COMMENTARY by Chandresh Shah
ChandreshShah.com
email: chandresh@chandreshshah.com
Last month free web-based EHR software company Mitochon announced it was shutting down this month. Read here. I had written about this in February and it does not surprise me at all. See my earlier post – ‘writing on the wall prediction’ here.
I got a few phone calls from people that told me I was wrong and these guys knew what they were doing. I don’t question that, but it is all about execution isn’t it?
So then, the next question is, what about Practice Fusion? Why is Practice Fusion still alive, and how is it making money?
Practice Fusion free web based EHR claims it makes money on Ads. I did some math earlier, based on a pure Ad model, it does not add up. I have to work the math again, but I am still not convinced.
To me, it is clear – there is something else cooking. That stew is ‘data mining’. For sure, I am not talking about selling patient data, but analyzing aggregate intelligence, which is in dire need by Pharma. Today I believe Practice Fusion is building the mass and momentum. This is why they have billionaires like Peter Theil behind them. They need lots of cash to burn every day.
Why do you think ADS bought AdvancedMD? ADS? A-D-S – Advanced Data Processing. Data is their core business. ADS has nothing to do with healthcare as such. The only thing in common is Data. So, they did the right thing. They bought AdvancedMD, with a ‘Paid’ model rather than free. They are charging money while collecting data. They are spending huge amounts of money marketing, advertising rather than offering the software free.
So, here’s where I see the long term – five years from now. There will be consolidation for sure. The buyer will be strong in the data space or have particular interest in data. And because there are huge buyers of this data, there will be money in it.
So, two messages for small EHR software vendors – client server EHR and web based EHR.
1. Stick it out, hang on, stay profitable.
2. Don’t fly in the cloud. While you may get bought out, keep your valuations realistic. Forget your 10+ multiple expectations on revenue.