I feel like I’ve been sitting around waiting for this to happen forever. When I was working as an analyst, I was once asked by one of my favourite vendors (you know who you are) “when is the consolidation going to start in the EMR market? “ Being the genius that I am I predicted in the next 12-18 months…this was in 2007. Ummm not exactly a home run.
This got me thinking lately, not just about EMR market consolidation, but the whole Canadian Healthcare IT market. I’ve always had an abiding interest in all things merger and acquisition, and on the surface the Canadian healthcare IT market seems ripe for consolidation. For the sake of this post, I am going to assume that consolidation is good and inevitable thing. You may agree or not as you see fit.
Many CIOs and others on the provider side would be just as happy dealing with a smaller number of large vendors than hundreds of smaller guys. Combine this with a highly fragmented geographic distribution of vendors and market share and the big guys “should” be buying companies left and right.
I think there are a number of systemic issues that are preventing this from happening.
1) The most logical buyers (the big companies) are largely branch plants of US or International companies, and they have to compete with the head office for acquisition resources. I know who would get the first crack at resources if I was running one of these companies, the US market. Why by Vendor A in Canada that sells into a small market, when you can buy the same kind of company and sell your stuff into a market 10 times bigger. Simple math wins every time.
2) The Canadian market has hundreds of small companies, with most selling into highly regional markets. Many of these small companies have limited access to capital, a record of building things themselves and an unrealistic view of the dollar value of some of their targets. This makes for reluctant buyers or unrealistic ones, not a good situation if you are looking at consolidation.
3) In terms of the EMR market, have the provincial certification programs actually slowed down market consolidation? Given that it did happen, then it is pure speculation as to the alternatives, but I love speculation.
- Would the market have consolidated already if all vendors were equal with no certification? Perhaps. I think one of the big reasons there is less activity is that with a 70% discount to switch vendors, it makes it awfully hard to buy another EMR for their user base.
- Would the market have consolidated already if there had been a single national certification program created years ago? Again I would say perhaps. It would be easier to source acquisition capital to do a national play than to do 4 or 5 regional plays. This would also be more attractive to the big players who are only interested in selling nationally with their other stuff.
I wonder what those who have done a recent acquisition think about my logic? Did I get it right or am I missing something?