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Business Game Forecasts Increase in HIT Mergers

Four top business schools recently predicted in a public war game that most prominent companies in the HIT and healthcare delivery industries, including Microsoft, McKesson, Kaiser Permanente, and Allscripts, will quickly move to create alliances—and, in certain cases, merge with their rivals—to take advantage of the government push to adopt electronic medical records (EMRs).

This year’s event, “The Battle for Healthcare Information,” is the fifth national war game championship organized and run by Cambridge, Mass.-based Fuld & Company. As in past war game contests in the technology industry, this competition, featuring teams from the Wharton School of Business, Columbia University School of Business, Massachusetts Institute of Technology’s Sloan School of Management, and Northwestern’s Kellogg School of Management, is expected to accurately anticipate competitive events.

According to Leonard Fuld, president and founder of Fuld & Company, “In this day-long event, teams assumed the identity of four major healthcare icons, simulating and ‘stress testing’ their anticipated strategies to determine who will profit from the adoption of EMR. The Obama administration’s injecting $19 billion to kick-start this nascent electronic medical records industry just gets the players moving. It is no guarantee you will see universal adoption of electronic records in healthcare any time soon.”

Among the predictions during this fast-paced business school war game event were the following:

• Entrenched interests will continue to resist EMRs for some time to come. Healthcare system change, engendered by EMRs, means some interests will win dollars while other traditional players will lose. Physician, hospital, and patient/consumer markets are going to be major challenges for all companies in the field, the teams acknowledged. Hospitals and doctors actually can make money through these current inefficiencies and will likely resist change. Smaller medical practices may continue to resist installing EMR systems, not wanting to invest in long-term promises while sinking lots of money into new systems. Emerging pay-for-performance requirements and reimbursement incentives may sway the thinking, though.

• A shortage of technical manpower will slow down the implementation of EMRs, no matter how much money is thrown against the challenge.

• Allscripts (and other similar pure plays, such as Epic) will seek to exploit cheaper Web-based solutions to bring EMRs to smaller medical practices. To penetrate the small medical practice market, where most of the EMR potential user base exists, it will have to look to stripped-down, cheaper cloud computing solutions rather than the client/server solutions sold to larger medical practices and hospitals. It may also have to look to form an alliance or merge with a larger player that has a more extensive sales force, such as a pharmaceutical firm, to effectively access the small medical practice market across the nation.

• The market that is driving efficiencies, such as EMRs and other scalable solutions, will act as a catalyst to force small medical practices to band together or merge in the next few years, allowing doctors to spread the cost—and the risk—of EMR implementation.

• Kaiser Permanente seeks to lower healthcare costs by “undocking” healthcare information within its system, increasing the access and portability of patient data. As a major healthcare provider, Kaiser is well positioned to set industry best practices and influence adoption of EMR systems rather than provide the “killer app” platform itself. Kaiser will become the nexus of important alliances between government and industry to craft standards in HIT (eg, to afford interoperability of data-related tools and technologies) that have been nonexistent.

• McKesson will work to expand its HIT niche through its dominance in logistics and understanding of the health value chain, data creation, and data utility with an emphasis on physician, payer, and healthcare delivery applications. The company will look to generate synergies among all these different points of the healthcare delivery chain through IT.

MIT’s team, simulating the McKesson strategies, won the war game competition based on four criteria: its strategic insight, its accuracy in presenting McKesson’s strategy, the creative ways it expressed McKesson’s culture and goals, and its ability to project its strategic vision into the future.

— Source: Fuld & Company