2014 HIS Vendor Revenue

© 2014 by H.I.S. Professionals, LLC, all rights reserved.

By Vince Ciotti, PrincipalHIS Professionals, LLC

1980 1990 2000 2010 2015

HIS-tory of Vendor Revenue• If you’ve been reading print magazines in our industry along with

getting far more unvarnished insights from HIStalk, you’ve probably followed our annual rankings of the leading HIS vendors in order of their annual revenue for many years:– Original credit for the idea must go to Bill Childs who created

this whole media when he started his Computers in Hospitals magazine in 1980 with a whopping 52 page first issue.

• Bill’s magazines morphed & were renamed many times over the years, and subsequent rags expanded the vendor review from 25 to 100 vendors in issues running 200+ pages.

• Last year, the magazine we wrote our vendor review for had shrunk so small (≈30 pages) they only ran our article on their web site, so this year we’re only running it on HIS-talk!

Definitions• It’s important to define what one means by an “H.I.S.” vendor

since some of HIT rag’s rankings include billion-dollar firms in their top 10 like Dell, Phillips, CareFusion and Cognizant, that don’t really offer an HIS. We define “HIS Vendors” as:

- Hospital – acute care facilities are their primary market, not “just” physician practices, managed care, long term care, home health, PACS, etc.

- Information – the full suite of apps needed to automate a hospital: both financial and clinical systems. Thus, specialty vendor like SCC (Soft) & Sunquest for LIS and Oracle for ERP are excluded.

- Systems - the complete package of hardware, software and implementation. This excludes giants like Dell, CSC, IBM, Leidos, HP, etc, who only offer hardware and/or consulting.

2014 HIS Vendors Revenue• We obtained the figures from published earnings reports and

SEC filings (K-10s). Estimates had to be made for companies that are privately held (e.g.: Medhost), or are a part of giants whose “healthcare” revenue includes many non-IT products (e.g.: GE).

2014 HIS Vendors Revenue• This bar chart illustrates the enormous difference in $ size

between the large-hospital giants & small-hospital vendors:

2014 Shockers• There are some surprises in this table that deserve highlighting:

- Cerner – jumped ahead of McKesson to be the #1 vendor in the HIS industry by revenue for the first time in the firm’s 35-year history. And that’s before the ≈$1.2B they will gain from Siemen’s client base (which closed in Feb of this year)!

- Meditech – actually declined in revenue by 11% from 2013. Their annual report last year was delayed for many months due to some “booking” issues, so maybe it’s an accounting anomaly, but this is their 2nd straight drop in revenue in 2 years.

- Slow Growth – many vendors showed small growth compared to previous years, including McKesson (5%), Epic (4%), Allscripts (1%), and CPSI (2%).

Whassup?• Overall, the revenue total for the top 12 HIS vendors only went

up by 5%, compared to previous years (eg: 2011) when the total revenue increased as much as 17% as illustrated below:

17%

5%

Meaningful Abuse!?• The reason for this relatively flat market can be found in the

HITECH Act – our consulting firm’s experience sums it up well:

- One of our major product lines is system selections; we’ve done over 165 over the past 28 years. In the boom years of 2009 to 2011 when hospitals were buying EHRs to first earn MU $s , we did 10-12 searches per year, and I bought (too) many of these rare collector motorcycles:

- From 2012 to 2014, we shrunk down to 2-3 searches per year as hospitals stayed with their current vendor’s EHR (no matter how poor) struggling to attest for Stage 1 & 2 MU criteria. Our business has been so slow I am now selling my most valuable bike to try to make ends meet!

- HIS vendors have seen this slowdown in new sales too, as I’ve heard many sales executives lament over the past few years. We all hope hospitals will soon look to replace legacy systems soon…

Next 3 Weeks• We’ll delve into the details of the 12 vendors’ performance over

then next 3 episodes of this review, broken down by the three major HIS market segments (in terms of beds and revenue):– Large – those vendors whose derive the majority of their

revenue from large hospitals over 300 beds in size, including large AMCs & Multi-IDNS: Cerner, Epic, Allscripts & GE.

– Mid-Size – vendors whose target market includes mainly mid-size hospitals of 100 to 300 beds in size, including Meditech (all 3), McKesson’s Paragon, NTT Data and QuadraMed.

– Small – vendors whose client base consists of mostly under 100 bed facilities, including CAH (Critical Access Hospitals) of under 25 beds: CPSI, Medhost, Healthland and NextGen.

• Any questions, comments, or offers on my Honda, please contact:Vince Ciotti, vciotti@hispros.com, 505.466.4958