Time Capsule: Few Threats Seen to Healthcare IT’s ‘Big Three’

I wrote weekly editorials for a boutique industry newsletter for several years, anxious for both audience and income. I learned a lot about coming up with ideas for the weekly grind, trying to be simultaneously opinionated and entertaining in a few hundred words, and not sleeping much because I was working all the time. They’re fun to read as a look back at what was important then (and often still important now).

I wrote this piece in August 2006.

Few Threats Seen to Healthcare IT’s ‘Big Three’
By Mr. HIStalk

Neither Phamis nor IDX sold very many LastWord / CareCast systems. Its mid-80s architecture wasn’t sexy. Only big hospitals scared to death of hardware-induced downtime could afford its Tandem hardware.

When GE bought IDX last year, the renamed Centricity Enterprise was to be its first-string offering, at least until co-development with Intermountain Healthcare yields a commercially viable product.

So far, GE’s luck seems to be all bad. I haven’t heard much about new sales. It was booted from the UK and shown the door at Stanford. And now, high-profile customer Sharp HealthCare is replacing it with an unnamed vendor’s system.

The industry has obviously consolidated dramatically over the past few years. I wouldn’t have guessed back in 1996 that the high flyers would be the little-known ambulatory system vendor Epic Systems, ambitious lab system vendor Cerner, and small-hospital dominator Meditech.

I don’t see anyone catching up to these Big Three, with the possible exception of dark horse McKesson. GE Healthcare, Siemens, Eclipsys, Misys, and others may get an occasional full-system sale, but they’re mostly fighting over crumbs.

With the benefit of 20-20 hindsight, I looked back to see what clues I might have picked up about these Big Three 10 years ago:

• They built their own products instead of acquiring someone else’s.
• They had a single product line and architecture (although both Cerner and Meditech were porting theirs to new platforms).
• They touted integration over everything else.
• They had broad offerings that could replace best-of-breed systems.
• They sold benefits, not cutting edge technology.
• They had competent clinical systems, not just administrative applications.
• They kept their product functionally current.
• They were led by their founder and, as a result, had a consistent company culture.
• They stuck with their game plan, unswayed by trends or even customer demands.
• They had only one business: healthcare IT.

Maybe the Big Three moniker is appropriate, reminiscent of the early Detroit days when Ford, GM, and Chrysler rose to dominance over a plethora of now-forgotten competitors. If someone like American Motors tried to horn in, the Big Three either waited for them to fail or just bought and buried them. The high barrier to entry protected them from competition, at least until they got lazy and let overseas companies eat their lunch.

I don’t see many threats to healthcare IT’s Big Three. Open source gets a lot of press, but little adoption so far. Self-development is all but dead in most hospitals. Few foreign competitors exist, as evidenced by the United Kingdom’s reliance on American vendors for Connecting for Health. The big-system vendor pool is shrinking, not growing.

Perhaps the biggest threat is a mature market, in which hospitals have little incentive to switch from one commoditized product to another, especially given limited funds. Even in that scenario, that’s when companies make big profits, milking a locked-in recurring revenue stream while spending little on research and development. Growth is replaced by high profits.

Perhaps the biggest loser in a Big Three scenario is hospitals, who will have few competitive choices with even less innovation than today. Car buying became a passionless checklist process once everything from Detroit started looking alike. Maybe those heart-pumping days of picking from an array of wildly different products offered by 10 potential vendors are over.