Accruing revenues worth 2929 million Euros in 2002, HIS is a complex mixture of software, hardware, and services. A typical system consists of a network connecting the hospital departments, running a software package processing data either on patients or hospital finance. Integrated Systems cover all aspects of hospital administration, both clinical data and administrative information. Led by the administrative data systems sector, revenues are forecast to climb to 3378,8 million Euros in 2008. Clinical data systems and integrated systems jointly account for 57,1 percent of total revenues in 2002.
"At the same time", reports Chris Cherrington, the study's author, "the total hospital IT budget has many demands, including new technology developments such as wireless technology. Expenditure on high-profile projects remains a temptation for hospital administrators. We believe that stronger emphasis on improved clinical outcomes from enhanced data holds the key to greater revenue yields for vendors active in this market."
The inherent conservatism of the medical profession represents a further stumbling block to growth. While the impact of this factor is decreasing as the benefits of robust IT solutions become more apparent, there is often strong resistance to the "liberalisation" of medical data. Patient confidentiality is of crucial importance and this forms a key part of hospital's thinking when dealing with HIS and IT. The temptation for many administrators is to hold data at a departmental level and to resist the integration of department's software or IT systems. It will be many years before this instinct is finally removed from this market.
Over the last few years, the buoyant European HIS market has seen a number of major computer vendors exiting the market. The hardware companies Bull, HP and IBM had taken a stranglehold on the hospital sector in the late 90s. However, these companies have gradually shifted their focus from the professional services, a sector which was deemed a future source of riches, to their hardware sales.
"This series of events is now turning back into its final chapter, with the professional services companies eyeing the hospital and health care market as a new revenue source as the financial sector implodes under the stresses of falling share prices post-September 11 and last year's collapse of Enron", Mr. Cherrington reports. The problem for these vendors is that after a few years' neglect, the health care sector is not as enamoured of the companies as it once was. The medical hardware companies such as GE Medical, Philips and Siemens have been quick to offer software and to buy up health care software vendors.
Frost & Sullivan's study observes growing interest amongst the vendors of health care related software in Electronic Patient Records (EPR), which is widely perceived as a future revenue stream for many HIS companies and for other software vendors and service providers. EPR can be easily achieved with the existing technologies available. An electronic patient record is nothing more than a database entry. In fact, at its loosest definition, all HIS systems are a form of EPR.
Awareness of the potential for revenues derived from HIS is rising in tandem with the mounting pressure to capture a larger chunk of this buoyant market. This is manifested in the intensifying competition between the existing vendors and competition from other medical-related software vendors diversifying their product base.
Mr. Cherrington notes: "While hospitals and health care standards are merging across Europe and equipment manufacturers regard the market as global, the inherent characteristics in the HIS arena remain stubbornly national in nature and reflect the idiosyncrasies of the relevant regional health care systems."
This poses a problem for the vendors. "A single one-size-fits-all solution is the stock in trade of the IT community. A bank is a bank, just the language and layout of the chequebook show variations across different countries. HIS is not a high-profit zone and consequently, the market will be dominated by vendors that make their money from the non-HIS products", Mr. Cherrington adds.
A spate of mergers and acquisitions has diminished the total number of vendors, although this activity has largely been cross-border, giving the merged entity a larger geographic spread. Frost & Sullivan believe that competition will intensify as companies are increasingly struggling to generate revenues.
Siemens emerges as the clear European market leader, flourishing due to the company's purchase of Shared Medical Systems (SMS). Of the remaining contenders in the HIS market, perhaps both GE Medical and Philips have the financial strength to launch a serious challenge. GE has purchased some smaller vendors and a stake in Cerner, and this company is seeing its share of the market grow. At the same time Philips having bought Agilent, Philips wants to clinch the number one spot and can buy this position if it has to.
The study is confident that the medical hardware companies will aggressively buy into the market, as illustrated by Siemens' recent move. The experience of every other industry and vertical market suggests this is a flawed strategy. Frost & Sullivan concedes that the next few years will tell if the HIS market is different.
Frost & Sullivan's latest findings analyse both the profitability of the HIS market itself and the likely outcome of the fight for the hearts, minds, and finances of Europe's hospitals. The HIS market study is available at the price of 5000 Euros and can be ordered by contacting Mrs. Katja Feick of Frost & Sullivan.