR system to their practices. Online demos could be made available to healthcare providers through You Tube, company websites, medical society websites, etc. • Differentiate and promote the Allscripts brand from competitors by educating IT staff on the medical and clinical needs of healthcare professionals, so that IT staff truly understands the specific needs of their customers relative to EHR application.
This would bridge the gap that currently exists between the technology and real efficiencies and patient care improvements. It could also minimize likely decreases in revenue as their patient load decreases throughout the implementation phase. Allscripts is a leader in the health IT arena, but like most companies there is much room for improvement to stay competitive in a lucrative, but fiercely competitive marketplace. A marketplace that has a long future as the need for the modernization of the U. S. ealthcare system takes shape, as it is behind the curve compared to almost every other service industry. America and patients alike deserve healthcare that is cost-effective, efficient, and innovative. References McNurlin, B. C. , Sprague, R. H. , Jr. , & Bui, T. (2009). Information Systems Management in Practice (8th ed. ). Upper Saddle River, NJ: Prentice Hall Top health industry issues of 2011. PricewaterhouseCoopers (PwC) at http://www. pwc. com accessed on January 30, 2012 View: Making over healthcare. 2010) Issue 14. PricewaterhouseCoopers (PwC) at http://www. pwc. com accessed on January 30, 2012 Healthcare Industry Description. Hoovers. Retrieved at http://www. hoovers. com/industry/health-care/1374-1. html on September 18, 2011 Big Business Eyes EMR Industry. By Lauren Folino, Oct 6, 2009. Access at http://www. inc. com/news/articles/2009/10/emr. html on February 4, 2012 Introduction of an Electronic Medical Record System into Physician Practice Offices: Why Is It so #%! &-ing Hard for Everybody? —Part III.
Joseph P. Lyons, MA, CPA,* and Stephen Klasko, MD, MBA. Information Systems (2011) Tapping the Unmet Potential of Health Information Technology O’Malley, Ann. The New England Journal of Medicine 364. A12 (Mar 24, 2011): 1090-1091 Allscripts corporate website, accessed at http://www. allscripts. com on February 3, 2012 eClinicalWorks corporate website, accessed at http://www. eclinicalworks. com on February 3, 2012 GE Healthcare corporate website, accessed at http://www. gehealthcare. com on February 3, 2012