Costco Enters Electronic Health Record Business

12 EHR Vendors That Stand Out

Costco has entered the health IT business with a nationwide rollout of a cloud-based electronic health record (EHR) designed for small physician practices.

Following a successful pilot in a few regions, the giant price club is offering Allscripts' MyWay EHR through a value-added reseller, Etransmedia, just as a lot of small practices are finally jumping into the market to take advantage of government EHR incentives.

Costco is pricing its MyWay package at $599 per doctor per month, or $499 for physicians who become "executive members" of Costco. The package encompasses not only the EHR, but also an integrated practice management system, a patient portal, training, implementation, maintenance, and claims submission. Hardware is not included, but the remotely hosted software does not require an onsite server.

Sam's Club, Costco's biggest competitor, launched an EHR initiative in partnership with eClinicalWorks (ECW) and Dell in 2009, just after the passage of the law that authorized the EHR incentive program. But Sam's Club never sold many packages to physicians, and it withdrew the offering in March 2011.

The Sam's Club EHR, which was not cloud-based, cost $24,000 for the first physician and $10,000 for each additional physician. Annual maintenance costs ranged from $4,000 to $6,500 per year.

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Why does Costco believe it can succeed where Sam's Club failed? "When we did our research, we didn't see a whole lot of savings that Sam's was bringing to the table," John Conlon, director of Costco Services, told InformationWeek Healthcare. In contrast, he said, Costco is offering a package that is significantly less expensive than the competition when all of its components are factored in.

"Most of these programs, surprisingly, are offered at around the same price as the stimulus dollars coming back. Most of the EHRs we priced out came in at $44,000 and up. So at $30,000 [over five years] for our executive members, we feel we're delivering a really good value."

In Conlon's view, most practices already have the computers they'll need, since a user needs only a Web browser to access the application and the database. Nevertheless, he acknowledged that many small practices lack even basic information technology. So Costco is in discussions with hardware suppliers to supply "top-of-the-line" computers to medical offices that buy the EHR package.

Costco chose to jump into the EHR market now because physicians must purchase a system soon to qualify for the full Meaningful Use incentives. And the price club also recognized that small practices were its prime target.

"Obviously, those small practitioners have a much lower adoption rate so far," Conlon noted. "And we felt that that was what our member looked like--someone in a small physician office." More than 100,000 physicians currently belong to Costco, he added.

Another key decision was to use a value-added reseller to reach small practices. This is a very different approach from that taken by Sam's Club, which relied on its own sales channel and eClinicalWorks to sell its EHRs. Etransmedia, which works closely with Allscripts, will also handle training, implementation, hosting, and technical support, Conlon said.

Lee Shapiro, president of Allscripts, noted that VARs such as Etransmedia can help small offices get through the change process, which is the most difficult part of acquiring an EHR. Having a local partner that has had experience in working with these practices, he added, will help Costco achieve success in its program.

Costco's other major advantage, he said, is that "they provide a significant number of services to small businesses. Costco's solution is being championed by its business services team, which provides insurance and other related services to their small business customers. And they have a significant number of physicians who are customers of Costco Business Services."

This is the right time to mass-market an EHR to small practices, Shapiro said, because EHR adoption numbers are rising but the smaller offices are still behind the curve. Alluding to a recent report that the government has paid out nearly $2 billion in EHR incentives, he said, "This is the time to ensure that there's an appropriate awareness of the availability of these technologies and the opportunity to take advantage of the government subsidies that will run through the next four years."

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