January 7, 2013
Riding the Epic Wave

In our healthcare practice, we look to identify and invest in the
biggest trends in the marketplace.  So what is the largest healthcare
trend today?  If you ask healthcare CEOs and CFOs across different
health systems, their #1 priority is to purchase and implement
electronic medical record (EMRs) as soon as possible.  Unanimously.

For those who follow the healthcare space regularly, the reasons are clear.  The federal HITECH Act,
passed as part of the American Recovery and Reinvestment Act (ARRA),
signed into law in 2009, includes $17.2 billion in incentives for the
adoption of EMR starting in 2011, and penalizes those that have not
adopted an EMR by 2015.  Through September 2012, the Center for Medicare
and Medicaid Services (CMS) paid out about $4 billion in incentives to
82,000 medical professionals and more than 1,400 hospitals.

While $4 billion may seem like a large number, it pales in comparison
to the amount that hospitals are spending on EMR systems.  The deal
sizes for EMRs are large; for instance, San Francisco’s top hospital,
UCSF, is spending $160m over 10 years.  At Bessemer, we identified this
trend in EMRs very early through our roadmaps; our investment in Allscripts,
one of the leading EMR companies, happened over a decade ago, and the
company has gone on to become one of the winners in the space.

As we look today at the inpatient EMR space, it is hard to ignore one particular player – Epic Systems.

Epic is a family-owned EMR company based in Wisconsin that is the
leader in the hospital-based EMR space; it has the #1 market share in
larger hospitals, and 80% of hospital EMR selections now go to either
Epic or its competitor Cerner.  More and more, we see companies starting to ride this “Epic” Wave (and the wave of other leading EMR companies).

Epic Wave 2

As hospital IT budgets transition from purchasing EMR systems to
leveraging the data they are collecting, we envision a new ecosystem
forming around the EMRs – an investment roadmap we broadly call EMR 2.0
These companies will be built to serve hospitals and physicians who
need to support their implementations, proactively help clinicians use
technology, and develop ways to generate a return on investment on their
EMR investments through data analytics.

In particular, we have seen hospitals investing more in these EMR 2.0 products, namely:

  • Using predictive analytics to identify patients who are at risk of readmissions;
  • Tracking patients through the post-acute continuum of care (home health, nursing home, hospice)
  • Developing clinical decision support tools to help physicians properly treat and code during their patient visits;
  • Protecting patient privacy and medical information through best-in-class software and services
  • Utilizing data warehouses to connect clinical data within the EMRs to other data stored in other software within a health system

Similar to the EMR space, we believe the EMR 2.0 space will yield
multiple winners, and we hope to support many an entrepreneur along
their path in doing so!

Ambar Bhattacharyya is a Vice President with Bessemer Venture Partners in Cambridge, MA.  You can find this post, as well as additional content on his blog located here.  You can also follow Ambar on Twitter (@AmbarBh) by clicking here.