Epic in 2013 = AOL in 1999?
This is a good time to be a big EHR company. Health systems are willing to pay more than $100 million to have a new electronic health record system installed. The New York Times even fawned over the innovative prowess of Epic, which is arguably the most powerful EHR company on the planet.
But are EHR systems designed for healthcare’s future state? Let’s put aside the absurd $100+ million price tag and consider what EHR systems are designed to do. They enable clinical data exchange within a hospital. Exchanging data beyond the hospital walls -- even with patients themselves -- is an afterthought of these systems. EHR systems are really good at providing a view of patient information from the perspective of a single institution -- a walled garden of clinical information.
Here’s the problem. Health reform is driving patient-centered care coordination. Thriving in the future means getting really good at the very things that EHR systems don’t do well.
At one time, AOL provided a walled garden for internet users. And it was a juggernaut. In December 1999, AOL hit a market capitalization of $222 billion. The next month, AOL announced it was buying Time Warner for $160 billion, marking the biggest merger in corporate history. The merger was also notable for racking up $99 billion in losses in a single year.
Those were frothy times. AOL CDs were in every mailbox. The internet was poised to change everything. No one knew exactly how the change would play out, but no one wanted to miss the boat. Still, I remember discussing with people at the time: Most web innovation is happening outside of AOL. The garden walls will come down and it won’t be pretty for AOL.
In 2000, 94% of US households did not have broadband. By 2003, roughly 1 in 3 households had relatively fast, always-on internet access. AOL quickly became an anachronism of a time when people needed help making sense of the internet. Users quickly woke up to the notion that AOL's walled garden approach didn't make much sense within the quickly evolving web. The subscriber churn tells the rest of the story:
AOL’s market cap is currently about 1.5% of its 1999 peak.
In 2013, Epic is high on the hog. Is this the peak? The most interesting innovations in health IT are certainly happening outside of EHR systems. Patients are also waking up to the importance of taking control of their health -- and they won’t stand for locked-down data silos much longer. Change happens more slowly in health IT than it does in the consumer web. But those two worlds are now merging.
That said, EHR vendors won't likely see the steady customer churn that AOL did. Instead, over the next decade, it will become increasingly clear to health systems that their $100+ million IT investment system has fundamental limitations. During this time, new accountable care (ACO) models will rise. The software offerings for managing ACO patient populations may seem incomplete at first when compared with EHR systems. But these software systems will feature flexible data sharing, care team collaboration, and rich patient-facing features. All at <10% the cost of a traditional EHR.
Eventually, health systems will face another big upgrade-or-replace IT decision. That is when Epic's customer growth curve might take its first major step down. With many more to follow.