With all the recent reports and rumors about Apple and Amazon tipping their gigantic toes in the healthcare IT waters, it begs the question; are Epic and Cerner in trouble?
The short answer is no, not right now. However, Apple and Amazon will be disrupting the healthcare industry. Epic and Cerner will have to decide how they want to respond.
Make no mistake, despite the title of the article found on Healthcare IT news Wait! What? Amazon and Apple eye building EHRs?, there is no way Amazon and Apple enter the healthcare IT market with an Epic fighting EHR of their own. According to a more reasonable article from CNBC, Amazon is more interested in the data from EHRs than they are in building one of their own. Building an EHR from scratch does not make sense for the tech giants. The barriers to entry are too great. Government regulation, glacial sales cycles, high switching costs, and the overall complexity of healthcare in general are enough to pour water on the notion of an Apple/Amazon EHR. Citigroup suggested that Apple acquire athenahealth, but that notion was quickly squashed as well.
So if Apple and Amazon are not creating any direct EHR competition, will Epic and Cerner really be affected at all? Absolutely. Apple and Amazon have set their sights on solving two major problems that Epic and Cerner have been unable and unwilling to solve for a decade: interoperability and population health.
Population health? Don’t Epic and Cerner have population health products? Yes, but the response has been underwhelming. The data is still siloed within each organization, which limits the value of the discoveries that can be made considering it is such a small subset of data. Additionally, Epic and Cerner have essentially no experience building any type of machine learning software to extract the type of revolutionary discoveries hidden in the treasure trove of data they have been collecting over the past two decades.
On the other hand, Amazon and Apple have made data analysis their bread and butter. For years Amazon has not only been using their own machine learning algorithms to help run their own business, but they have been providing these tools to third party entrepreneurs and developers through their Amazon Web Services platform. Apple has also recently launched their own machine learning API for developers to enhance mobile user experience. It seems Amazon and Apple have discovered the massive amount of data Epic and Cerner have been so nicely collecting for them over the years, and cannot wait to monetize that gold mine.
The barriers to entry for population health for Apple and Amazon are almost non existent. They essentially have no competition from the majors since the difference in value added is so great. Healthcare organizations have little incentive to keep or purchase EHR vendor population health products. In fact, healthcare organizations have been begging for a solution to liberate their data for some meaningful research. The upside to finally evaluating clinical practice across such a diverse population is almost limitless.
Apple seems more interested in tackling patient experience, and as a byproduct the interoperability problem, as evidenced in this CNBC article. Interoperability has been a problem for hospitals since the inception of the electronic health record. However, incumbent vendors have made little progress, which is no surprise since they have no incentive to share data with the competition. CareEverywhere and CommonWell are token gestures in the right direction, but in clinical practice record sharing is not quite as easy as “one click of a button” and the medical information is often incomplete.
Apple will undoubtedly be producing a more user friendly and comprehensive patient portal application than what is currently available. Apple has two big advantages over Epic and Cerner when it comes to patient portals; user experience and user base. Apple’s wheelhouse has been crafting a superior user experience for its customers, seamlessly carrying users from product to product. From a design and usability perspective, Apple will have no trouble besting the current offerings from Epic and Cerner. On top of that, every iPhone user has iHealth already downloaded on their device. Many patients have never heard of MyChart or HealtheLife.
The beauty of Apple taking on patient experience and transferring control of the medical record to the patient is that it also solves the problem of interoperability. With the patient able to share their records directly with their physician, hospitals no longer are held captive by their siloed EHRs for access to outside records. If EHR vendors are the barrier to true interoperability, then just go around them. Apple has the talent, resources, technology, and established customer base to do just that.
The path to disruption in health IT is a modified version of the classical Clayton Christensen theory of disruptive innovation. Typical disruptive innovation involves a smaller upstart company producing a lower cost, lower quality product targeted at the lower end of a market. The large incumbent happily cedes this lower end market share so they can focus on their higher margin customers. This is the approach athenahealth is taking, targeting small physician practices and small rural hospitals that historically have not been on Epic’s radar. Trying to avoid becoming the next Blockbuster or RIM technologies, Epic is fighting back with stripped down versions of their enterprise EHR aimed at these lower market players.
However, athenahealth is the only real example of disruptive innovation in health IT capable of threatening the incumbent vendors. The barriers to entry for small companies are too many, and the odds against success are too great. So instead, the industry needs to be disrupted by a big player. Apple and Amazon both fit the bill. In terms of size and market cap, both Apple and Amazon dwarf Epic and Cerner. For a little perspective, Amazon recently acquired Whole Foods for $14 billion. The news sent Amazon’s stock up about 3%, effectively increasing their market cap by $15 billion in one day. Cerner’s market cap is just shy of $21 billion, and Epic’s has been estimated at $12 billion, although no one, including 99.9% of Epic’s employees, has any real idea of the true value of Epic.
Still, Apple and Amazon are not going after the core business of the EHR “giants”. They are going after the ancillary services of patient experience and population health. The difference between traditional disruption and this kind of disruption is that the offerings from Apple and Amazon must be superior to the current Epic and Cerner products. With their size, experience, and vast customer base, Apple and Amazon should not have any kind of problem developing far superior products. The other major difference is that there is absolutely nothing Epic or Cerner can do to prevent Apple or Amazon’s entry into the health IT market.
The incumbent EHR vendors have a choice. They can create adversaries out of Apple and Amazon by making their entry into health IT as difficult as possible, simply delaying the inevitable, or they can create partnerships with the tech giants. Facilitate access to their products. Help usher Amazon and Apple into the healthcare IT business. In essence make themselves indispensable to the disruption Amazon and Apple are bringing to the industry. There is no stronger way for the EHR vendors to secure their futures than to become partners with two of the most valuable companies in the world.
As the old adage goes, if you can’t beat ‘em, join ‘em.
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