HIT Sector Ripe For Consolidation

Privately held health IT providers could be prime acquisition targets for larger companies seeking health information exchange solutions, report says.

Nicole Lewis, Contributor

April 19, 2010

3 Min Read

As the healthcare industry braces for a slew of technologies that capture, store, protect, and exchange patient data, many small healthcare information technology providers will be gobbled up by larger competitors, an IDC report predicts.

The report, entitled Vendor Assessment: Industry Short List for Health Information Exchange Technologies, said many health IT vendors are small to medium-sized, privately held companies and could be prime acquisition targets for larger companies seeking health information exchange (HIE) solutions.

"Typical of nascent markets, the HIE vendor market is volatile with new entrants and market consolidation. Mergers and acquisitions have been the dominant vendor strategy to build out the HIE technology portfolio," the report said.

As mergers and acquisitions transform the vendor market, these firms will also have to contend with the challenge to deploy HIE technologies that serve integrated delivery networks and health or hospital systems as well as regional health information organizations (RHIOs) and statewide or national HIEs that have competing entities.

"The healthcare environment is a challenging one. There are lots of processes and legacy systems that are not interoperable and they can be difficult from which to extract data. Many HIE tools have gotten better at being able to create an interoperable platform despite those proprietary applications in different parts of a hospital," said Lynne Dunbrack, Program Director at IDC Health Insights and author of the report.

According to Dunbrack, health IT vendors will have an easier time installing HIE technology across integrated delivery systems such as hospitals that have established connectivity to their affiliated community-based physicians making it easier to access patient information.

Dunbrack said it will take a year for these hospital networks to implement HIE technology, but believes that it will take more than double the time for the same implementation to occur among RHIOs and statewide or national organizations tasked with establishing HIE's.

RHIOs are healthcare organizations that collaborate within a geographically defined region or community. They establish a governance structure, develop and manage a set of contractual terms, arrange electronic data exchange, and develop and maintain HIE standards. RHIOs and national health organizations such as the Department of Veterans Affairs, will have a tougher time developing HIE's, the document said.

Much of the problem has to do with bureaucratic red tape which at the state and national level involves longer periods of time to collaborate between organizations as decisions on what technology to buy, who will do the job, and budget approvals in a constrained financial climate are taken into consideration.

According to the report:

"Despite federal and state funding under the Health Information Technology for Economical and Clinical Health (HITECH) Act to spur statewide initiatives, this segment will evolve very slowly because of the following challenges: budgetary constraints at the state level during this economic crisis; other health IT projects competing for resources; coordinating the efforts already under way by enterprise and regional HIEs; lack of stakeholder cooperation; and resolving privacy and security concerns. Federal funding for the matching programs will not begin until fiscal 2011, which will also impede progress."

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