As one EHR company shuts its doors, is it too soon to think consolidation?

8:26 pm by | 1 Comments

As Aristotle once said, one swallow does not a summer make, so the closing of electronic health record company Imagine MD doesn’t mean consolidation for the EHR industry is here or even imminent, but it’s a useful reminder that it’s coming.

The New York health IT  business’ target market was small medical practices that paid a monthly subscription. It provided a cloud-based EHR system with services such as e-prescribing and helping clients meet Meaningful Use requirements. As of January this year backers had invested $25 million in the company, $10 million of that in the past 12 months. It had raised $25 million in the 12 months to January 25. George Blumenthal, the CEO and chairman of the business founded the company in 2006 as eHealth Made Easy. He had previously founded and led Cellular Communications, known as Cellular One in the US.

A message on its website read:

We are terminating all of our services as we are in the process of exiting the business.


Following termination of Services we will return to you, or, upon your written instruction, transfer to another party, all patient records, including personal information you have provided to us or we have created and maintained on your behalf. Such information will be provided in an encrypted format. You will be contacted in the near future regarding this transfer of information.

The HITECH Act with its millions in incentives to get smaller physician practices and hospitals to change over to electronic medical records attracted loads of companies to enter the field.  Tom Olenzak of Drexel Partners and a consultant with Independence Blue Cross, observed that the market can’t sustain the hundreds of registered electronic health record companies out there.

“It’s a finite market. Realistically, they will consolidate by being bought out or closing their doors. What we don’t know is will small companies be able to sell their patient lists to someone else?” And because there are so many electronic health record companies, it’s tough to imagine that a startup would fetch exciting numbers.

Raj Prabhu, co-founder and managing partner of Mercom Capital, which tracks health IT companies think it’s bit early to start using the c word: “We monitor news like this and we haven’t seen many EMR/EHR companies being closed in the last few years. That said, I would not consider one company closing as a sign of consolidation. This sector is still very young for consolidation and there might have been other problems with the company’s business strategy and the product itself.”

As so many have noted before, it’s not necessarily about the quality of a company’s product. It’s also about marketing, leveraging relationships and many other variables. As the competition in the health IT market continues to build, the companies that can make shrewd partnerships are the ones that are likely to endure.

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Stephanie Baum

By Stephanie Baum

Stephanie Baum is the East Coast Innovation Reporter for She enjoys covering healthcare startups across health IT, drug development and medical devices and innovations deployed to improve medical care. She graduated from Franklin & Marshall College in Pennsylvania and has worked across radio, print and video. She's written for The Christian Science Monitor, Dow Jones & Co. and United Business Media.
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Hi Stephanie--good article. You can't exactly say 'well done' about Imagine MD EHR's exit. One, they took no moves to transition their practices (probably in the low hundreds?) to another EHR company, nor sell their accounts. Two, one wonders whether they gave any kind of decent notice to their physicians--doubtful from the tone of this note, which is essentially 'come and get your records'--more fear factor among doctors. Three, their website six weeks later is still up and active on all pages save for a small notice bar across the front--it should be pulled down save for the notice. Definitely anyone who would be doing this has left the building like Elvis (or hasn't paid their web developer!). Four, I'd suspect their resellers, partners and investors have equally been left in the lurch. 


The fact that their exit has received little notice other than here is illustrative that after burning through $25 million in investment, their management couldn't get any traction or market share. Like a lot of early EHRs, they depended on selling high-priced software, expensive updates and high monthly service prices, only to find the market change with lower-priced cloud based EHRs--they only moved to this model earlier this year--and pricing essentially collapsing. 


It's an untenable situation--hundreds of small EMR/EHRs which are basically the same fighting for a slice of the practice market, with only a handful having any meaningful market share (e.g. eClinicalWorks and NextGen which have multiple affiliations with RECs; PracticeFusion which is free; AthenaHealth where it's bundled with their payment system), and their revenue per practice shrinking. The easy money through ARRA 2009-10 is pretty much all spoken for.


I don't cover this area for Telecare Aware, but in some companies I've spoken with, their feedback is that physicians who already have EHRs are unhappy and that over half are looking to change, so you are going to see conversions from one system to another, not expansion. Established companies with solid REC affiliations, strong service, happy doctors and decent capitalization will do OK. Those with limited capital, only a regional presence, limited service and a few hundred systems in place are either going to consolidate, sell, shut or ramp up for one final push into the market--a move you see when prepping for sale.


Projecting for 2013, there are going to be two 'c' words--'consolidation' and (given ACA, the economy and the state of medical practice) 'collapse' a la Imagine MD.


Donna Cusano, Editor North America, Telecare Aware  @telecareaware  @deetelecare