Slideshow 6 reasons why EHR software prices will fall

Published
  • May 23 2016, 1:30pm EDT
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6 reasons why EHR software prices will fall

The federal electronic health record incentive program created strong demand from providers to buy applications. But now that almost all hospitals and a high percentage of eligible professionals have EHR technology in place, what effect will that have on future prices? IBISWorld, a market research and analytics firm, says a variety of factors could cause prices to decline slightly over the next three years.

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Competing market pressures at work

While the adoption of EHR software is expected to accelerate during the next three years, mounting market competition and falling operating costs will prompt suppliers to reduce their prices to win and retain business.

Provider demand for EHRs will increase

Demand for EHR systems will surge as healthcare providers continue to implement EHR software to avoid financial penalties or to maximize reimbursements. Demand also will rise as more healthcare providers recognize the benefits of using digital applications to improve organizational efficiency and quality of care, as well as to minimize medical errors and administrative expenses.

More patients, more data

The rising number of patients also will lead to large amounts of data that providers will need to maintain effectively and securely, thus boosting demand for EHR software.

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For vendors, production costs will rise

Because of concerns surrounding EHR software’s efficacy and security, software suppliers will bolster their R&D efforts to improve product quality and differentiate from competitors, IBISWorld predicts. The need for skilled and experienced workers will become more acute, resulting in vendors having to pay higher wages.

Sales growth will help offset operating costs


Balance of power will swing to providers

During the next three years, buyers will continue to maintain their negotiation power and benefit from low price volatility, which will give them greater flexibility in evaluating their purchasing needs and selecting a supplier, IBISWorld says. The fierce market competition also will benefit buyers, as more companies are expected to enter the market to take advantage of its growth potential.

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Price competition to increase

Vendors will feel pressure to invest in improving product quality and offer competitive prices to win and retain business. Despite intensifying price competition, market share concentration is expected to rise slowly in the next three-year period, as large software suppliers seek to acquire smaller competitors, IBISWorld predicts. Consequently, buyers—particularly those with large-scale and long-term needs—should consider entering long-term agreements to lock in favorable contract terms and hedge against financial risks associated with rising market share concentration.

But it’s hard to switch to another EHR product

The highly specialized nature of EHR software and high switching costs can undermine buyer power. Vendors typically customize software functionality based on the buyer’s needs, size and specialty to ensure maximum efficiency and quality. The upfront cost of installing EHR software is very high and may require a long-term agreement depending on license type. Data interoperability is another major problem in transferring medical records among various systems and healthcare settings.