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For HIEs, the future is uncertain

By Mike Miliard , Executive Editor

 

This much is known about the health information exchange marketplace: It's probably the most fast-changing and unpredictable sector in health IT.
 
"I think that's what makes it so interesting," said Chilmark Research principal John Moore. "It's a very dynamic market right now."
 
A perfect storm of rapidly advancing technology, evolving policy mandates and shifting market valuations means the HIE sector, like few others, is in flux.
 
For instance, last December, the market saw one of its biggest mergers in some time when Aetna paid "quite a princely sum ($500 million) for Medicity," said Moore. Then, in February, he said, "you saw Harris pay a fairly decent sum ($155 million) for Carefx. So I think the valuations in the market remain high."
He added that, "in conversations I've had with a few companies, they find the prices to be out of reach. They've been looking around at buying into the market or adding to their portfolio via acquisition, and they've decided to focus on partnerships at this time, until the valuations come back down to earth.”
 
Axolotl and Medicity were probably the two leading vendors in the marketplace. "Now we're looking at ‘tier twos’ being acquired," said Moore. "And they saw what happened with their ‘tier one’ brethren and are expecting the same returns. I think they might actually be a little ahead of themselves in terms of what the market is actually willing to bear."
 
As such, he said, "I think we’ll still continue to see acquisitions where it makes a lot of strategic sense, but you're going to see more partnerships."
 
That will make for some interesting developments as vendors seek to meet the needs of providers and exchanges as they scramble to fulfill meaningful use and accountable care regulations.
 
"On the technology side, the actual exchange of information is going to increasingly become more of a commodity," said Moore. "What's really going to get interesting is when you start layering on other services on top of those pipes to, say, do clinical decision support, or run reports and analytics on efficiencies."
As such "a move toward open systems and platforms" is in the offing, he said, with room "for third party apps to sit on top. I think that's an interesting trend in the industry. Particularly as these vendors have come to realize they're not going to be able to provide everything that someone's going to want or desire in an HIE."
 
As all that continues to play out, Moore said he's still struck by how nebulous the sector continues to feel.
At HIMSS11, he spoke to "a very large number" of HIE vendors, and "what surprised me was that everyone is still trying to figure out how this market will shape up: What it will look like in three years, what it will look like in five years? And no one really has a clear picture on that right now."
 
There are "still a lot of question marks out there," said Moore. "I find it a little surprising. But it's not stopping people from going out and announcing partnerships and doing things."