A decline in spending on electronic health record systems by healthcare organizations is negatively impacting the financial bottom lines and future growth prospects of some health information technology vendors and consultants.
A prime example is Buffalo, N.Y.based IT solutions and services company CTG, which on Feb. 24 reported that its fourth-quarter 2014 profits plunged by 67 percent. And, the vendor warned that its earnings are likely to tumble by upwards of 38 percent.
On a conference call with analysts, CTG interim CEO Brendan Harrington said the vendor expects 2015 to be a challenging year with some carryover challenges in its healthcare business that started in the second half of 2014, namely a decrease in EHR implementation spending as many organizations' systems have gone live while others are primarily using internal resources to support implementation activities.
Similarly, Dan Morefield, COO of Quality Systems, Inc.the parent company of NextGen Healthcaretold analysts on a Q3 2015 earnings call last month that the federal governments extension of Meaningful Use Stage 2 and the delay of Meaningful Use Stage 3 were having a negative impact on their business. All of these things tend to postpone what our clients want to do and the upgrade requirements, said Morefield.
Many providers and payers are holding off in the short term on making significant IT investments while determining the best way to move forward under new pay-for-performance business models being introduced with healthcare reform, according to CTG.
To offset these declining business areas, the consultancy said it plans in 2015 to enhance IT consulting services such as population health management, revenue cycle management, ICD-10, application management, and EHR performance optimization.
"There are multiple emerging new business opportunities as healthcare organizations look to reduce costs, comply with health reform mandates and initiatives, and optimize their significant EHR investments, states Harrington. These new opportunities will help CTG adapt to a decline in EHR spending and IT investments by healthcare organizations, which impede our ability to grow CTGs revenue and earnings in 2015.
According to a report released earlier this month by research firm Frost & Sullivan, hospitals will invest more in administrative IT systems, health information management and revenue cycle analytics than in EHRs over the next few years.
Administrative information systems, in particular, offer robust opportunities for IT vendors as this area has been somewhat ignored in recent years due to the scramble to implement EHRs, states Frost & Sullivan. The need to better manage labor costs, drive productivity with new workflow tools, engage consumers, and maximize operational efficiencies will see this segment grow.
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