The Medicare and Medicaid incentives for adopting electronic health records will lead to a gradual build in demand for the software, rather than a surge, one investment analyst says. “That’s because some portion of the market will want to wait to see the final rules,” says Raymond Falci, managing director of Cain Brothers & Co., New York, who tracks public health care I.T. firms.
On Aug. 20, David Blumenthal, M.D., national coordinator for health information technology, predicted that the final definition of the “meaningful use” of electronic health records that will be used to determine eligibility for incentive payments under the economic stimulus program will not be available until the middle or end of spring 2010. The preliminary definition of meaningful use requirements will be issued by the end of this year, followed by a 60-day comment period, Blumenthal said.
This timing for defining meaningful use, which is later than many expected, may mean demand for EHRs will ramp up more gradually than if the details were known sooner, Falci says. Regardless, health care organizations are dividing into two camps: Those that are moving forward with plans to qualify for federal electronic health records incentive payments and those that are waiting for the final regulations on incentives, he says.
“A lot of hospital CIOs and group practice administrators have told me that they need to get started now” to ensure they qualify for maximum incentives by having a qualifying EHR in place by 2011, the analyst says.
Falci speculates that the federal government might wind up pushing back all the deadlines called for under the American Recovery and Reinvestment Act, much as it did when creating the rules to carry out HIPAA. “My guess is, in the big picture of what the government is trying to accomplish, they’re going to have to modify the timeline.”
Regardless, the Wall Street analyst predicts that most clinical software companies “will be pretty busy next year just serving those who want to get a jump start. So I’m not too concerned about the impact on their financial performance.”
Jim Corrigan, vice president and general manager at GE Healthcare IT, Waukesha, Wis., offered this assessment:  “The delay in the meaningful use definition is definitely going to have an effect on the timing of decisions. The total number of decisions won’t change, but there may be a shift in timing.” The result, he says, could be a “slower, steadier growth” in demand.
Although the revelation of final stimulus plan details will contribute to demand, eClinicalWorks already is seeing 30% growth in the number of providers buying its remotely-hosted EHR this year vs. 2008, says Girish Kumar Navani, CEO. “The stimulus may create a catalyst on top of our existing growth, but we cannot predict it,” he says.
Many hospital and clinic executives who are nervous about the final “meaningful use” definition want vendors to guarantee that their software will enable them to meet the criteria, Falci says. “But most vendors have been unwilling to take that position,” he contends. “To guarantee against a completely unknown set of criteria just seems too open-ended to them.”
Some vendors, however, are already routinely including such guarantees. “We put in our contracts now that our product will have the functionality that a practice will need to meet the meaningful use criteria,” says Navani, of Westborough, Mass.-based eClinicalWorks.
 “What we’re guaranteeing is that our software will have all the tools needed for a customer to meet meaningful use guidelines, including anything that hasn’t been discussed yet,” a GE Healthcare IT spokesman said. “But it’s a little like seatbelts in your car. The auto manufacturer puts them in, but only you can decide to use it.”
Some providers are moving forward with EHR implementations out of concern that software companies may not be able to provide adequate help with implementation and training once the deadlines for qualifying draw near, Falci says.
“GE will always add staff to meet growing demand,” Corrigan says. “In addition to changing staffing levels to meet demand, we’re working to make our software lighter, simpler and easier to implement.”
Navani of eClinicalWorks contends firms like his, which have always used their own staff and infrastructure to support implementation and training, should be able to easily handle growth in demand. Some other firms that “have used primarily external resources” to help clients roll out applications could face difficulties, he says.
Among hospitals, most of which already have some components of an electronic health record, demand will be strong for systems integration expertise, GE’s Corrigan predicts. “Acute care settings have a tapestry of applications that they don’t want to rip and replace,” he says. “They want them to work better together.”
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