Health systems and hospitals have expanded through mergers, acquisitions, and partnerships in the past several years. Electronic health record (EHR) giants Epic and Cerner have benefitted the most from this market consolidation building a combined 85% market share among large, 500-bed U.S. hospitals, according to a new report.
As hospitals and health systems consolidate, this has a significant impact on purchasing decisions as these organizations often seek to integrate all facilities onto a single platform, according to KLAS Research’s most recent report looking at the U.S. EHR market.
Among hospitals with 500 or more beds, Epic has a 58% market share and Cerner now has 27% of the market.
Among all acute care hospitals across the country, or 5,400 hospitals, Epic and Cerner together control 54% of the market—Epic’s market share stands at 28% and Cerner at 26%. That market share has grown since last year as other EHR vendors’ market share has dropped. The other vendors now trail Epic and Cerner considerably in terms of market share—Meditech (16%), CPSI (9%), Allscripts (6%), Medhost (4%) and Athenahealth (2%).
This past year saw significant movement in every market sector, according to KLAS’s analysis. In terms of EHR purchasing, 2018 was the busiest of the past three years. Nearly 450 hospitals— from critical access facilities to 1,000-bed hospitals—were impacted by an EHR decision, and the majority of these organizations, regardless of size or type, chose Cerner or Epic.
Epic had the highest net market share gain with 121 “wins” in 2018, as the company gained new integrated delivery network hospitals, new standalone hospitals and customer add-ons. Fewer large hospitals (500-plus beds) and multi-hospital organizations are making EHR purchases today, but those that do almost exclusively choose Epic, KLAS reports. All three of the large, private organizations that made an EHR decision in 2018 went with Epic, switching from Allscripts or Cerner.
Cerner signed the most new hospitals in 2018 by cornering the market on U.S. government contracts thanks to its $10 billion EHR deal with the Department of Veterans Affairs. The VA decision includes 147 acute care and 20 specialty hospitals, accounting for 76% of Cerner’s 2018 hospital wins. Government contracts have made up 39% of Cerner’s hospital wins over the past five years, KLAS reports.
On the flip side, the company saw significant losses in its Millennium EHR business in the private sector—65 hospitals dropped the Cerner platform, 52 of which came from two health systems, and the vast majority moved over to Epic.
At this point, most large organizations have invested heavily in implementing a single, go-forward solution across all of their hospitals, so future purchases will be highly contested and require a significant rip and replace, according to KLAS researchers. Four key vendors remain in the large space—Epic (with 163 hospitals), Cerner (77 hospitals), Allscripts (16 hospitals) and Meditech (12 hospitals).
Impact of mergers, affiliations on EHR purchasing
Regional affiliations are another key factor that drives acute care EHR purchases, KLAS reports, as organizations often consider what systems are used by the surrounding organizations they share patients, data and physicians with.
While Carequality and CommonWell support interoperability between EHR vendors, many organizations still prefer to achieve interoperability by using the same system as the hospitals in their network, according to the report.
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Since 2014, 20% of acute care hospitals that have switched EHR vendors have done so as a result of M&A activity, and over 50% have done so as part of a broader organization decision.
"This consolidation—and the desire for easy data sharing—means that acute care EMR purchasing today is less likely to be based on functionality considerations and more likely to be based on factors such as consolidation to a standardized platform or integration with referral organizations. Overall, Epic has seen the most benefit from this M&A and standardization activity," KLAS said.
Meditech, Allscripts, Athenahealth feel the impact of consolidation
Meditech is one of the vendors most impacted by M&A activity among customers: 16 of their 33 hospital losses in 2018 were the result of market consolidation by large organizations.
Allscripts also has felt the impact with increased losses in both 2017 and 2018. In 2018, 14 hospitals—nine of which came from one large organization—switched from the company’s Sunrise Clinical Manager platform to Epic. Additionally, 16 hospitals left the Paragon platform, moving to Cerner, Epic, Meditech or CPSI.
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The Horizon platform, which Allscripts acquired from McKesson in 2017, has been officially sunsetted—three Horizon hospitals made go-forward decisions in 2018 but none chose an Allscripts EHR.
However, these vendors are garnering interest from small and medium-sized hospitals. Critical access and community hospitals in particular are choosing web-based EHR solutions from Athenahealth and Meditech, KLAS says.
However, the acquisition of Athenahealth by private equity firms Veritas Capital and Evergreen Coast Capital, a subsidiary of Elliott Management, has created uncertainty about the company’s future. The deal was announced in November, but it was the end result of several tumultuous months in which the company was pressured to consider a takeover offer and founder and longtime CEO Jonathan Bush resigned.
Athenahealth’s growth in the hospital market slowed last year as organizations reported that the vendor has paused sales of its hospital platform and stopped responding to request for proposals, according to KLAS.
CPSI and Medhost have been in defensive postures for several years, with Cerner and Epic expanding down from the large space and Athenahealth pushing up from the critical access market. However, both companies managed to stabilize their market shares in 2018, KLAS reports.
KLAS researchers expect small standalone hospitals to continue to have high purchasing energy as customers face consolidation, governmental regulations and financial pressures.