Fuld’s Competitive Musings

 While car sales are languishing, another industry – one with potentially explosive growth – the nascent Electronic Medical Records industry has adopted the same approach as car dealers.  G.E. just announced a 0% financing scheme on June 15. IBM has a very similar plan.

 What is this market about and why the aggressive financing pitch?

In our recent public war game, The Battle for Healthcare Information, we demonstrated that dozens of behemoth companies, from IBM and Microsoft to McKesson and GE, will take no prisoners when trying to sell hospitals, managed care organizations, doctors and others on the benefits of automating the now archaic world of healthcare information.  The market potential is conservatively estimated in the tens of billions of dollars.

Here’s the problem: There is no blockbuster standard technology for electronic medical records similar to other industrial technology products that might currently be offered by an Oracle, a Microsoft or an Apple. Instead, what you find are dozens of incompatible systems installed in lots of medical centers and doctors’ offices. Worse, most doctors (some estimate more than 90%) are still using paper and resist the move to electronic medical records for a host of reasons, ranging from implementation cost to the distraction they cause in serving patients.

Yes, our game predicted lots of mergers in this business over the next couple of years, which we believe will happen. And when mergers do occur, you will see dominant platforms take shape. 

What I see taking place here is no more or less then a land grab – this time for institutions and patients. If GE can effectively give away its Centricity backbone for electronic medical records to hospitals and providers, it will capture the organizations and their patients in one move. Build enough of a “network effect” and you have a strategic stickiness that will in turn attract other institutions. Before long, you will have a critical mass that may become so overpowering that other rivals will have to merge with you – at least that appears to me to be GE’s intent with this aggressive financing scheme.

Anyone interested in a late-model Centricity? Hmmm, ready to kick those tires Mr. or Ms. Hospital?