June 2, 2008

1. You Don't Want to Fight Me, NHS, I'm a Fujitsu Expert

Facts and Background

Fujitsu walked away from its $2 billion contract with Britain's NHS last week after it could not reach agreement on payment for tailoring the Millennium systems of its subcontractor Cerner to meet local needs. 

Opinion

That's two vendors (Accenture being the first) that thought they could figure out how to make their multi-billion dollar contracts profitable once they got on board with a lowball price, but were wrong. That strategy would probably have worked in the US, where BearingPoint took a single $750K VA CoreFLS work order and parlayed it into a $116 million deal with no competitive bidding and minimal oversight.

Musings

• Lots of Cerner news is coming out of the UK, most of it bad.
• Former project head Richard Granger was known for aggressive vendor management, maybe a bit too aggressive given how unhappy vendors are to be involved.
• The UK has seen its share of massive IT projects that failed miserably. This one seemed to have all the right foundations, but its chance for success as originally envisioned seem minimal.
• Cerner needed something sexy to offset slowing US growth, so the UK deal looked great, especially since Cerner had originally lost the business, but then regained it. If it fails, Cerner shares may be punished significantly since they've played the worldwide growth card.
• Epic is the obviously Cerner replacement if it comes to that, other than the fact that they are too smart to sign up for a project with minimal chance for success.
• A Fujitsu consultant got into hot water in early 2007 for publicly stating that NHS seemed to expect that simply installing IT solutions would revolutionize healthcare, with emphasis on installing rather than using creatively.
• Anyone who things the Nationwide Health Information Network is a great idea should look at the cost, politics, and results of England's IT projects and the performance of their big consulting company vendors.

2. HIMSS Opens Doors to New Members Not Committed Enough to Pay $140

Facts and Background

After a "soft opening," HIMSS opened signups for its Organizational Affiliate program, which allows providers to enroll unlimited individual members for less than $3,000.

Opinion

HIMSS continues to fuel its growth by tapping into the willingness of vendors to pay for access to its members, meaning the chief metric is to keep memberships and conference attendance growing at all costs.

Musings

• How interested and committed will throngs of new members be who couldn't justify the $140 in annual dues and signed up only after membership became free?
• The HIMSS "butts in the seats" business model continues to look more like those timeshare guys who give you free trips for sitting through a sales pitch, knowing that enough people will buy the sponsor's product to cover the costs of those who don't.
• One might speculate that HIMSS saw the possibility of reduced membership renewals and conference attendance (especially as hospitals struggle financially), which would threaten the existence of the vendor gravy train, so simply making everything free blocked the possibility of defectors (who would cancel a free membership?)
• HIMSS tax reports show that the vast majority of its income comes from the annual conference (and most of that is paid by vendors), so free memberships are a good investment if they boost conference attendance.
• The real question: will the volunteers and core members who give HIMSS credibility stay interested when their ranks are infiltrated by newbies with no relevant experience? It's walking a fine line to bring in new blood without changing the organization into something else that might not be as profitable (do vendors value high conference attendance by non-decision makers?)

3. CBO Throws Sticks at the RAND Illusion

Facts and Background

A Congressional Budget Office report says that a widely quoted RAND Corporation study that estimated $77 billion a year in savings from EMR adoption is flawed, making unlikely assumptions about the quantity and quality of their adoption.

Opinion

This would be big news except nobody believed the Cerner-sponsored study in the first place.

Musings

• EMR adoption is up since the study was written. How much of the $77 billion are we saving so far? Costs don't seem to be decreasing, so one might assume that EMRs don't save the federal government anything.
• Not mentioned in the study: many doctors and hospitals buy technology to increase billing, not necessarily to decrease costs or increase quality. That increases costs.
• The report says that IDNs are the only constituency saving money with EMRs. Not coincidentally, they are also the only constituency buying them and executing major quality improvement projects around them.
• The most damning conclusion: RAND simply ignored any negative studies in coming up with a rosy estimate, no doubt making Cerner happy with a big number.
• Individuals and organizations will make decisions that maximize their own benefit under whatever rules are in place. EMRs or not, providers aren't going to volunteer to accept lower payments. The reimbursement system is more responsible for EMR adoption (good or bad) than anything else.
• Economic theory suggests that the government has no role in advocating the use of software as its own issue. If EMRs provide benefits, they will be used without prodding. If not, nothing short of mandate will give them traction.
• Both the RAND and CITL studies seemed to have the singular purpose of being trotted out by vendors to shame providers into buying their software products that didn't have sufficient attractiveness otherwise.

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