Tag Archives: DMEA2023

SPI Digital Health: Race Ready and Raring to Go, but KHZG Vendors Warn of Project Delays

As DMEA2023 wrapped up in Berlin last week, it was clear that two topics had dominated discourse among participants. One was Oracle Cerner’s ongoing tribulations in Germany with its i.s.h.med EHR solution (which Signify Research explored last week in this Insight). The other was, inevitably, progress (or the relative lack of it) on the Germany Hospital Futures Act (KHZG) from the perspective of vendors waiting for hospitals to award contracts. 

According to the Bundesamt für Soziale Sicherung (Federal Office for Social Security), as of mid-April, €2.9BN out of the total €3BN in federal funding had been approved, covering around 6,070 KHZG-related IT projects.  

Hospitals are starting to receive some of this money, but IT vendors at DMEA said this is not yet translating into a steady stream of contract awards. Consensus in Berlin was that this will only start to happen later this year, with contract award activity peaking through 2024. 

The Signify View 

Signify Research’s regular observations in recent months that the bulk of the impact of KHZG is back-loaded towards the end of the funding period (2021-2024) was vindicated at DMEA. Realistically, vendors do not see full implementation of IT systems under KHZG being complete before 2026/27. They claim that an IT manpower shortage in Germany means they cannot commit to the timescales needed to execute all the 6,000-plus projects approved. 

As well as being a source of frustration for hospitals in dire need of digitalisation, any delays also leave vendors – who have invested a lot of time, expertise and money in product development to meet the technical criteria of KHZG’s 11 pillars – playing a waiting game for now. Most IT vendors with ambitions to serve KHZG are, from a technical perspective, race ready and raring to go. But with only a finite amount of skilled resources to implement projects, and only a trickle of contracts coming through anyway at this stage, there isn’t much of a race for them to run right now. 

Any rollout delays also raise the spectre of spiralling project costs. With German inflation averaging 8.2% in the first three months of 2023, cost overruns are a real prospect. In this scenario, hospitals would either need to find additional money to complete projects, project scopes may need to be scaled back, and/or vendor margins will be squeezed.  

CGM Manoeuvres into Position 

Nevertheless, vendors continue to prepare for what is expected to be a rush of contracts later this year and next year.  

In the run up to DMEA, Signify Research predicted (read the Insight here) the top five themes that would dominate at the show. One was to reiterate our (long-held) belief that both CompuGroup Medical (CGM) and Dedalus are in prime position to support multiple different KHZG pillars. Both vendors reported healthy organic growth in their Hospital Information Systems (HIS) businesses last year (CGM grew 8% and Dedalus an estimated 15%) and will achieve further growth in future via acquisition or partnerships with KHZG in mind. 

It was fitting, then, that the day before DMEA opened, CGM announced it had taken a 51% stake in specialist patient portal provider m.Doc. 

Project Priorities 

This is a smart move by CGM. Patient portal is the second most popular KHZG pillar in terms of the number of funding applications received from hospitals (electronic documenting of patient files being the first as shown below). 

CGM has had some success with its Clickdoc virtual care platform to date, but m.Doc is an established name in the sector. It has more than 300 hospitals on its books, and is accredited to meet the technical criteria of the KHZG patient portal pillar. This acquisition will turbo-charge CGM’s non-organic HIS growth, and there is every chance the company will become a disruptive influence in the patient portal pillar, where German vendor samedi and French telehealth specialist Doctolib are also competing. Doctolib, which began life in French primary care, has made a big play in the German hospital market precisely with KHZG in mind. 

CGM’s move to acquire 51% of m.Doc also reinforces Signify Research’s assertion, stated earlier in this Insight, that it and Dedalus are ideally equipped to support multiple different KHZG pillars. For its part, CGM is now active in patient portals, medication management, emergency room, IT, decision support systems, hospital telemedicine, cloud computing and hospital bed capacity management pillars. Dedalus, meanwhile, bought Dosing in 2021, allowing it to address the fourth and fifth pillars of KHZG.  

Future Fears  

Perhaps reflecting the time that hospital managers currently have to consider long-term strategy during the relative calm before the contract award ‘storm’ later this year, another discussion topic at DMEA centred on the ongoing maintenance and support that German hospitals will need for the big IT systems they are procuring under KHZG.  

It is widely acknowledged (most recently by the German health minister) that hospital IT systems in the country lack the quality of those installed in US hospitals. KHZG funding will go some way to reducing this gap, but once that funding has been spent, hospitals will have much higher ongoing IT costs, whether to service SaaS-based IT contracts or operational/maintenance support contracts for on-premise IT. As it stands, this is a point of concern for hospitals, and many are looking to the Federal government for indications as to how this will be addressed over the longer term.  

Furthermore, German hospitals self-assess the complexity of their EHR platforms against the EMRAM hospital standard. Most hospitals are at 0 to 1 on EMRAM, and improving the maturity of their EHRs will take time and require additional funding long after KHZG is complete. 

Calm Before the Storm 

With nearly all federal funding now approved for KHZG IT projects, the gaze now falls firmly on hospitals, which are starting to receive money, as they go out to tender. 

There is a sense now that the market will soon begin to really ramp up. The waiting game that the hospitals and vendors have played for the last two years is nearing its end, certainly in terms of contract awards. 

The German healthcare industry will have factored some capacity challenges into their equations – after all, implementing 6,000-plus sizeable projects across the country pretty much simultaneously over two years is a big undertaking. But, given that vendors are likely to be maxed out on resources as KHZG contracts are awarded means there will need to be some push back on timings. 

In any case, it will soon be all hands to the pump.

SPI Digital Health: Signify Research’s Top Five Predictions for DMEA2023

For many years the annual DMEA meeting in Berlin was very much a German affair; however, more recently the show has become Europe’s leading pan-continent digital health IT conference and exhibition. Whilst the agenda at DMEA2023, which will take place from 25 to 27 April, will still have a German bias, issues discussed, and products showcased, increasingly impact healthcare IT development across Europe. Here’s our take on the leading themes.   

KHZG: Funding Translating into Contracts  

Two years after coming into force, Germany’s Hospital Futures Act (KHZG) is slowly delivering on its goals to digitalise the nation’s hospital network. However, it is taking time for government funding to trickle down to IT vendors.  

Two vendors that Signify Research has historically forecast would benefit considerably from KHZG were CompuGroup Medical (CGM) and Dedalus. Whilst both vendors’ business in related markets grew in 2022 (CGM’s Hospital Information Systems group grew 7% and Dedalus’ DACH business is estimated to have grown ‘in the teens’), much more is to come. 

To an extent the fund allocation process has resulted in the bulk of the impact being back-loaded towards the end of the funding period (2021-2024). First, hospitals had to apply for funding by pillar. After being allocated funding, IT tendering began, with IT contract awards coming last. This impact was first felt in 2022, with more substantial effects being seen in 2023.  

Another reason why the impact has been slower for larger generalist hospital IT vendors is that initial activity was focused on KHZG’s ‘easier’ elements. Funding has been allocated by pillar, across 11 pillars (detailed below), with the initial focus on pillars where overheads, in terms of implementation, were lower. For example, the below shows that Digital Care and Treatment Documentation (mainly comprising dictation solutions) was the most funded pillar, followed by Patient Portals. More complex and costly areas in terms of implementation, such as Emergency Room IT and Process Digitalisation, ranked lower. Expect more to come in terms of more complex pillars over the latter half of the funding period.  

Source: November 2022 German hospital digital maturity assessment co-ordinated by Digital Radar (DR)

Many IT contracts to service this funding will now move towards contract allocation. Expect IT vendors at DMEA to position themselves as go-to-vendors for specific pillars, with a handful, such as CGM and Dedalus, positioning themselves as best equipped to support a multitude of pillars.    

Record European Government Investment in Digital Health IT  

Germany is not alone in allocating significant new public funding for healthcare IT projects in recent years. For many EU countries the post-COVID EU Recovery and Resilience programme was a key vehicle for revitalising and increasing the digital maturity of healthcare IT in general, with large amounts of public money allocated to projects. In specific countries new, well-funded projects were announced during COVID (some linked to the EU programme, some not) to upscale the sophistication of IT in European hospitals and elsewhere in the healthcare ecosystem. 

Examples include Gara Sanità Digitale (Italy), Ma Santé 2022 (France) and Le programme HOP’EN (France). DMEA has historically been DACH-focused, but in recent years is becoming Europe’s largest cross-continent digital health show. Vendors positioning themselves as able to deliver the IT required to secure contracts in countries where funding has been ramped up, will be a key feature of the show.   

Vendor Consolidation – Local Champions to Regional Heavyweights 

More than 500 vendors, from international heavyweights to start-ups, will exhibit at DMEA, a sign of a healthy, competitive ecosystem of IT and device companies addressing the European healthcare technology market. However, the backdrop to this is the recent emergence of several pan-European heavyweights, specifically in relation to hospital IT.  

CGM has, for many years, been relatively large, serving many European (and global) geographies; however, 2021 saw it breach the €1Bn threshold for the first time, and €1.1B in 2022. It has grown partly organically but also via ambitious acquisitions, most recently of Medicus, VISUS, New Line and eMDs. Its 2020 acquisition of several product lines from Cerner (now Oracle Cerner) also significantly boosted its hospital business.    

Dedalus has also rapidly expanded its business and footprint. As well as being the DACH region’s dominant vendor, it also enjoys tier 1 status in Italy, France and the UK, often in both inpatient and outpatient/primary care markets. This has largely been achieved via acquisitions.  

Many of Europe’s once single-country-focused vendors, such as TietoEVRY, Mesalvo (the merger of iSolutions and Meona), Cegedim and Cambio have attempted to scale internationally, sometimes organically, but more often via M&A. Further, the two dominant US inpatient health IT vendors, Oracle Cerner and Epic, now also hold a substantial presence across Europe.  

A key debating point at DMEA is whether Europe is heading in the same direction as North America, where most large digital health IT contracts (particularly inpatient EHR/HIS) are mopped up by a small number of incumbent vendors with the scale and resources to address increasingly demanding tender requirements.  

Signify Research’s view is that this will not happen. There will be increased consolidation, benefitting the likes of CGM, Dedalus and Epic, but at a slow pace. However, the specific geographic nuances of each country, the fact that European EHR and Clinician Information System (CIS) markets are still relatively independent, and the entrenched position of many leading local vendors (think Maincare (France), SystemC (the UK), Ines (Switzerland), Engineering (Italy)) will result in a healthy, and relatively fragmented, competitive ecosystem for the foreseeable future. The plethora of vendors that have already benefited from KHZG funding adds weight to this argument.  

New Models of Care Leveraging Integrated Data 

“New perspectives on health data use and analysis”, one of the key themes on the DMEA congress agenda, underlines the drive to develop connected healthcare ecosystems in many European countries. This has been a focus of German healthcare IT investment over recent years in the form of Gematik Telematikinfrastruktur (TI), a programme to connect the multitude of IT systems used across the healthcare network.  

However, whilst successful IT-wise, the programme has not ultimately changed how healthcare is organised and provided across Germany. There are examples in other European countries where data connection/integration programmes were a component of a broader reorganisation of healthcare towards a more integrated, holistic, predictive (as opposed to reactive) system. These include the creation of Integrated Care Systems in the UK, and Territorial Professional Health Communities (CPTS) and GHTs in France. To some extent these programmes mirrored US Value-Based Care/ACO programmes, although all have been slow to deliver on their promise.  

A key theme at DMEA will be how to accelerate the integrated care agenda across Europe, which models offer the best opportunity to tackle the increasing burden of healthcare provision across the region and, specifically, how this is implemented in DMEA’s home territories of Germany, Austria and Switzerland.   

Scaling Digital Therapeutics and Remote Patient Monitoring 

In November 2019 the German Bundesministerium für Gesundheit (Federal Ministry for Health) launched, with great fanfare, the Digital Healthcare Act (DVG).  Core to this was €200M($240M) annual funding to 2024 for Digitalen Gesundheitsanwendungen (DiGA) apps. These were digital apps prescribed by healthcare providers to support the management of a range of medical conditions from depression, panic attacks, obesity, anxiety, and osteoarthritis. Solutions could range from patient-focused decision support software, apps to manage medication dosage or solutions to monitor and collect data on patients related to therapy or condition. 

The launch was initially plagued by challenges, from delays in testing and authorising solutions on the official DiGa app register, to a lack of engagement from physicians in prescribing solutions to patients. In subsequent years, there has been some progress, but the programme is still far from delivering on the original fanfare.   

The DiGa experience is representative of many digital therapeutics and remote patient monitoring (RPM) programmes across the continent. For many countries, including Germany, making the step from small, regional trials tied to specific pilot programmes to scaled solutions addressing large sections of the population managing chronic conditions and mental illness remains an unmet challenge. Patients managing chronic conditions and mental illnesses are some of the most expensive cohorts in terms of healthcare provision. Grasping the opportunity that digital health offers to limit these costs must be prioritised.   

Europe has, largely, still not passed the latency inflection point in the product life cycle for both digital therapeutics and RPM, unlike the US which is now clearly growing owing to clearer funding mechanisms and a more holistic spending viewpoint via VBC. Much discussion at DMEA will relate to what is needed to move the dial on this topic across Europe.   

DMEA’s coverage will be broad, and these themes represent what we believe will the leading topics. A range of other issues will be addressed, from cloud migration, virtual care post-COVID, to the increasing influence of big tech in Europe’s health IT markets. In general Europe has lagged the US in healthcare digitisation. DMEA will be a bellwether as to whether the post-COVID influx of IT funding is narrowing this gap.