Readers Write: Are Hospital EHR Vendors Primarily Software or Services Companies?

Are Hospital EHR Vendors Primarily Software or Services Companies?
By Kyle Samani

Hospital EHR vendors are not primarily software companies with professional services divisions. They are primarily professional service companies with software divisions.

Although the core value of hospital EHR companies is the software they develop, the bulk of the value they provide is in training, data conversion, setup, logistics, and support. These services are built on top of the software that they support, but are collectively more valuable than the software itself.

I’ve seen the challenge of deploying an EHR in a hospital first hand. Most of the challenges are with the people, not the software. Hospital EHR vendors derive most of their value for their professional services.

Hospital EHR vendors employ more services staff than software staff. At least 60 percent of the employees at the major hospital EHR vendors are in deployment and support services, not software design, development, testing, or administrative functions. Employees, especially road warriors, are expensive. The more employees involved in a given division, the more expensive and valuable that division is.

But perhaps even more important than sheer costs, healthcare IT staff need to receive sophisticated training in hospital workflows and software systems. Before the HITECH Act, there weren’t enough people with healthcare IT skills to deploy the entire country in five or six years. Many argue that there still aren’t enough people. The EHR vendors had to develop large-scale internal training programs to teach all of these people how to set up, train, deploy, and support hospitals. This is one of the greatest sources of value that the big EHR vendors have generated: an educated healthcare IT workforce. The scale and scope at which they’ve done that has been remarkable.

Epic employs 6,400 people and Cerner 11,900. I would estimate that at least 60 percent of those – or 11,000 people in just these two companies – work in training, deployment, and support roles. These companies and many others have developed phenomenally large internal training programs for their employees, who are usually fresh college graduates.

To provide a sense of scale, the University of Texas at Austin — one of the largest universities in the country by enrollment (60,000+ students) and located in a major US technology center — boasts that it has graduated a grand total of 333 people in its 9-10-week-long healthcare IT program since its inception a few years ago. Vendors are educating the workforce, not the educational system.

Training and conversion costs usually prevent hospitals from switching EHRs. These costs are multi-dimensional, spanning financial cost, employee personal costs, and opportunity cost of working through other initiatives such as Meaningful Use 2 and ICD-10.

As an employee at a smaller hospital EHR vendor, I’ve experienced this phenomenon. We are trying to spearhead the replacement market for hospitals that are dissatisfied with their legacy EHRs. Most of them love our product and are even willing to pay, but aren’t willing to change systems because the non-financial costs of change are too great for the organization.

Because the costs of switching are high, the cost of choosing the wrong EHR the first time is even higher. Most large software projects that fail do so because of the people, processes, and cultures, not because the software isn’t capable. In that sense, the services surrounding the software implementation are even more important than the software itself. The majority of the value that the vendors provide is in services, not software.

Looking at hospital EHR vendors as service companies can help understand management decisions that may not have made sense when looking at them as software companies. Decisions are made based on training and deployment realities, not software limitations. This analytical framework can also help explain vendor practices and methodologies (especially hiring), release cycles, growth rates, stability, and many other operating metrics.

Kyle Samani is inpatient deployment manager at VersaSuite of Austin, TX.