Ambulatory Electronic Medical Records Revenue to Peak in 2013

Frost & Sullivan predicts that revenue for electronic medical record use in ambulatory doctor's offices will double in 2012 and fall off starting in 2013.

In a new report, consulting firm Frost & Sullivan is predicting revenue for electronic medical records in ambulatory medical facilities (outpatient doctor's offices) will double in 2012 and then fall beginning in 2013 due to market saturation and falling prices. The volume of products and number of users may continue to increase, however.

Frost & Sullivan reports $1.3 billion in revenue for the ambulatory EMR market in 2009 and forecasts growth to $2.6 billion in 2012.

According to the firm, the Obama administration's financial incentives under HITECH (Health Information Technology for Economic and Clinical Health Act) are contributing to the market's financial growth through the guidelines set by the Centers for Medicare & Medicaid Services.

Nancy Fabozzi, a Frost & Sullivan analyst and author of the report, described a "gold rush" by vendors to cash in on government stimulus money for EMRs, which are also sometimes referred to as electronic health records, following the government's July announcement of meaningful-use guidelines on how to access federal aid for EMR implementation.

"A lot of providers have been sitting on the fence because they didn't know what the government would require," Fabozzi told eWEEK.

The F&S report looked at only ambulatory, or private, outpatient medical practices rather than at hospitals.

The factors contributing to the growth in EMR revenue include new HIPAA regulations and ICD-10 diagnosis codes, which require software upgrades to submit claims electronically, explained Fabozzi. Penalties for insufficient use of EMRs will kick in by 2016.

Fabozzi attributed the expected drop in ambulatory EMR revenue after 2013 to the natural process of market penetration and competition as well as falling prices.

"As technology gets more penetrated, it gets better and it gets cheaper," Fabozzi explained. "That's where the revenue drops off. Even if there's 100 percent penetration, prices will go down."

Increased technology innovation will also decrease prices for EMR platforms, she added.

In addition, the ambulatory physician market is shrinking, as practices are acquired by larger hospitals.

"There are going to be market opportunities to grow with non-physician clinicians [nurses, midwives], but because of competition and changes in technology, the prices will go down," said Fabozzi.

Medical facilities will also be required to bill more efficiently.

The total number of ambulatory physicians in the United States for 2009 was 614,000, said Fabozzi. Of those, she said, 44 percent were using an EMR. She expects the total to increase to 651,000 ambulatory physicians by 2016, of which 89 percent will be using an EMR.

Fabozzi explained that the EMR market in hospitals differs from the ambulatory clinics market because fewer vendors serve hospitals; what's more, the larger facilities require expensive and more-sophisticated EMR tools. EMR licenses in hospitals are also determined by beds.

"Ultimately, in terms of dollars, the hospital market is much bigger for EMRs," Fabozzi noted.