Bubble

Here's an interesting story in the Kansas City Business Journal on the early impacts that open source software and what it might mean for Cerner.

With annual federal health care spending on pace to hit $4 trillion by
2015, "it's a great time for a company like Cerner," U.S. Sen. Sam
Brownback, R-Kan., said during an April 11 visit to the company's North
Kansas City headquarters.

Yeah, right. Just because EHRs and RHIOs are all the buzz, does not mean that industry or government is whipping out their checkbooks to write big (really big) checks for software they've never had to have before. Most hospitals don't even have paperless charting, and with EMRs for a mid sized hospital going for $20 million a pop, don't expect rapid growth of a new HIT product category. Hospitals only have a fraction of the budget needed to purchase all kinds of new technology that's available to improve patient safety and reduce operating costs - most with attractive ROIs - so how are they going to pay to play in EHRs? What's needed is some serious commoditization to substantially lower costs.

Medical device and IT vendor's business models have remained relatively unchanged over the past 30+ years - while outside of health care, business models and product strategies have gone through earth shaking transitions. The open source software movement could significantly impact health care, just not today.

For the near future, Forrester Consulting's Brown doesn't expect
open source to "lay waste to the commercial market" either, he said.

"At this point, the Cerner product is more feature-rich and
robust," he said. "But open source has the potential to create some
downward pricing pressure because it offers a lower price point."

That doesn't mean open-source systems are free.

"The all-in cost includes all the systems integration, implementation, support and training," Brown said.

Therefore, he said, the price difference between an estimated $40 million electronic medical record system that The University of Kansas Hospital expects to buy soon and an open-source system "is not the difference between $40 million and nothing."

True, but the cost of open source in most cases is closer to nothing than $40 million. In other industries, buyers tend to drive innovation. But among health care delivery organizations there are few innovators like Wal-Mart, GE and IBM.

Ron Carter, assistant director of information technology for KU
Hospital, said the savings offered by open-source software would not
justify the lesser performance and higher in-house IT demands that
would come with such a system.

That may be true today, but the open source effort is making progress. Most open source software targets modules or specific applications; successful implementations include the Apache web server, rules engines, enterprise service busses, Java application servers, and HL7 parsers. Open source Linux is gaining significant adoption, from corporate data centers to embedded medical devices (Siemens/Acuson ultrasound systems for example). Open source software is built into many currently available health care products, and larger projects like RHIO software are gaining traction in health care.

Browsersoft also is part of Connecting for Health, one of four
consortiums chosen in November to receive a total of $18.6 million in
federal grants to create prototypes for the proposed Nationwide Health
Information Network.

Using a record locator system within OpenHRE, the Connecting for
Health team recently marked something of an "Alexander Graham Bell
moment" for the sharing of electronic medical records, Browsersoft
President Don Grodecki said.

For the first time, Grodecki said, the team was able to exchange clinical records stored by disparate RHIOs in three states.

Although not widely publicized, the event was as significant as the
first exchange involving disparate automatic teller machine systems,
Grodecki said. And Connecting for Health released all of the technical
data that made it possible on April 6.

There are many areas in health care ripe for application of disruptive technology and especially business models that have seen success in other industries. Vendors like Cerner still have time to prepare, if they get started soon.

UPDATE: Reader, and board member of NYC's MIT Enterprise Forum, Stephanie, thought we should know about the following MIT EF meeting titled Connected Healthcare, a $34 Billion Dollar Market Opportunity:

"It should be a fascinating event with the following speakers:
Moderator:
Elizabeth Boehm - Principal Analyst, Healthcare & Life Sciences, Forrester Research
Panelists:
George Boyajian, Ph.D - EVP, Strategy and R&D, Living Independently Group
William Burkoth - Senior Manager, Strategic Investments Group, Pfizer
Mary Furlong - President, Mary Furlong Associates
Donald Jones - Vice President, Business Development, Healthcare, Qualcomm
Douglas McClure - Corporate Manager, Technology Services, Partners Telemedicine
Astro Teller, Ph.D - CEO, Body Media."

Be there Thursday May 4th, at 5:15 p.m. If I was a little closer I would love to attend.