CEO SUMMARY: In recent years, the market for browser-based laboratory test ordering and results reporting systems has grown at a steady rate. Second and third generation products are more robust, offer more features, and are easier to install and operate. To date, smaller start-up companies are capturing more sales than the big healthcare IT corporations, and at least one expert predicts that trend will continue.
ENTREPRENEURIAL START-UP FIRMS are winning lots of business in the market for Web-based lab test ordering and results reporting systems. In compiling a list of companies offering such systems, THE DARK REPORT counted 27. This is almost double the number from winter 2001, when our published directory of firms offering Web-based lab test reporting totaled 13.
To learn more about how and why this market is expanding, THE DARK REPORT contacted Bruce Friedman, M.D., Professor of Pathology at University of Michigan Health Systems in Ann Arbor. For more than 20 years, Friedman has produced the laboratory industry’s biggest annual meeting devoted to laboratory information systems and laboratory informatics.
“One reason the demand for these systems is increasing is the need for hospital laboratory outreach programs to offer services which match or beat their commercial laboratory competitors,” stated Friedman. “The other reason is that the systems themselves are based on Web-type architecture, making them flexible and easy to customize. Many incorporate second and third generation Internet technologies, making them faster, more reliable, and less complicated to operate.”
Small, Nimble Start-Ups
Friedman also offered an opinion on why the start-up companies seem to be placing more systems in laboratories than the big healthcare IT corporations. “I think it has to do with strategic focus,” mused Friedman. “The big IT companies have a hospital workflow and information flow mindset that mirrors their biggest customers, which are hospitals and health systems.
“They tend to view hospitals and health systems in general as a holistic, self-contained universe and offer a variety of clinical information systems to serve different areas within this universe,” continued Friedman. “With this mindset, most of the leading IT firms have never understood the ‘disintegration’ occurring within the lab industry, because so much is happening outside that closed universe of the hospital.
“I believe ‘disintegration’ is the right word,” stated Friedman. “After years of consolidation, which fed centralized core labs (and the need for a centralized IT solution), there is now a fragmentation of laboratory services. Testing is moving out into physicians’ offices, into home health settings, and closer to the patient.
Dealing With Variables
“Some of the billion-dollar healthcare IT giants seem lost when discussing the ramifications of laboratory outreach testing, which involves serving all types of physician offices, nursing homes, and other healthcare providers,” added Friedman. They often have trouble conceptualizing service to the private physician’s office not served by the health system central IT services and the hospital intranet.
“When it comes to direct access testing (DAT) programs, they don’t understand why a lab might want the ability to charge a customer’s credit card at the time of the blood draw,” he explained. “Nor are they ready to address the needs of home health services, where workers must send lab test requests or access lab results by dial-up or wireless.
Know The Market
“In contrast, smaller, newer companies offering browser-based systems for lab test ordering and results reporting literally live outside the hospital or health system in this space ,” observed Friedman. “They are close to their laboratory customer. They are close to the physicians’ offices served by labs. They must be nimble and responsive to survive. Much of this perspective derives from their having large reference labs as customers early in their corporate lives, or, in fact, being a spin-off of large reference labs.
“As first movers, these start-up firms know that the risk of a second mover capturing their market is ever-present. This fear keeps them alert and nimble—listening to customers’ needs and always introducing new features into their products,” commented Friedman. “Because they are focused on their main revenue source—hospitals—the IT giants generally view the laboratory information services market as mature, offering little opportunity for growth.”
Not A Mature Marketplace
Friedman says the number of laboratories using browser-based test order/results reporting systems is steadily increasing. “When I see one of the larger of these firms double the number of FTEs and office space in only 18 months, that’s a good indication they are selling new systems,” he observed.
Another sign may be the changes Friedman sees at his annual lab information systems meeting. Formerly called “AIMCL” and based in Ann Arbor, Michigan, it is now called the “Lab InfoTech Summit.” Dates are next month, on March 10-11. The location is the Venetian Hotel in Las Vegas.
“This year, we already have 24 vendors committed to exhibit, a much higher number than in previous years,” he said. “Early registrations are also up, because of interest in developments on lab portals, new enhancements in LIS, first examples of e-laboratories, and LIS/IVD integration.
“Clearly the marketplace is driving laboratories to become more information systems-savvy,” concluded Fried- man. “It’s created an opportunity for the start-up firms to sell systems. But it’s also pushing lab directors and pathologists to upgrade their lab’s IT capabilities, or lose market share to competitors.”