Is One Company About to Lock Up the Electronic Medical Records Market?

Will Silicon Valley lead health care's next revolution -- or miss it?


(Editor's Note: the following commentary was co-authored with Tory Wolff, a founding partner of Recon Strategy, a healthcare strategy consulting firm in Boston.)

Silicon Valley entrepreneurs and investors have never quite been able to figure out health, and they know it.

For years, the clever technology fixes dreamed up by engineers have largely failed to take hold, their well-conceived rationality no match for the complexity of medical care, the persistence of clinical habit, and the counter-intuitive impact of existing incentives. Many of the Valley's most audacious VCs have become leery of the space, electing instead to pursue innovation elsewhere.

The new battlefield is on the technologists' home turf: information systems for electronic medical records (EMRs). Will this time be different? Are technology entrepreneurs finally ready to disrupt medicine?

Here's the context (please see our last commentary, available here, for more details). Most of the nation's largest and most prestigious medical centers seem headed towards a relatively closed health information system, driven by a single dominant private company, Wisconsin-based Epic, which excels at the near-flawless, customized installation of their client-server platform in big hospitals.

While Epic is meticulously working its way through the largest hospitals, the long tail of stand-alone ambulatory practices operate largely on a jumbled mess of EMRs, using many emerging vendors (such as AthenaHealth and PracticeFusion) with a multi-tenant model, similar to

Since medical care as a whole is consolidating, the basic question is whether emerging EMR vendors will gain enough traction and offer enough capability to enable stand-alone practices to remain independent. Or will platform fragmentation put unaffiliated practices at such a competitive disadvantage that they'll be even more motivated to join up with larger hospital systems (the most important of which will rely upon Epic)?

What makes Epic particularly interesting is that its success seems to fly in the face of how so many of us -- Silicon Valley technologists in particular - have come to view innovation; it also contrasts with the much-celebrated, widely accepted strategy of open innovation.

"No matter who you are, most of the smartest people work for someone else," Bill Joy's law goes, and so much of the current Silicon Valley innovation ecosystem relies upon the ability to leverage the insight and wisdom of others. Let good ideas bubble up, find ways to capture creativity from everyone.

From the perspective of most technologists, Epic epitomizes the exact opposite of how a health information system should work (which is also why many of these same technologists feel it's bound to fail). Ideally, according to the technological experts, there should be a common, robust and open set of standards governing healthcare information, easing its accessibility. Companies would then compete for the most effective way to exploit the information, almost certainly via a multi-tenant platform.

According to the smartest people in the Valley, Epic shouldn't be winning. But it is. How is this possible, and what does it mean?

Epic's success suggests that it has locked onto something that its key clients - academic medical centers and large health systems -- need most right now. This burning need, it turns out, isn't the capacity for bubbled-up innovation. What they need is the quick and flawless imposition of structure - pushed down from above, and proprietary if necessary.

The tertiary hospital is a vast enterprise with incredibly complex array of care delivery, with a wide web of participating - and very vocal, idiosyncratic - stakeholders involved. It faces long-term pressures - e.g. care shifting from the hospital to ambulatory settings - and shorter-term pressures with more uncertain endpoints - e.g. reimbursement changes, regulatory requirements. They need someone to step in and define the information sharing processes for the system, providing a reliable way to capture, transport, receive, and use information, as a path towards measuring and incrementally improving the quality and efficiency of care.

It turns out Epic has been paying attention -- a lot of it -- to successful technology enterprises, and appreciates better than anyone else the most important lessons of two of the nation's most successful entrepreneurs, Amazon's Jeff Bezos to Zappos' Tony Hsieh: know your customers.

As one articulate reader of our recent commentary (and former physician informaticist at Epic), Craig Joseph, observed ,

"Epic is successful for many reasons, but possibly chief among them is their CEO's laser-like focus on the customer. Judy Faulkner knows what large health systems need, and she gives it to them. Often, she knows what they need before they do. Further, Epic figured out long before its competitors that the vendor usually knows best -- not the customer. While this sounds paternalistic (and probably is), the truth is it works."

Epic's credibility -- built up from installations across many of the biggest brands in hospital care - allows it to say what can and can't be done. Even places like Partners in Boston - as unique a medical system as any, and a long-time investor in home-grown solutions - has recently announced that it, too, will move to Epic.

Competitors earnestly contend that Epic's approach locks clients in to a platform that is neither agile nor open, hence it lacks adaptability. Epic is viewed by many in the health information space as a canonical example of an established player who will be disrupted by nimble innovators -- and there are no shortage of eager contenders who lay claim this mantle.

Is the story so simple? How much of it is wishful thinking (or sour grapes) on the part of Epic's competitors?

The great paradox here is that by imposing a specific and relatively strict structure on a large health system, Epic provides an "industrialization" function that enables not only process efficiency but also the comprehensive capture of clinical decisions and the assessment of quality and costs, which can then be iteratively improved; the availability of a robust clinical data set can also support the research mission of an academic medical center - or at least, can help those investigators who are able to obtain access to the data. This can accelerate progress in several key areas:

  • Evidence-Based Medicine : The ability to collect and easily share extensive medical information from the large patient populations served by major medical centers means that hospitals may be able to develop a robust dataset upon which to guide evidence-based decisions - they can start to segment and track both patients and physicians, and develop, and iteratively improve, best practices
  • Medical Research : Access to a coherent, longitudinal medical record will enable inquisitive physicians to generate hypothesis which can be explored in silico, providing an important opportunity to accelerate knowledge development and advance clinical science. These observations can also form the basis for both basic molecular research and rigorous prospective clinical studies. (See here for recent discussion of phenotype as medicine's next frontier.)

Importantly, these are two types of innovation AMCs are relatively good at today. Well structured systems like Epic will make them much better.

And, to the extent that Epic-enabled hospitals do become the center of a broader care delivery model (e.g. through provider practice acquisitions), it should also support greater coordination of care: In the current system, care can be highly fragmented, with patients providing the same information multiple times, and multiple providers often entirely unaware a patient's basic medical history. A well-implemented EMR system will integrate the information and make it readily available to all relevant providers who can deliver better care as a result.

On the other hand, there's a risk with an IT system that fits all too comfortably with the current practices of providers at the top of the healthcare food chain - it will serve to reinforce the "big hospital" style of medicine, and (through hard-to-remove technology) create a hefty sunk-cost barrier to change. Given the consolidation of practices into hospitals, the leverage of these players is only getting stronger.

What sorts of innovation might get left behind? Precisely the sort many believe medicine urgently needs - radically new approaches to care delivery, to primary care, to the fundamental way doctors and patients relate and interact. It's not so much that Epic can't provide any given aspect of this, but rather, Epic isn't designed to facilitate a series of explorative forays. And these areas are outside the traditional terrain of academic medical centers.

A ubiquitous Epic platform may also reinforce many unwelcome ways medicine is practiced. Already, many physicians complain about the poor user interface, driving a wedge between provider and patients. Relying on best practice algorithms may standardize care but not optimize it (see here and here); it may be more difficult for doctors to customize care for patients, and to explore new approaches. It's especially important to recognize the lack of good data behind many best-practice recommendations, and it would be especially disappointing to undermine the doctor-patient relationship in order to impose formality for its own sake, informed only by false precision.

In contrast, imagine a world in which all medical information utilized robust and common standards; in this scenario, innovators could easily explore more disruptive approaches, could look at completely different ways to deliver care, or to address very specific pain points within an existing system.

The consumerization of medicine - the explosion of gadgets and apps representing the one area of health in which Silicon Valley has demonstrated a serious and abiding interest - would especially benefit from a more open system. There is unquestionably an urgent need for better patient engagement, and it's easy to see how existing efforts in this busy space could support this important mission - especially in the challenging area of behavior change.

While it's difficult to see how this ecosystem could develop without more robust standards (though some in the Valley envision consumers ultimately replacing physician-based healthcare), it's also easy to see the attraction of a compelling EMR, beautifully designed and offering delight as well as function to patients as well as doctors. Such an approach might appeal both to unaffiliated "creatives" - hacker-practices -- who see themselves as thinking differently, and to the patients who seek these exact qualities in their doctors.

Starting to sound familiar? It certainly seems like there's a ready-made opportunity for a progressive, patient-focused, design-centric upstart that could cast itself as the Apple-inspired alternative to Epic's stodgy, impersonal, PC-like brand.

All innovators like to see themselves as Steve Jobs (see here), and there's an opportunity for Epic to step into this role as well - by permitting the construction of an innovation ecosystem on its platform and expanding its customer set to providers and care settings outside the big hospitals, practices who are driving the leading edge of ambulatory care centered solutions and patient engagement. It must first decide, however, whether such an effort is more likely to rock the boat or deliver value to its core customers.

Given Epic's s precise sense for what its customers need - together with Silicon Valley's consistently poor understanding of the realities of healthcare - you'd want to think twice before betting against Epic. It's just possible they understand better than anyone else not only how much innovation medicine says it wants in principle, but also how much disruption medicine demonstrates it can stand in practice.

But it's even harder to bet against the urgent need for profound new thinking in healthcare.

Imagine a world effectively split into two systems of care - a system comprised of today's large medical centers, build upon the Epic platform, and a second system that explores the use of truly disruptive, patient-centric models of care delivery, build on platforms that are cloud-based. Here, disruptive change in clinical practice would be led not by academic physicians treating patients out of university medical centers, but rather by a motley collection of concierge doctors, involved patients, and savvy technologists. Meanwhile, the big integrated players, dependent as they are on Epic, could risk locking themselves out of medicine's next great revolution.