Mr. HIStalk recently dropped this little tidbit on us:
The bond rating agency of Dartmouth-Hitchcock (NH), noting the health system’s weak operating performance, blames two factors: reduced state funding and the cost of implementing Epic.
This item reinforces what I have been hearing constantly on the street, particularly from lab colleagues. Many are experiencing embargoes on lab capital spending and LIS enhancements emanating from the hospital C-suite because of the high cost of deployment of their Epic EMRs. In the past, hospital budgetary problems frequently revolved around the high cost of a new hospital building or a low patient census. This Epic EMR twist strikes me as a relatively new phenomenon.
As I am writing this note, I am looking for analogies to this situation in the world of business outside of healthcare. Think, for example, of a medium sized for-profit company with a budget comparable to that of a large hospital or even a hospital chain. When was the last time you heard that such a company had its credit rating under threat because of the cost of some piece of software that it was purchasing? The answer is probably never because most software is not prohibitively expensive. We certainly are well aware of the reported cost of the Epic EMR to the Kaiser health system according to Forbes in a recent article on the web: about $4 billion (see: Epic Systems' Tough Billionaire). This must have caused a bit of a burp in the Kaiser budget.
How are we to explain this struggle by hospitals to purchase the Epic software? One explanation is that it's a mission-critical product that a hospital will acquire at any cost and cannot operate without. Another explanation is that Epic is the EMR pick du jour for executives in larger hospitals and that they are willingly, and grossly, overpaying for the product because of the near-monopoly the company now holds (see: Does Epic Exercise a Near-Monoply for EMRs in Larger U.S. Hospitals?; The Feasibility of Using the Epic EMR as a "Platform" to Extend Its Functionality). Here's another quote from the Forbes article cited above:
At the beginning of each year, [Epic founder and CEO] Faulkner commands her tiny salesforce to select customers based on whether they are fit to work with Epic—making it a privilege. “They don’t need salespeople, customers come to them; they’re like kids showing up at the door asking for Oreo cookies,” says Leo Carpio, a health IT analyst at Caris & Co. At rival Cerner, sales and marketing make up 4% of total expenses.
My problem is that this particular brand of "cookie" is going to cause profound indigestion in ancillary hospital units like pathology and radiology. It's basically a double hit for them -- Epic products like the Beaker LIS can only handle core functions (see: Selecting the "Best" EMR; Problems with the "Greatest Good" Doctrine; ) and then there's insufficient capital available to purchase additional software to manage the absent functionality (see: Details about Epic's Beaker LIS, Supplied by the Company; A Pathologist Describes His Firsthand Experience with a Demo of Epic's Beaker LIS; Assessing the True Cost of Serving as a Beta Test Site for the Beaker LIS).