Though I have not played in years, Diplomacy is my favorite game. It is a wargame based in Europe at the start of the WWI. The most interesting games occur when seven players are involved (the game’s maximum). Each player begins the game controlling only three or four supply centers; winning requires control of 18 of the 34 available centers. At the start of the game, some supply centers are unoccupied, which allows players to conquer new supply centers without any conflict. However, once all supply centers are occupied, the only way for a player to extend his territory is by invading the territory of another player. From this stage in the game, players conquer new territories by forming alliances against the weaker players, attacking them, and dividing the spoils. Winning often requires conquering a former ally.
When I look at current trends in the EHR marketplace, I see intriguing similarities to Diplomacy scenarios. EHR sales are targeted at clinicians and hospitals, and both are in limited supply. At the initiation of HITECH, most clinicians and hospitals did not use EHRs, allowing plenty of room for EHR vendors to extend their customer bases without stepping on one another’s toes. Assuming EHR incentive programs are successful, how will vendors maintain revenues once the pool of paper-based practices and hospitals has become significantly smaller? Gaining new clients will require displacing another vendor. As in Diplomacy, the fight for new territories could become nasty. Very likely, smaller vendors will form an alliance, be purchased, or go out of business. When vendors disappear from the marketplace, their customers will be forced to migrate to new EHRs. This expense will not be covered by incentive payments. In addition, I doubt few practices will welcome the productivity hits they incur due to implementing a new EHR, migrating data, and adapting to new workflows.
Market dominance is the other side of this coin. What happens when the inpatient EHR market has two dominant players, and there are perhaps only three or four in the ambulatory sector? How will these companies use their dominant positions? Will they attempt to: exert more control over standards development or certification procedures; assert more control over data ownership; or use their patent portfolios to keep new companies from entering the market? Will we see higher licensing fees and support costs? It is impossible to say, but looking at other industries might provide a clue.
When there are a limited number of airlines serving the same market, prices tend to increase, not decrease. As the number of wireless carriers diminished, what happened to the cost of phones and services? Now that smart phones are generating billions of dollars in revenue, manufacturers are using patent lawsuits to protect their market shares. There is every reason to believe that dominant EHR vendors will try to consolidate their positions through acquisition of other EHR companies as well as HIE, clinical research, and billing/revenue management companies. How will clinicians and hospitals maintain their bargaining power, should these events occur?
Market dominance could also negatively affect spending on research and development activities. The Medicare incentive program ends in four years, and the federal usability initiative is barely underway. By the time actionable EHR usability research becomes widely available, the Medicare incentive program may be nearly over and most EHR purchases already made. At that time, what reason will dominant EHR vendors have to change their products?
Customer service could well be a victim of market success. Banks, insurance companies, and wireless carriers are not known for being loved by their customers. Slowing growth rates due to the rapidly shrinking pool of easily converted paper-based providers may result in the misery-by-a-million-fees practices to which banks, hotels, and credit card companies have resorted in order to maintain revenues.
Current EHR incentive programs have the admirable and well-intentioned goals of improving the quality and lowering the cost of healthcare. However, should the push to make EHRs pervasive succeed, the effects may be different than expected. It will be interesting to see what the Law of Unintended Consequences has in store.