LIS Sales Decline in 2000 As Labs Shift Emphasis

Health systems moving to integrate clinical systems and doctor access

CEO SUMMARY: THE DARK REPORT’S annual ranking of the Top Ten LIS Vendors reveals that sales of new LIS products declined for the second consecutive year. This is evidence that the influence of multi-hospital health systems is changing the way LIS is purchased and implemented. It is also evidence that LIS buyers are moving with caution, as they watch the growing influence of the Web and e-health services.

SALES OF LIS SYSTEMS DECLINED again for the second straight year. However, despite all the hoopla about the Internet and Web-accessed healthcare services, most laboratories and hospitals are still devoting the majority of their time and resources to traditional laboratory information system (LIS) software and other clinical systems.

THE DARK REPORT has identified a fundamental shift in how laboratories are dealing with the current generation of LIS products compared to just a few years ago. During the 1990s, LIS con- versions and upgrades were the dominant trend within the lab industry.

However, over the past 18 months, a new trend surfaced. It is the interfacing of various clinical systems within a healthcare enterprise. These efforts are directed at creating an integrated suite of clinical applications that can be loosely described by the term electronic medical record (EMR).

Growing numbers of integrated healthcare networks (IHNs) are giving top priority to the integration of data flows from clinical systems such as radiology, laboratory, and pharmacy into a clinical data repository (CDR). Upgrades and conversions to LIS and other systems continue but at a lesser rate than just a couple of years ago.

This trend is confirmed by THE DARK REPORT’S annual ranking of the Top Ten LIS Vendors. (See below for this year’s rankings.) The number of new LIS sales has declined in each year since 1998. Between 1999 and 2000, new hospital LIS sales declined 28.5%, from 634 to 456.

“Another factor which may be contributing to the decline in LIS unit sales is the slower purchase and implementation cycle of the growing numbers of large healthcare systems,” stated Gary Braley, President of Braley Consulting Services, Inc., based in Minneapolis, Minnesota. “Bigger organizations tend to take longer to evaluate a new software purchase, implement the conversion and train all the staff. This naturally slows down the replacement cycle.

Complex Issues

“I’ve seen this change in my consulting practice. As integrated healthcare networks (IHNs) become bigger, it requires correspondingly more effort to change any part of the informatics systems serving the IHN,” added Braley. “Besides the complex issues that need resolution, there is also a larger group of users who legitimately have different needs.

“Not surprisingly, all these complications lead to a longer cycle of decision–purchase–implementation,” he said. “For example, an LIS installation serving eight or ten hospitals is obviously going to be more complicated than one serving two hospitals.”

Braley also believes LIS products are relatively better than other clinical systems and this contributes to a longer cycle of purchase and upgrade. “For all their quirks, LIS products are usually technology leaders within the healthcare informatics marketplace,” he observed. “Traditionally, there are two reasons why this is true.

High Transaction Volume

“First, LIS software must support a high volume of transactions,” he explained. “Second, pathologists and lab administrators are closely involved in all aspects of LIS functions. Once an LIS conversion is completed, that is typically why such software often runs satisfactorily in a laboratory up to ten years or more.

“In contrast, I think most users would judge other software, such as scheduling, transcription, and the like to be less reliable than LIS software,” noted Braley.

Braley also observes that a couple of additional factors may act to restrain sales of new LIS systems in the near future. “First, I believe LIS vendors are having a difficult time keeping up with the changes occurring within the healthcare system,” he observed.

“This includes many levels, from the consolidation of healthcare providers into IHNs to the swift introduction of new technology,” said Braley. “Lab buyers are watching cautiously and taking care to buy LIS solutions they think are compatible with the next generation of healthcare technology.

Inadequate Implementation

“Second, administrators of these huge healthcare systems often don’t appreciate the complexity of LIS and other clinical systems. As a result, conversion planning and implementation is woefully inadequate.

“If it costs $1 million to acquire a system, the budget for selection, installation and operation should approach that same number,” he explained. “To successfully install and implement an LIS requires a detailed plan, along with rigorous testing and extensive training of the staff. This certainly requires money and time to do properly.”

Braley’s observations reflect the LIS market as it is today. In recent months, two key meetings dealt with the topic of laboratory information and its evolution in the next few years. One was the special “Web-accessed Lab Test Ordering/Results Reporting” program immediately following the Executive War College in Cincinnati on May 9-11. The most recent was the 19th annual “Automated Information Management in the Clinical Laboratory” (AIMCL) gathering in Ann Arbor, Michigan on May 30-June 1.

Experts at both meetings hit upon the same themes. LIS software used by labs today is going to evolve at a rapid rate over the next five years. It will become easier for LIS products to interface with other clinical systems and data repositories. The widespread deployment of “interface engines” which substitute for the arduous development of point-to-point interfaces is contributing to this greater efficiency.

New technologies, utilizing the Internet, will make it possible for lab customers to both order tests and review tests results. For example, labs can allow doctors to use wireless devices to access patient test results. The earliest attempts to introduce this type of service are happening in a handful of IHNs right now.

Recently-implemented standards for automated laboratory equipment and information systems will stimulate manufacturers to build compatibility into their diagnostic instruments and LIS products.

Selling EMR Products

Dr. Bruce A. Friedman, one of the leading thinkers in the field of laboratory information (and host of the annual AIMCL meeting) stated at his Ann Arbor program that “another challenge in the LIS space is that some vendors view the lab market as mature and want to sell an integrated EMR suite.”

One consequence of this, according to Dr. Friedman, is that purchasing an LIS system is becoming more complex. Instead of picking an LIS vendor whose product optimally manages all lab functions and interfaces to the central IHN computers and the various lab analytic instruments, purchase of an EMR suite is now being handled by the enterprise CEO and CIO with the vendor-supplied LIS product bundled with the software suite. Because the selection of the product often hinges on the quality of the tools offered to clinicians, lab personnel may have little influence in the total suite selection despite the fact that the LIS choice may have a profound effect on lab operations.

Dr. Friedman further observed that efforts are already underway to expand LIS interaction with Web portals for order entry and results reporting, wireless connections to PDAs carried by physicians, and prescription ordering systems used in physicians’ offices.

Taken together, all of these market forces demonstrate that the traditional purchase and replacement cycles for LIS are evolving. For legitimate reasons, LIS buyers are taking longer to acquire and implement upgraded systems. This directly leads to a decline in the total number of new LIS systems sold each year.

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LIS Market Is Mature

THE DARK REPORT agrees with Dr. Friedman that one consequence of this development is that LIS vendors do indeed consider the LIS market to be mature and offering limited potential. It’s the reason why major IT vendors are shifting their product development emphasis to products which support the electronic medical record.

This is why lab administrators and pathologists should exercise caution when considering the near-term replacement or upgrade to their LIS software. The environment served by LIS is changing. IHNs want lab test data to flow throughout the health system in new ways. Vendors are scrambling to build this capability into their existing IT products.

In some cities, hospitals and IHNs are responding with integrated communications solutions. This is true of the Winona Project in Winona, Minnesota and HealthBridge, a multi-IHN clinical intranet repository serving 25 hospitals in Cincinnati, Ohio.

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