EHR in the Cloud Portends Big Shift in HIT

An electronic health record system provider is offering to equip small physicians practices with cloud-based software on a shoestring. The move is making high-end EHRs that cost tens of millions of dollars to get up and running look like dinosaurs, at least at small health systems.

One reason physicians have gravitated to mobile devices is the steep discount that phone carriers have passed along to customers to get their hands on the latest hot smartphone. Now that same trend has come to the doctor's office desktop—without the usual two-year commitment.

Practice Fusion, which for several years has given away free, web-based EHR software to small practices of 15 physicians or fewer, upped its game last month by announcing that it would make available one Chromebook per practice to anyone willing to sign up for its cloud EHR.

It's a marketing gimmick, but what a gimmick. Recipients sign no contract, and could basically take the Chromebook and run. Confident officials at Practice Fusion, riding a surge of adoption in 2013, believe recipients will like its cloud EHR enough to stay.

The venture-backed company is one of several big bets that individual practices are not going the way of the dinosaur. From their perspective, the endangered species is more likely to be the high-end EHRs that require tens of millions of dollars to get up and running at large systems.

To an extent, it's a comparison of apples and oranges. Practice Fusion cannot run a hospital. But as the industry moves away from hospitals and toward primary care as the main source of its revenue, equipping a small practice with cloud-based Meaningful Use Stage 2-compliant software on a shoestring budget holds a certain appeal.

Goodnight, XP
Adding to this shift is the current sunsetting of Windows XP, that stalwart operating system from the dawn of the millennium, a version of Windows yet unequaled in terms of adoption and acceptance. A lot of small practices are faced with ditching that XP hardware due to the imminent discontinuation of security patches from Microsoft. Although a one-year extension was recently, if begrudgingly, announced.

Chromebooks share a lot in common with zero-client PCs. They're really simple, yet powerful. The computer's browser also has the ability to cache data should there be an interruption in connection to the Internet. During such episodes, don't expect the app to catch every single drug-drug interaction or accept new lab results. But for a small practice, it's just enough technology to get the job done until the connection resumes.

And yes, the desktop and even laptop computers are losing their dominance. A recent study found that more than half of U.S. physicians perform some work-related tasks on a tablet computer. But no one is giving away computers – except, as far as I can tell, Practice Fusion.

Practice Fusion didn't have the best reputation when it was launched. Critics said it lacked features and integration physicians had come to expect on "real" EHRs. But the Meaningful Use program has allowed Practice Fusion, athenahealth and some other interlopers to come a long way in the critics' eyes.

Just last week, athenahealth dethroned Epic for the KLAS award for best practice management software in practices of 75 physicians or less. Like Practice Fusion, athenahealth is cloud-based, which reduces the need, which small physicians never understood anyway, to run their own servers. Meanwhile, Practice Fusion received its Meaningful Use Stage 2 certification in mid-December, while some premise-based EHRs are still struggling to reach that goal.

Fewer Hassles for the Well-Wired
The digital divide persists. Many rural communities still lack high-speed Internet, so a Chromebook won't do them much good. Even in the wired communities, outages still happen – Google's Gmail had a hiccup last week that some people swore lasted all day, even though it lasted all of 30 minutes in most places. But these outages are becoming less commonplace.

It's often argued that the true cost of IT is not in the hardware or the software, but in process or workflow redesign, in training, and in the thousand things that can go wrong with PCs—theft, missing backups, viruses, upgrade headaches, and plain old user error.

Some of this persists with the Practice Fusion PC-less model, but it's greatly reduced. Chromebooks don't get viruses. Data gets automatically backed up. Upgrades get automatically pushed to every account with a few days' notice to allow everyone to get used to the latest improvements.

Any EHR carries with it the threat of lock-in. The qualifying step for switching to the Practice Fusion EHR to get the free Chromebook involves converting the physician's e-prescribing credentials over to the Practice Fusion platform, from wherever else the practice has them. Or Practice Fusion can create credentials from scratch if necessary.

Practice Fusion offers standard assurances that all data put into the system can be exported one time, free of charge. (The company also loads data from any EHR at the start free of charge.) Still, no one, small practices least of all, likes to switch EHRs. So likely as not, once they sign up for this cloud-based service, physicians practices are not likely to leave any time soon, unless perhaps they're acquired by a larger practice or healthcare system.

Understanding the Business Model
And every time they hear about this something-for-nothing proposition, physicians have to wonder about the underlying business model, and what they're getting themselves into. When I put the question to Practice Fusion co-founder and vice president Matt Douglass, he first noted how the company has raised $150 million from venture capitalists. Now I know some of those VC companies. They're not always in it to make the world a better place. They expect a handsome return on their investment.

So, where are those Practice Fusion revenues? Douglass says the EHR represents "a marketing platform for pharmaceutical companies to advertise to our physicians." Lab companies such as LabCorps, Quest, and 350 other labs in the U.S. pay a premium to Practice Fusion to receive orders electronically from doctors using Practice Fusion, and to send results back electronically. "We repeat that business for imaging centers, for billing companies, for transcription centers, for pretty much any business that needs to interact with physicians."

I'm not sure these revenue sources totally reassure skeptical physicians or make the company worth $150 million in investments. It all has a dot-com whiff about it to me. But we may be at a particular inflection point in the evolution of healthcare IT where giving it away and a getting a big installed base fast works one more time in tech.

So yes, this could portend a big shift in health IT technology. Remember that the dot-com boom left Google and Amazon standing, and look how they're still changing technology more than a dozen years later. So I say to small practitioners: Keep your eyes and your options open. And for larger systems, think about what the tech landscape would look like today if you weren't paying off a $150 million Epic investment.