Monthly Archives: May 2010

EMR: Free? Really!

Free is a marketing term that typically evokes a mixed set of reactions ranging from an optimistic “You have my attention, tell me more,” to a cynical “There’s gotta be a catch,” to a pessimistic “There’s no such thing as a free lunch.” All three of these showed up when I heard about a free electronic medical records system offered by a company called Practice Fusion.

Their Web site referenced the book Free: The Future of a Radical Price, which includes an analysis of “How can healthcare software be free?” So I read the book. The basic theme is that costs of data storage, transmission, and processing are falling so fast—on the order of 50% per year–that the costs associated with “bits” of data (as contrast to “atoms” or physical stuff) are heading for zero. With atoms, revenue usually has to be associated with cost. With bits, revenue can be loosely related to costs or even independent of costs.

At the level of a private or small group medical practice the typical evolutionary path for medical records is from paper to site-specific computer to networked systems. Most of the software being sold today is site specific which means the doctor has to pay the up-front costs and networks will be added on. But, only some of the value accrues to the doctor and there is little or no broad agreement about what the networks will be or how they will be managed.

Practice Fusion sees the value in both the local data and data that is networked. Their basic premise is that by providing an EMR to a doctor the doctor’s data will be in a format consistent with the data of all of the other doctors using their system. With the appropriate consents and controls in place, the data can then be networked among subscribing doctors with full compatibility. Subscribing Doctor A can send a patient’s data to Subscribing Doctor B without translation, formatting or delay. Doctor A can send data to other doctors who do not subscribe to Practice Fusion with a similar level of ease or difficulty as using a site-specific system. Data can also be forwarded to billers and insurers.

With appropriate consents and controls in place, the data from multiple practices can be de-identified, consolidated, and shared with public health agencies and medical researchers to further increase its value at a very small increase in costs. Data can be sold at a higher price because it will be in a standard format and in larger quantities. A researcher, whether a not-for-profit institution or commercial company that needs 1,000 records will be able to go to one place and quickly get records of a known quality. Practice Fusion will recover its investment and cost from advertising (optional to users) and the sale of the data.

Practice Fusion has placed itself in the enviable position of having a cost structure that is getting less expensive and a revenue stream derived from data that is becoming more valuable over time as it gains longitudinal range.

Free presents the following hypothetical model:

Medical associations conducting research on specific conditions require longitudinal health records for a large set of patients. Depending on the focus of a study (think white, middle–aged, obese males suffering from asthma) each patient’s anonymized chart could fetch anywhere from $50 to $500. A physician typically sees about 250 patients, so Practice Fusion’s first 2,000 clients translate to 500,000 records. Each chart can be sold multiple times for any number of studies being conducted by various institutions. If each chart generates $500 over time, that revenue should be greater than if Practice Fusion sold the same 2,000 practices software for a one-time fee of $50,000.

[Practice Fusion is now reporting, “… 30,000 users across all 50 states and US territories.”]

Free is an option worth considering. Does that mean you should sign up? No.

The normal business process for selecting a system is to do a high level search and assessment to narrow the number of candidate systems for further study. The fact that free makes sense just means that a Practice Fusion system, or others like it, qualifies as a first round candidate.

The next step would typically be to prepare a cost/benefit study among the top few candidates. Because one of the systems is no-cost, the focus for the next step should be based largely on benefits.

Moving medical records from paper to a computer system provides opportunities to reduce office costs and improve both administrative and medical services to your patients. Benefits will include those directly related to the creation, storage, use, and networking of records plus those related to administration such as the non-medical part of patient records, appointments, billing interfaces, etc.

If you have already done your homework, now is the time to look at the benefits of a no-cost system. If you haven’t done your homework, check with other doctors and see what systems they recommend—both positive and negative. Get vendor documentation for other systems and acquaint yourself with the benefits those systems offer. Make a list of must have, like to have if cost is reasonable, and nice to have. Also, a list of things to avoid (negative benefits.) Now go look at a no-cost option and compare the benefits.

If a pair of shoes doesn’t fit, they aren’t worth taking home even if they are free. If a system doesn’t provide the benefits you need, don’t waste time considering it further. You do not want to change your practice to save money on a system. You want a system that will allow you to get the benefits at the lowest cost in terms of dollars with no negative impact on performance.

If a no-cost system provides the benefits you need at least as well as a for-cost system you have your answer. If two systems have comparable benefits, the cost/benefit analysis will always be better for a no-cost system than one where you buy it or pay a license fee.

If a no-cost system meets you minimum requirements and a for-cost system provides better benefits, you need to judge whether the better benefits justify the cost. They may. If a free pair of shoes fit but are not your style you will probably get more value out of a pair you like even if you have to pay for them. It is sort of the same thing with a computer system.

As a place to start, free is definitely worth considering. Be certain the vendor has a business model that makes sense. If it does, the next step is to get more information and be certain the system really meets your current and long term needs. But, that’s material for another blog post.

A footnote: On May 14, Chilmark Research, one of the healthcare blogs we follow posted a blog titled Where’s the Beef about another company that is offering a free service. That company claims it will be “generally available” in August. “Imagine our disappointment when we clicked on the [site] to find very few concrete details as to what the platform would offer …” Free is a good place to start but the real test is whether or not the system provides the services, protection, etc., you need. Thanks Chilmark for helping us make the point that it takes more than just free to make a system attractive.

Short link: http://wp.me/pyfFd-6V


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