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A handful of technology and telecom giants will dominate the healthcare market, predicts Marlin & Associates.

By Nicole Lewis ,  InformationWeek
November 10, 2010 11:52 AM

A report from financial advisory firm Marlin & Associates predicts that the U.S. healthcare IT market is in the early phases of a massive consolidation that will ultimately translate into a handful of mega firms that form healthcare IT "superstores," or healthcare information networks.

Released Wednesday, the report, titled "Back to the Future: Healthcare Rebooted," notes that the confluence of technologies is at a pivotal point to enable radical changes at relatively reasonable costs. In addition to continuing advancement in the field of medicine, major breakthroughs in telecommunication, data management, infrastructure, and analytics technologies have laid the foundation for more innovative solutions for the industry.

"The responses reveal that that the social and economic imperatives for a better healthcare system have never been so pronounced," said Afsaneh Naimollah, co-author of the report and a partner at Marlin & Associates, in a statement. "Solving the cost of healthcare from the fringes has never worked. Now, with the healthcare IT mandates in the federal healthcare reform bill, coupled with a stream of superior technologies, we are finally in a position for technology to have a measurable impact on the costs and the quality of care delivery."

In the near future, the report says, a few companies will emerge to lead the healthcare information industry, much as Bloomberg and Thomson Reuters lead the financial information technology arena.

Those companies that will dominate the industry will have successfully integrated the key components of a healthcare information network -- and thereby will be in a position to set industry standards, said the report. From that position, the report predicts, these companies will be positioned to provide comprehensive integrated information, analytics, communication, administrative, clinical, and revenue cycle management tasks, all via a seamless network, accessed through the web or dedicated terminals.

Marlin envisions a future in which providers, payers, and patients will be able to conduct the majority of their healthcare business through these integrated, seamless, real-time healthcare information networks.

The market commentary goes on to make five other specific predictions, including a quickening pace of mergers and acquisitions among administrative (payer and provider sides), revenue cycle management, and analytics businesses. The report also argues that the payers will take a more active part in individualizing medicine in order to avoid becoming commoditized.

"Payers have to invent new products and pricing such as pay-for-performance with providers or behavioral-based premiums for the consumers," said Naimollah. "It is the only way that they can stave off the commoditization train."

Another of Marlin's predictions relates to an increasing trend towards outsourcing, which the report says will lead to the creation of a new breed of business process outsourcing (BPO) companies that will focus on managing the information flow in many of the health information exchanges (HIEs).

The commentary notes several companies that may be looking to build the next-generation healthcare information network, including incumbents in the healthcare IT industry such as Ingenix, a wholly owned subsidiary of UnitedHealth Group, to large telecommunication or technology companies like Verizon, AT&T, Microsoft, and IBM.

According to Naimollah, "These companies all have pieces of the puzzle. The question is: Which firm will be first to assemble a truly comprehensive information and transactional healthcare platform? You need vision, money, and the right leadership to get there, not a small task if you are creating a comprehensive healthcare platform."

The report notes that government standards have been helpful, but ultimately the private sector will set the standards for the industry, just as Microsoft and Intel set technology standards in the 1980s.

The healthcare industry is undergoing a sea change as medical records go digital. In this report, we'll advise midsize practices on how to get up and running with a server structure ready for electronic medical records, from scoping hardware and selecting software to deciding the in-house vs. outsourced question.

To read the M&A Report click REPORT

To read the news release click "Back to the Future: Healthcare Rebooted."