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Newly released federal data has allowed analysis of the EHR Incentive Program (Meaningful Use) based on two years of data. First-year users, both from 2011 and 2012, as well as second-year users (who started in 2011) can now be studied. A new comprehensive analysis is now available, and can be downloaded for review. This document is intended to be an indispensable resource for those interested in detailed insights from the policy perspective, from the vendor perspective, and from the investor perspective.

The Executive Summary is presented here:

Both hospitals and community physicians have increase their use of Electronic Health Records (EHRs) dramatically over the past few years, and have now reached a point where the norm has become EHR-utilizing, rather than paper-utilizing. This shift has been due to a several aligned pressures, not the least of which has been federal policy contained in the Health Information Technology for Economic and Clinical Health (HITECH) Act, part of the American Recovery and Reinvestment Act of 2009. HITECH authorized Medicare and Medicaid to set up incentive payments to physicians and hospitals for demonstrating Meaningful Use of Certified EHR technology.

The Medicare part of the program is administered centrally by the Centers for Medicare and Medicaid Services (CMS), while the Medicaid part of the program is administered by each state, much like the overall Medicaid program is administered at the state level. Now with two years of experience, the Department of Health and Human Services (HHS) has published detailed data for the Medicare part of the program, indicating each successful Meaningful Use attester and which Certified EHR product was used. This is a rich data source for analysis, and allows insights into what kinds of providers are using the program, as well as how various EHR vendors stack up against each other.

Observations from this data are analyzed in detail in this document. Some salient observations from this data are:

• A majority of U.S. physicians have enrolled in the Meaningful Use program (56%), which is a considerable increase from the 25% seen in the first year of the program. Of those who signed up, about 72% of physicians were successful first-year attesters.
• Most hospitals in the U.S. have enrolled in the program (75%), and most of those hospitals were successful first-year attesters (85%). A late surge of hospital first-year attestation was seen in January of 2013.
• Ambulatory clinicians (Eligible Professionals, or EPs) from many different specialties  participated in the program. 41% were in Primary Care specialties, 29% were in medical subspecialties, 20% were in surgical subspecialties, and 10% were non-MD EPs.
• Second-year participation can now be seen – hospitals and EPs who were successful first-year attesters in 2011 are now second-year attesters in 2012. There were also many first-year attesters who started in 2012, and their second-year experience won’t be known until 2013. Among EPs, only 49% of successful first-year attesters in 2011 were successful second-year attesters by the end of January 2013 (though a late surge in attestation in February, which is not captured by the current data, may improve these numbers).  For hospitals, 78% of successful first-year attesters were successful second-year attesters.
• Most ambulatory physicians used the same EHR for their first-year attestation as for the second year (92%), but a non-trivial 8% switched EHR products between year 1 and year 2. Of note, certain vendors experienced a significant number of vendor switching between years – MedSeek, Citius Tech, Northwestern University, Jardogs, WellCentive and DrFirst all had over 50% of their first-year attesters use something different for their second year.
• Most hospitals that had installed Complete EHR systems from a single vendor stayed with that system for their second year. 71% of hospitals used a Complete EHR, and 99% of them used the same vendor for their second year attestations. However, about 29% of hospitals achieved Meaningful Use by assembling a collection of Certified EHR Modules. Of those, about 89% of such hospitals swapped out at least one Module for that of a different vendor between their first and second year. Of note, Meditech, HCA, Iatric Systems, T-System Technologies and Cerner all had over 100 of their modules swapped out to some other module between attestation years.
• Participation in the Meaningful Use program was widespread geographically, representing all 50 states and a few colonies and territories covered by the legislation. Participation varied by state, ranging from a low of 8.9% of physicians successfully attesting in the program (Alaska) to a high of 41% of physicians being successful attesters (New Hampshire). Most had percentages that ranged from the teens to the twenties.
• Vendor experience was also variable. On the ambulatory side, 80% of successful attesters used products from the top 24 vendors. The remaining 20% of attesters used products from 446 different vendors.  There were 370 vendors who have ACTB Certified products for Ambulatory use that were not used by anyone for Meaningful Use attestation.
• On the hospital side, a similar pattern is seen. Approximately 80% of hospitals used products from the top 8 vendors. The remaining 20% of hospitals used products from 116 additional vendors. There were 131 vendors with Certified products for inpatient use that were not used by anyone for Meaningful Use attestation.
• Between 2011 and 2012, the relative footprints of each EHR vendor shifted somewhat. Sometimes there was a dramatic increase in a product with local distribution (Intermountain Healthcare went from 0 to 7.66% of the market, solely in Utah). Early dominant vendors (such as Epic) lost ground in a relative way to the rest of the market, possibly due to their attesters being institution-associated early adopters. On the hospital side, Cerner seems to have gained ground relative to Epic from 2011 to 2012, while Allscripts and HCA lost ground between the years.
• The specific geographic distribution for each of the top 24 ambulatory vendors, and for each of the top 8 inpatient vendors is detailed, vendor-by-vendor. This may be of particular interest to those wanting an understanding of the particular performance of specific vendors.

The implications seen from this data for health policy, for EHR vendors, and for investors in the EHR space are reviewed in this document. The landscape has changed, and the market is beginning to show saturation, so that most physicians and hospitals now have some sort of EHR system at their disposal. That means that new entries into the field must address the reality that their market adoption will be at the expense of someone else, and vendor switching will become important.

There is room for consolidation and vendor failure, especially among vendors with little or no market adoption. Those that have good technology might find that their technology is purchased by someone else in order to improve someone else’s product and user satisfaction. There might be some consolidation due to purchase of someone else’s market footprint, but this is probably less likely than consolidation based on purchasing someone’s technology.

There is still ample room for innovation. No large vendor is immune from market share loss, and even though the EHR market is approaching maturity, there is plenty of room for competition based on product value. No one is truly “locked in.”

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