Impact of Hospital Futures Act on German EHR Market

Publication Date: 04/05/2021

Written by Alex Green, Cranfield, UK, 2nd May 2021 – The Hospital Futures Act (KHZG) was announced in September 2020 by the Federal Social Security Office (BAS) to support digital healthcare projects in Germany with 4.3 billion funding pledged to be invested over the next four years. The federal government is providing 3 billion of the funding and the individual States are contributing up to a further 1.3 billion. Most of the elements of the act will have a significant impact on the German EHR market over the next four years. Here we discuss why.

Market Impact

  • The EHR market in Germany will see above average growth over the period to 2024 as providers take advantage of the funding provided via the Federal Government and States
  • There are ten “pillars” of the act. Those that will be the most influential in relation to EHR vendors are Emergency Room IT, Patient Portals, Decision Support Systems, Medication Management, Process Digitalisation, Hospital Telemedicine and IT security.
  • Although funding is already available and contracts will be signed earlier, the greatest market impact will be felt in the period 2022 to 2024 as projects are crystalised and implemented.
  • 2025 is forecast to see a market decline over 2024 as projects are completed. However, service and maintenance contracts and other ongoing revenue streams will maintain the market at levels above those historically seen in Germany.

Vendor Impact

  • Dedalus, CompuGroup Medical, Cerner, Meierhofer, Telekom, iSolutions and Nexus are the EHR vendors best positioned to take advantage of the funding due to their existing German hospital footprint, in particular Dedalus and CompuGroup. However, a broad range of IT vendors will also play a significant part in projects.
  • Addressing all pillars may for too much of an ask for many EHR vendors. However, most pillars are relevant, and many vendors are already actively planning their product roadmap in order to target the majority of pillars.
  • EHR vendors will need to establish partnerships with specialist IT vendors and systems integrators to fill portfolio gaps and address the extensive and very specific individual pillar requirements.
  • Vendors need to move quickly to benefit from the funding. Some state deadlines have already passed for provider funding applications. Others will pass over the next few months. The providers developing funding bids are likely to be already assessing which vendors can support their bids.

The Signify View

The Federal Government in Germany has specified 10 key pillars (listed below) of the Hospital Futures Acts (KHZG); however, it has not specified what proportion of the funding needs to be used on each pillar, with the exception of the IT Security pillar (earmarked for 15% of the funding). Therefore, the decision how the potential €4.3B is spent on the remaining nine pillars is still to be made and rests largely with providers, States, and the Federal Government (as it approves each application).

EHR vendors can have some influence here. It is therefore important that they work closely with providers to support bid development and position themselves as central to the design of the IT required to support bids. With the hospital EHR often forming the central tool that many of the new IT systems will interface/integrate with, EHR vendors will often be the first port of call for providers planning KHZG projects.

They also need to move relatively quickly. Significant increases in revenue won’t be seen until next year; however, with application deadlines passing, it’s key that vendors are ensuring they’re front of mind in developing solutions for providers.

Impact on EHR Market for Next Five Years

Not all the funding will go to EHR vendors. There are approaching 120 IT vendors that are now certified to provide IT to KHZG, some better positioned than others. These range from virtual care platform vendors, admission/discharge IT specialists, system integrators, IT generalists, drug information IT suppliers, best-of-breed clinical IT vendors, etc. It is envisaged a broad ecosystem of vendors will benefit from the funding; however, a significant proportion of the funding will be directed to EHR vendors. Given that the EHR market in the Germany, Austria, Switzerland (DACH) region is estimated have been worth approximately $850M (both acute and ambulatory) in 2020, even a relatively small slice of the 4.3B will have a significant impact. In Signify Research’s latest report (published April 2021) on the DACH EHR market (a component of our EHR Market Intelligence Service), it is forecast that the EHR market will approach the $1.2B mark in 2024 with most of the growth a direct result of KHZG.

The Likely Winners?

As mentioned above, the leading acute EHR vendors in Germany have a lot to potentially gain from the Act. Dedalus has the largest installed base of hospital customers in Germany (approximately 850 hospitals), with many of these being the larger hospitals and university hospitals where KHZG spending is expected to be more focused. Dedalus’ broad German product offering centred around the Orbis solution and its willingness to invest to grow means it is expected to gain the most from the Act.

CompuGroup Medical (CGM) is the next largest acute vendor, its installed base of hospital customers recently doubled (to approximately 500) via the acquisition of parts of Cerner’s German business in 2020. After Dedalus, it is expected that CGM will be the next largest EHR vendor beneficiary, although with it supporting a range of independent acute EHR product lines in Germany, product development resources cannot be as focused around just one platform as per Dedalus and Orbis. How it reacts to different customer requirements will need to be tailored to the specific product line already being used, somewhat limiting its ability to scale individual KHZG solutions across different customers.

Opportunities are expected for the other leading vendors in Germany, such as Cerner/SAP, Nexus, Meierhofer, ISolutions, and Telekom. Although their smaller respective installed base of existing customers means the share of the funding that makes its way to these vendors will be smaller than Dedalus and CompuGroup.

One final thought to ponder is whether Cerner would have still made the decision to scale back its German business in 2020 had it known a multi-billion-dollar cash injection was imminent. Portfolio rationalisation certainly was a compelling reason at the time, and it is still able to benefit via its sizeable remaining installed base. But there may be a slight pang of regret should CompuGroup and Dedalus leverage their larger installed base of EHR customers to take the lion’s share of funding revenue.

Signify Research EHR Market Coverage EHR Companies That Will Benefit

The above analysis is a summary of data and commentary from Signify Research’s EHR Market Intelligence Service. The service provides a rolling set of publications on 20 geographies providing deep dive analysis of local, regional and global EHR market trends. April 2021 saw Signify Research published its latest county focused reports, one covering the DACH region and one covering UK/Eire. Next month our coverage of the Nordics and Benelux market will be updated. Please contact us if you’d like further information on our EHR Service or our broader Hospital IT portfolio.

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.

For further information please contact Alex Green.

+44 7814 256750