COVID Driving EHR Market Growth in Europe, Versus Decline in the US

Published 01/12/2020

Written by

Arun Gill

Cranfield, UK, 1st December 2020 – In a year that has seen healthcare providers and EHR vendors faced with unprecedented challenges, the most recent financials from public EHR vendors have highlighted some interesting results.

As illustrated below, the financial performance of several leading US and European-based EHR vendors varied considerably in the first three quarters of 2020 (versus 2019), fundamentally due to the global pandemic. Geographically, several US-based EHR vendors reported lower EHR revenues in the first three quarters of 2020 (versus 2019), whereas there is a contrasting picture with European-based vendors (e.g. TietoEVRY, CompuGroup Medical and Nexus) who reported relatively strong EHR revenues. These European-based vendors will be particularly pleased with double-digit revenue growth achieved amid the global pandemic.

* Growth for CompuGroup Medical (CGM) represents organic growth only and excludes €37.6M or inorganic growth. Growth was 10% including inorganic growth.
** January 2019 revenues for Cambio are estimated.

A summary of the Q1-3 2020 results for several leading EHR vendors is analysed below:

Cerner’s revenue suffered a 3.3% decline in Q1-3 2020 (versus Q1-3 2019). Its Q1 2020 revenue grew marginally (1.6%), although the outbreak of COVID-19 in mid-March resulted in a lower than expected volume of contracts. Q2 revenues were heavily affected by the pandemic (-7.0%) followed by a less severe impact in Q3 (-4.3%), although there were other factors contributing towards the results during this quarter (Cerner’s exit from a large revenue cycle outsourcing contract in late 2019 and two recent divestitures). Focusing on Cerner’s international revenue, this fell marginally as a proportion of its total business in 2019 (11.5%, down from 11.9% in 2018), although revenues grew in absolute terms by 3%. This international growth was aided by success in Europe, particularly in the UK and Nordics where it won new contracts. In H1 2020, Cerner’s international revenue growth (+1.1%) outperformed its domestic (US) performance (-3.3%) compared with the same period in H1 2019. However, the sale of parts of its European EHR business (the medico, Soarian Integrated Care and Soarian Health Archive products mainly sold in Germany and Spain) to CompuGroupMedical (CGM), which completed at the beginning of July 2020, contributed towards Cerner’s international revenues falling by 16% in Q3 2020 (versus Q3 2019), and -13.2% for the Q1-3 2020 period.

Allscripts’ Q1-3 2020 revenues suffered a relatively substantial drop (versus its competitors Cerner and MEDITECH), due to the pandemic (-7.3%). The pace of decline also accelerated over the three quarters (-3.5% in Q1, -8.8% in Q2 and -9.5% in Q3). It is estimated that this decline predominantly impacted North American revenues, whereas international revenues suffered to a lesser extent.

MEDITECH’s global revenue grew by 4.7% during the Q1-3 2020 period. This growth was entirely due to a strong Q1 2020 (+24%) which was boosted by a large backlog of 2019 product installations worth $16.5m falling into early 2020, and service revenues rising due to new customers going live, e.g. new Expanse EHR installations in Canada (including Ontario Mental Health Hospital). However, the effect of the pandemic resulted in its Q2 and Q3 2020 revenues falling by 3.4% and 5.3% respectively. Growth of its services revenue fuelled by more customer go-lives during these two quarters (+5.2% and 6.3%) was not enough to offset the product revenue declines (-22.4% and -29.9%) caused by implementation delays in Q2 and Q3 respectively.

Despite reporting a fall in customer bookings for its revenue cycle management services, NextGen’s revenue rose in each of the first three quarters of 2020 (versus the same quarters in 2019), resulting in an overall Q1-3 2020 rise of 1.8% (versus Q1-3 2019). This growth was fuelled by increased subscriptions that support improvements in patient access to healthcare services, such as its recently acquired Medfusion patient portal and OTTO Health telehealth platform, which integrates with EHR systems and allows providers to have video consultations with patients. It also reported an increase in demand for its population health and analytics (core NextGen and NextGen Office cloud-based) solutions. While revenue generated from its patient experience and telehealth platform has helped to offset the decline in RCM, the market uncertainty caused the vendor to announce several cost cutting measures in May 2020, including a small reduction of its workforce (c. 3%).

Whilst athenahealth reported an increase in Q1-3 2020 bookings (versus Q1-3 2019), it should be noted that its EMR pricing is based on a percentage of provider revenues (between 2 – 8%). With US healthcare providers struggling due to the impact of COVID, this could lead to a relatively larger dent in its revenue in the short term, versus its competitors which typically charge per bed. The positive news for athenahealth was the rise in demand for its newly launched telehealth solution; between the week of 25th May and 9th November 2020, it reported an average 354k athenaOne telehealth appointments per week, representing a ten-fold increase compared with its appointments pre-Covid (average 34k per week between January-February 2020).

CompuGroup Medical (CGM) saw revenues grow 10% (all business lines) in the first three quarters of 2020 compared to the same period in 2019. However, a significant portion of this was attributed to its acquisition of part of Cerner’s European business at the start of the year. Excluding inorganic growth, its business grew 4%. This was in partly driven by new business relating to the gematik Telematics Infrastructure project underway in Germany. In addition, COVID-19 has driven additional business for CGM as healthcare providers continue to adopt digital networking solutions as they react to address the pandemic. Further, the German government announced Euro3B investment to help drive the digitisation of German hospitals via the Hospital Future Act in September 2020. CGM is positioned well to take advantage of this over the medium term.

European based Nexus has a strong foothold in the German acute market and is active within the Dutch, French and Spanish market through acquisitions. The vendor achieved positive EHR revenue growth in Q1-3 2020, up by 8.7% (versus Q1-3 2019). The German market was less restricted by COVID-19 measures, and subsequently its German revenues rose by c. 11%, versus approximately 6% and 7% in France and the Netherlands, respectively.

Nordic EMR market leader TietoEVRY, which merged in December 2019 to strengthen its position in the region, saw its overall Q1-3 group revenue fall by 4.5%. In Q2 and Q3 2020, TietoEVRY’s overall revenues suffered respective declines of 6% and 7.1% (versus Q2 and Q3 2019) due to the impact of COVID-19. However, its Industry Software segment (covering Healthcare, Welfare and Public Sector), which includes EMR, achieved growth of >10% during these periods.

Top three Nordic EHR vendor and Swedish market leader Cambio has achieved several consecutive years of double-digit annual revenue growth, including +17% most recently in 2019 (versus 2018). This has been driven predominantly by domestic success in Sweden (86% share of overall revenue), along with its international business in Denmark and the UK. In June 2019, Cambio was awarded a significant regional contract in Sweden to implement its COSMIC platform within the SUSSA regions. The 10-year contract is worth SEK 2.7Bn and will ensure support for one quarter of the Swedish population, with the aim of achieving the target of regional collaboration, as set in Sweden’s E-Health Vision 2025. Cambio’s growth has also been fuelled by its strategy of M&A activity across these three geographies, including acquisitions of UK-based Cayder (patient flow software/patient administration provider) in 2017, Danish clinical IT solutions supplier Daintel in 2019, and Swedish vaccine supplier MittVaccin in September 2020; the two most recent acquisitions contributed towards its total Q1-3 2020 revenue rising by 26% versus the same period in 2019.

Key Take-aways

With public EHR funding/regionalisation projects already allocated in Germany and the Nordics, respectively, EHR spending in these countries is suffering from a relatively lower impact caused by the pandemic, compared with the US, for example. Indeed, in Germany the Hospital Future Act is largely a reaction to the negative economic impact of COVID-19 on the German economy, and can be viewed in a similar way to the HITECH economic stimulus act in the US twelve years ago. The US market has historically been largely fuelled by private investment, however private US healthcare providers have been impacted particularly hard by COVID, limiting EHR market growth. That said, there are signs that vendors addressing the ambulatory market have seen some positive results, largely driven by demand for new products to support virtual care (e.g. patient relationship management tools and telehealth modules).

In Signify Research’s just-published EHR – World – 2020 market report, the US market is forecast to be one of the slowest growing EHR markets over the next five years as it approaches saturation, particularly for core-EHR products in the acute market. Meanwhile, the EMEA region is predicted to outperform both the Americas and Asia and witness the fastest revenue growth (2019-2024 CAGR).

Diversifying product portfolios and expanding what is provided within “standard” EHR offerings are two strategies that can help to ensure US vendors maintain historical growth. As highlighted above, the likes of NextGen and athenahealth were able to offset some of the declines caused by lower implementation/booking revenues, by ramping up their telehealth offering in response to demand from healthcare providers for video consultations. Whilst it is not always an easy route, geographic expansion, as outlined previously by Signify Research, is another key strategy US EHR vendors could employ to help maintain historical growth, as their domestic core-EHR market has started to saturate. In a year dominated by the pandemic, which has amplified the challenges faced domestically, US vendors cannot afford to ignore the international opportunity.

About the Report

“EHR in Acute and Ambulatory Applications – World – 2020” is a newly-published Market Report compiled by Signify Research on the global market for Electronic Health Records. The report has been compiled using data from over 135 EHR vendors to create a bottoms-up view of the market. At a country level, the data is broken down in terms of revenues by vertical, product, public/private purchaser and vendor shares.

About Signify Research

Signify Research is an independent supplier of market intelligence and consultancy to the global healthcare technology industry. Our major coverage areas are Healthcare IT, Medical Imaging and Digital Health. Our clients include technology vendors, healthcare providers and payers, management consultants and investors. Signify Research is headquartered in Cranfield, UK.

Signify Research has published several market reports on the global EMR market and the Integrated Care/PHM market. For further information please contact Arun Gill.

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