Meaningful Use Stage Two – The Grim Reaper for Small E.H.R. Companies

Meaningful Use of Electronic Records, Stage 2 standards are set by the Office of the National Coordinator (ONC), on behalf of the U.S. Health and Human Services department (HHS).  Meaningful Use grew out of the American Recovery and Reinvestment Act (ARRA) and the HITECH Act which provides stimulus dollars for use of electronic health records.  Many simply refer to the Meaningful Use (MU) Stage 2 requirements as “2014 Edition” requirements for certification.

Over $19 billion in stimulus funds have been paid out to date.  The stimulus created a temporary, artificial ecosystem for electronic health record software companies to grow and flourish.  Meaningful Use Stage 1 was achieved by most of the over 350 companies we track in the healthcare IT E.H.R. market.

MU2 is More Complex and Expensive

Meaningful Use Stage 2 adds some new, highly complex requirements including:

  • Secure provider to provider communications using the DIRECT protocol
  • SNOMED data standardization along with LOINC and RxNorm data
  • Clinical quality measures (CQMs)
  • Enhanced clinical decision support (CDS) that automatically integrates with E.H.R. templates
  • Consolidated-Clinical Document Architecture (C-CDA) for Meaningful Use

For many Electronic Medical Records companies, these and other requirements are so expensive and complex that they are struggling to meet the regulatory deadlines.

Deadline of Death

These deadlines have serious consequences for both the E.H.R. company and their users, (aka Eligible Providers, or E.P.s).

Regulatory Deadlines for Meaningful Use Stage 2 require the following:

  1. That any health care provider who is attesting for Meaningful Use  during 2014 must use a 2014 edition certified E.H.R.   This means that if a provider is attempting to do their attestation for Meaningful Use Stage 1 they must still
    1. ONLY be using a 2014 edition (MU2) certified E.H.R.
  2. E.H.R. companies must ensure they are certified no later than June 30th 2014 so that their clients can use a 2014 edition certified E.H.R. to start their attestation by July 1st 2014 if they are a new Meaningful User.
  3. E.H.R. companies must achieve certification not later than September 30, 2014 to ensure that their clients (E.P.s) may use the E.H.R for certifications starting with an October 1, 2014 reporting period if they are not new meaningful users.

These certification deadlines are challenging because:

  1. ONC Authorized Testing and Certification Bodies (ATCBs) are booked solid with testing days for existing Healthcare IT vendors who wish to certify their products.  Last minute requests for certification are being pushed into September 2014 or later which is too late for many companies.
  2. E.H.R. companies must ideally allow more than one day to enable their EPs to upgrade to the new system in order to start their attestation to meet the 90 day reporting period.
  3. There is a high failure rate of first time attempts to certify.   Re-testing may be hard if not impossible to schedule within the deadlines put forth by ONC for EPs to do their attestation on a 2014 certified E.H.R.

E.H.R. Switching Peaks in 2014, Will Nearly Stop in 2015

As a result we predict that many small E.H.R. companies will not have the resources to achieve meaningful use stage 2 and will be forced out of business, or will have to merge with a large E.H.R. who wants their customers to migrate to the acquiring company’s system.

E.H.R switching will come to a virtual halt in 2015 because the reporting period for subsequent stages of Meaningful Use will be expanded to one year.  Therefore, EPs who understand the regulations will want to switch now and or lock in their E.H.R during 2014 because switching during 2015 will be impossible if they wish to comply with the one year reporting period.

Meaningful Use Stage 2 offers important benefits to the health care industry.  It also serves as a grim reaper that will bring an end to many small E.H.R. companies because of crushing near term deadlines, complexity and expense.

M&A Activity is Accelerating

The time for a land grab in the E.H.R market is now.  Companies who wish to consolidate their market position should acquire struggling companies who may not make MU2 soon, and migrate users to a single platform before the start of 2015.  Mergers and acquisitions in this market started earlier this year with Vista Equity Partners and their acquisition of Greenway Health, a solid E.H.R that plowed a huge portion of their income back into their product to both comply with regulations and to build appealing clinical workflows for a superior customer experience.   Smaller E.H.Rs that do not comply with MU2 but that have an attractive customer base will be acquisition targets or struggle to stay in business.

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Michael F. Arrigo

Michael Arrigo, an expert witness, and healthcare executive, brings four decades of experience in the software, financial services, and healthcare industries. In 2000, Mr. Arrigo founded No World Borders, a healthcare data, regulations, and economics firm with clients in the pharmaceutical, medical device, hospital, surgical center, physician group, diagnostic imaging, genetic testing, health I.T., and health insurance markets. His expertise spans the federal health programs Medicare and Medicaid and private insurance. He advises Medicare Advantage Organizations that provide health insurance under Part C of the Medicare Act. Mr. Arrigo serves as an expert witness regarding medical coding and billing, fraud damages, and electronic health record software for the U.S. Department of Justice. He has valued well over $1 billion in medical billings in personal injury liens, malpractice, and insurance fraud cases. The U.S. Court of Appeals considered Mr. Arrigo's opinion regarding loss amounts, vacating, and remanding sentencing in a fraud case. Mr. Arrigo provides expertise in the Medicare Secondary Payer Act, Medicare LCDs, anti-trust litigation, medical intellectual property and trade secrets, HIPAA privacy, health care electronic claim data Standards, physician compensation, Anti-Kickback Statute, Stark law, the Affordable Care Act, False Claims Act, and the ARRA HITECH Act. Arrigo advises investors on merger and acquisition (M&A) diligence in the healthcare industry on transactions cumulatively valued at over $1 billion. Mr. Arrigo spent over ten years in Silicon Valley software firms in roles from Product Manager to CEO. He was product manager for a leading-edge database technology joint venture that became commercialized as Microsoft SQL Server, Vice President of Marketing for a software company when it grew from under $2 million in revenue to a $50 million acquisition by a company now merged into Cincom Systems, hired by private equity investors to serve as Vice President of Marketing for a secure email software company until its acquisition and multi $million investor exit by a company now merged into Axway Software S.A. (Euronext: AXW.PA), and CEO of one of the first cloud-based billing software companies, licensing its technology to Citrix Systems (NASDAQ: CTXS). Later, before entering the healthcare industry, he joined Fortune 500 company Fidelity National Financial (NYSE: FNF) as a Vice President, overseeing eCommerce solutions for the mortgage banking industry. While serving as a Vice President at Fortune 500 company First American Financial (NYSE: FAF), he oversaw eCommerce and regulatory compliance technology initiatives for the top ten mortgage banks and led the Sarbanes Oxley Act Section 302 internal controls I.T. audit for the company, supporting Section 404 of the Sarbanes Oxley Act. Mr. Arrigo earned his Bachelor of Science in Business Administration from the University of Southern California. Before that, he studied computer science, statistics, and economics at the University of California, Irvine. His post-graduate studies include biomedical ethics at Harvard Medical School, biomedical informatics at Stanford Medical School, blockchain and crypto-economics at the Massachusetts Institute of Technology, and training as a Certified Professional Medical Auditor (CPMA). Mr. Arrigo is qualified to serve as a director due to his experience in healthcare data, regulations, and economics, his leadership roles in software and financial services public companies, and his healthcare M&A diligence and public company regulatory experience. Mr. Arrigo is quoted in The Wall Street Journal, Fortune Magazine, Kaiser Health News, Consumer Affairs, National Public Radio (NPR), NBC News Houston, USA Today / Milwaukee Journal Sentinel, Medical Economics, Capitol ForumThe Daily Beast, the Lund Report, Inside Higher Ed, New England Psychologist, and other press and media outlets. He authored a peer-reviewed article regarding clinical documentation quality to support accurate medical coding, billing, and good patient care, published by Healthcare Financial Management Association (HFMA) and published in Healthcare I.T. News. Mr. Arrigo serves as a member of the board of directors of a publicly traded company in the healthcare and data analytics industry, where his duties include: member, audit committee; chair, compensation committee; member, special committee.

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