CEO SUMMARY: Turnover and turmoil are the big news in the LIS field. Hospitals and commercial laboratories are upgrading or replacing their existing LIS software at a rapid pace. Meanwhile, mergers and consolidations within the LIS industry create new power players. LIS conversion projects continue to be difficult, expensive and time-consuming.
Market leaders Meditech and LabSoft, Inc. topped THE DARK REPORT’S rankings of the Top Ten LIS Vendors for 1996. Meditech and LabSoft ranked number one in both new sales and total installations in the categories of hospitals and non-hospitals, respectively.
Meditech sold 82 new systems to hospitals during 1996. Shared Medical Systems (SMS) and Sunquest Information Systems tied for second place. Each sold 54 new systems in 1996.
LabSoft, Inc. sold 142 systems to non-hospital laboratory sites during 1996. Trailing at number two and number three were Schuyler House, with 33, and Clinical Information Systems, with 28.
Meditech and LabSoft also topped the rankings for total installed systems in their respective categories of hospital and non-hospital.
With 741 installed hospital LIS systems, Meditech has a significant lead over the 609 installations of number two ranked Sunquest. Cerner Corporation comes in third, with 490, trailed by Citation Computer Systems at 486 and HBO & Co.’s 411 installations.
For non-hospital laboratory installations, LabSoft’s 675 installations were more than double Comtron’s 265 installations. Sunquest came in third with 256 non-hospital LIS installations.
Meditech’s large numbers of sales and installations are generated from its contract with Columbia/HCA. It is the exclusive information systems vendor for all hospitals owned and operated by Columbia.
Meditech’s large numbers of sales and installations are generated from its contract with Columbia/HCA.
THE DARK REPORT’S annual Top Ten LIS Vendor rankings aid laboratory executives in watching how the marketplace judges products offered by different LIS vendors.
The most visible industry change during 1996 was an increasing number of acquisitions. The large transaction was Sunquest’s acquisition of Antrim. Dynamic Healthcare Technologies purchased CoMed and gained rights to CoMed’s popular anatomic pathology product, called CoPath. Isys purchased Biovation.
Impact From LIS Mergers
“These mergers have the potential to impact many laboratories during the next two years,” stated Raymond Aller, M.D., Professor of Pathology and of Medical Informatics at the University of Utah. “Take the Sunquest-Antrim merger, for example. Antrim was clearly one of the two leading laboratory vendors among commercial laboratories. Now it is joined with Sunquest, which is a market leader in its own right in providing hospital LIS systems.
“If the combination of these two companies works successfully,” he continued, “they could provide laboratories with LIS resources which exceed what each company could do alone.”
Dr. Bruce Friedman agreed. “Consolidation of LIS companies is the big story of 1996. When your LIS vendor gets bought by a new company, you do not know whether the new owner will change things for the better or for the worse.”
Dr. Friedman is the Director of Pathology Data Systems and Ancillary Systems at the University of Michigan Medical Center. He is a keen observer of the LIS world and pointed out the potential downside from 1996’s mergers.
“When you buy a software company, you are really buying intellectual capital,” he explained. “If the acquired company had a good product and a good service team, many times the new owners end up driving those people assets away. This can cause a rapid deterioration in both service and the quality of the product.”
“Consolidation among LIS vendors should be expected,” said Dennis Winsten, president of Dennis Winsten &Associates, a recognized consultant specializing in healthcare-based information systems. “The marketplace served by LIS vendors is dwindling. In the commercial laboratory area, consolidation is over.
“It is a similar story with hospital laboratories. Widespread mergers between hospitals, accompanied by a general decline in the occupancy rate of hospitals, reduce the number of sites which need LIS,” he continued. “Sales numbers and earnings of the LIS vendors reflect this. In fact, most of the new sales reported by these companies are LIS conversions, where hospital labs which were using Vendor A switch to Vendor B and vice versa.”
Numbers used by THE DARK REPORT were gathered by R. L. Johnson and Associates of Danville, California. Johnson has collected annual data from hospital software vendors for 15 years. Like Winsten, he believes that LIS vendors face a shrinking laboratory marketplace. Revenue growth will not come from placing more installations. Instead, it will come from providing software products which offer unique and useful features.
Last year Winsten told THE DARK REPORT that LIS systems were increasingly driven by the need to provide cost and productivity data along with the normal functions of test analysis and reporting. He also predicted technology changes to hardware and software would lead to decentralized data processing departments.
“Managed care is driving the requirement for LIS to provide more sophisticated cost and productivity reports,” said Winsten. “Those elements are creeping into the various LIS software packages. However, over the course of 1996 I did not see LIS vendors introduce many additions to functionality.”
“In fact, probably the most notable change for LIS users during 1996 was the arrival of the graphical user interface (GUI) to LIS. This utilizes the Windows’ ‘point and click’ approach to software. It is rapidly becoming a standard feature for LIS.
“Another area which surprises me is the resurgence of stand-alone anatomic pathology and blood banking systems,” mused Winsten. “Laboratories seem willing to purchase the stand-alone software module if the variety of features appeals to them.
“One specific area where rapid change is occurring to LIS involves better front-end architecture. Although this is invisible to laboratory LIS users, vendors are quickly incorporating new computer hardware and new software technology into their LIS programs. This makes it easier and faster for them to enhance the future capabilities of their LIS software.”
Winsten made another interesting comment about the collective capabilities of the existing LIS software products currently available. “With the trend toward regional laboratory networks, I am not convinced that there are any LIS products which are designed to meet the unique needs of regional laboratory networks.”
Regional Lab Networks
“Unlike a multiple hospital laboratory information system, a regional lab network usually consists of a loose coalition of hospital laboratories,” noted Winsten. “Thus, the LIS requirements of regional laboratory networks are different from the LIS requirements of multiple laboratory sites within an integrated healthcare system.”
Winsten’s observation reveals a recognition that the growing national movement toward regional laboratory networks will encounter problems if no satisfactory LIS software product is developed to meet the unique needs of such networks.
What might be the next hot thing for LIS? Dr. Friedman believes the surprise answer will be LIS systems built around internet browser technology, using the emerging technologies of “fat client” and “thin client.”
“What often gets overlooked in discussions about what LIS can and should do is the underlying cost of maintenance,” he said. “Hospital IS managers have increasingly relied on desktop computers. Yet the average cost to maintain and service a desktop computer now approaches $6- $8,000 per year. This “thin client” technology basically pares down the amount of software that the desktop computer uses.
“Instead of loading all the software on each desktop computer, there exists a server in the middle tier of this system. Virtually no software is resident on the desktop. This drives down maintenance costs because changes and upgrades are only made to the single server in the middle tier of the computer network.
“Also, it means that the desktop computer can be relatively simple, either an Apple or a Wintel,” concluded Dr. Friedman. “This technology is catching the attention of information systems managers in all industries, not just healthcare. I believe it will rapidly find its way into laboratory information systems.
“Further, this technology is well suited for use by the ‘virtual laboratory,” he concluded. “It enables remote testing sites to be economically linked
to the central LIS.”