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Analysis: An Early Wave Crest?

May 26, 2011
by Mark Hagland
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Healthcare it Vendors Move Ahead, Across Inpatient and Outpatient Spheres, at a Time of Rapid Industry Change

Even a cursory glance at this year's Healthcare Informatics 100 list provides fascinating glimpses into the current state of the healthcare IT vendor market, when this year's list showing 2010 revenues is compared to previous years' lists documenting 2009 and 2008 revenues.

With only three exceptions, every single vendor whose revenues are listed in this year's compendium has seen increased revenues between 2009 and 2010, and many vendors have seen considerable upticks, some through expansion or acquisition. (The only two exceptions among those companies reporting revenues are the Conshohocken, Pa.-based Apollo Health Street, whose revenues declined by $4 million in the past year, and the Sacramento, Calif.-based E*, which reported the exact same revenues in 2010 as in 2009. Our analysts have estimated that revenues for the Mortsel, Belgium-based Agfa HealthCare have seen a decline in the past year, but that company has not reported revenues to us.) In other words, 97 of 100 companies listed in this year's 100 have seen revenue increases.

And some have seen dramatic increases, including the Chicago-based Merge Healthcare, which leapt from $56.7 million in 2008 revenues to $66.8 million in 2009 revenues to $140.3 million in 2010 revenues (marking a 110-percent jump between 2009 and 2010), partly on the strength of acquisitions-fueled growth. Other companies benefiting from acquisitions-fueled growth include the Burlington, Mass.-based Nuance Communications (from $356.3 million in 2008 to $392 million in 2009 to $449.3 million in 2010), and the Horsham, Pa.-based NextGen Healthcare (from $214.9 million in 2008 to $262.9 million in 2009 to nearly $334.8 million in 2010).

There were even a few spectacular leaps, arising out of exceptional circumstances. Among these were for the Boston-based Keane, whose reported revenues jumped 687 percent from 2009 to 2010, based on its operations being merged with Knight Subsidiary Corp. to form the new Keane International, itself a subsidiary of Tokyo-based NTT Data. Another exceptional case involved a 362-percent jump for the Owings Mills, Md.-based Edaptive Systems, whose federal government healthcare contracts have been exploding in volume, so much so that the company noted the leap on its website (along with the announcement of the awarding of three contracts from the Centers for Medicare and Medicaid Services totaling $108.5 million). Even some consulting firms are seeing big leaps, as was the case with the Chicago-based Burwood Group whose 199-percent growth between 2009 and 2010 certainly reflected boom times for IT implementation consultants.


Core Clinical Vendors Move Ahead Strongly

Even apart from exceptional situations such as those being experienced by Keane and Edaptive Systems, some of the strongest growth on the Healthcare Informatics 100 list in the past year came from some of the larger core clinical IS sphere, including the Verona, Wis.-based Epic Systems Corp., which grew from $602 million in revenues in 2008 to $650 million in 2009 to $825 million last year. And the Chicago-based Allscripts Healthcare Solutions, whose merger with the Atlanta-based Eclipsys last year was the most talked-about merger of the year in healthcare IT, leapt from $383.8 million in 2008 to $561 million in 2009 to $704.5 million last year.

But the increases from 2009 to 2010, as dramatic as they have been for certain vendor companies, can be expected to be dwarfed by those from 2010 to 2011, as the rush to implement core clinical systems in order to meet the requirements of meaningful use under the federal American Reinvestment and Recovery Act/Health Information Technology for Economic and Clinical Health (ARRA-HITECH) Act becomes more apparent.

Which Healthcare Informatics 100 companies will see the biggest increases next year? Look for those core clinical IT vendors with consistently strong rankings coming out of the Orem, Utah-based KLAS research; as well as those electronic health record vendors with strong track records overall and the bandwidth to service hundreds of new customer organizations now and in the next two years; as well as those EHR vendors with solutions that can be implemented effectively in short timeframes and whose interoperability can be most readily demonstrated.

And don't forget about those EHR vendors servicing the physician office space, particularly ones like the Westborough, Mass.-based eClinicalWorks that have won awards and received recognition for their strong solutions. eClinicalWorks has already gone from $86.3 million in 2008 revenues to $105.8 million in 2009 to $154 million in 2010. Similarly, Greenway Medical Technologies, Carrollton, Ga., has gone from $38.8 million in 2008 to $48.7 million in 2009 to $64.6 million in 2010. With physicians still far, far behind hospitals in EHR adoption, look for particularly big revenue leaps among those vendors servicing the small-to-medium-sized physician practice market, as eClinicalWorks and Greenway do. Meanwhile, with its unusual and innovative subscription-based business model, the Watertown, Mass.-based athenahealth, Inc., has seen astonishing growth, from $100.8 million in 2008 revenues to $188.5 million in 2009, to $245.5 million in 2010.

Two areas of particular interest to consider are healthcare IT vendors supporting health information exchanges, and those whose core offerings center around clinical decision support, particularly for physicians. The acquisition of the San Jose, Calif.-based Axolotl by the newly-renamed OptumInsight of Eden Prairie, Minn. (formerly Ingenix) should be seen as particularly interesting at a time when both health information exchange and data analysis capabilities will be vital for the success of patient care organizations going forward. Similarly, vendors whose offerings focus on clinical decision support, including evidence-based physician ordering, such as the Philadelphia, Pa.-based Wolters Kluwer Health (through its Minneapolis-based ProVation Medical subsidiary), and the Los Angeles-based Zynx Health (see page 54 for more on the Zynx story), are absolutely companies to watch in the next few years.

Overall, the continuous upward growth of vendors in the healthcare IT space, while in no way surprising, validates the impact of policy-driven changes (the HITECH Act, as well as the federal Accountable Care Act healthcare reform legislation) on a sphere that had already been primed for growth. It will be fascinating to see the growth patterns in the next two to three years. Most likely, we will see the 2010 revenue patterns expressed in the Healthcare Informatics 100 compendium as an early crest in a much bigger, broader wave.

Healthcare Informatics 2011 June;28(6):42-44

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