In the fragmented European hospital information systems market, established vendors have a distinct advantage

Aug 18 2004

In the highly fragmented European hospital information systems (HIS) market, established vendors tend to have a distinct advantage due to the strong relationships they have formed with pockets of provider groups that continue to use their legacy systems. Many of these providers do not have the funds required to upgrade to more sophisticated systems.

New vendors are therefore finding it extremely difficult to break through the barriers and reach potential clients. While some cash-rich vendors have attempted to address this issue through the acquisitions route, the fact that customers give preference to old relationships is acting as a roadblock in many cases. This is perhaps one of the most significant challenges facing HIS vendors in Europe today.

To overcome this challenge, vendors will have to provide compelling evidence by way of success stories. They will also have to offer competitive pricing and simultaneously convince prospective clients about the need for advanced functionality in their systems.

Even supposing clients' budgets permit them to make expensive upgrades, the drive to integrate new modules with existing systems is likely to favour vendors that can offer integrated healthcare IT solutions with established track records. In fact, vendors that have recently snagged contracts are realising how highly customers value such solutions that can also guarantee a longer product life cycle.

"Given the high costs of HIS, first-time clients and new medical centres are keen on purchasing state-of-the-art systems that have advanced capabilities and functions to support their needs for many years," remarks Industry Analyst Siddarth Saha from Frost & Sullivan. "This is likely to be a critical challenge, especially for smaller vendors that tend to package and sell a varied mix of sub-systems."

Low budgetary allocations are another obstacle in the uptake of HIS. Traditionally, European healthcare budgets have given less importance to IT and prioritised diagnostic equipment acquisition and general infrastructure improvements instead. Additionally, with the public sector being the major healthcare provider, and hence the largest buyer of HIS, vendors often have to contend with bureaucratic and time-consuming procedures that can stand in the way of increased adoption.

Again, it will be an urgent priority for HIS vendors to convince health authorities about the pressing need to stay abreast of the latest technology developments.

Notwithstanding these challenges, the future of the European HIS market is promising. The market is projected to grow from USD 3,131.0 million in 2003 to USD 6,343.0 million in 2010, primarily driven by the active implementation of hospital clinical information systems in major European markets such as the United Kingdom, Germany and France.

Increasing evidence of the cost of medical errors and inefficiencies in healthcare delivery is also expected to contribute to market growth. Concerns about patient safety as well as data security are on the rise, causing providers to seek information systems that have specific capabilities to mitigate such errors and eliminate inefficiencies.

Additionally, major initiatives such as the National Health Service's (NHS) National Programme for Information Technology (NPfIT) and the e-Health initiative propagated by the European Commission are likely to go a long way in boosting growth rates of HIS.

The steps taken by the NHS to begin electronic booking service, e-prescribing service and an integrated care records programme clearly prove its commitment in setting up integrated administrative and clinical systems in healthcare delivery organisations. This political momentum can only spell good news for HIS vendors, given that more than 75 per cent of provider groups fall within the purview of the public sector.

In particular, the clinical segment of the HIS market is likely to provide the most growth opportunities to vendors. This is because the healthcare industry is increasingly banking on clinical decision support systems to deliver much-needed cost efficiencies, increase quality and improve clinical workflows. Estimated at USD 1,892.0 million in 2003, this segment is projected to grow at a compound annual growth rate of 12.3 per cent between 2003 and 2010.

Some of the clinical systems generating great interest include the picture archiving and communications systems (PACS), radiology information systems (RIS), electronic medical records (EMR) and the computerised physician order entry (CPOE) systems.

"With the trend towards integrated healthcare, clinical systems such as the EMR are set to play a pivotal role in achieving the continuity of care envisioned," says Mr. Saha. "In addition, there is a growing industry trend towards improving healthcare revenue cycles as an outcome of clinical automation instead of relying only on financial modules. These factors are driving the growth of the hospital clinical systems market."