SMB Solution Providers Grapple With Shrinking Healthcare Opportunities

VARs in the small and midsize business market say many of their local doctors' offices and smaller medical centers are closing down or getting acquired by larger regional hospitals because they can't keep up with the IT costs related to things like electronic medical records (EMR). And, there's usually an incumbent solution provider handling the larger hospitals, which leaves SMB VARs on the outside looking in.

"In Vermont, EMR has already happened because the state has really been pushing it," said Larry Gold, president of Computer-EZ in Mendon, Vt. "And a lot of my customers who were doctors' offices or therapists' offices are no longer my customers. All that IT is ending up in the hands of the large regional hospitals that are buying up practices, or the doctors are moving out of town and closing their practices."

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Richard Trahant, president of Land Computer in Peabody, Mass., said he's seeing the same trend in his state; smaller practices are having a difficult time upgrading their IT systems to comply with new laws and regulations, and sometimes the process is too expensive for them to handle.

"We've experienced a lot of that," Trahant said. "The smaller offices are not adapting to the changes, and they're basically hanging in there with old technology and getting swallowed up by larger companies or counting the days until retirement."

Technology Business Research last month released a report that predicted larger North American healthcare businesses would increase their IT spending by more than $34.5 in 2014 as regulatory mandates push organizations to modernize their IT infrastructure.

Gold said the healthcare IT business is indeed growing -- but the majority of spending is moving upstream to larger integrators and away from SMB. Many smaller medical practices simply don't have the capital to make the necessary IT upgrades, so selling the business or closing it down are often the only options.

"I've talked with a lot of my ex-customers who are doctors, and to some degree they're happier because they don't have to deal with all of this," Gold said. "If they don't join the EMR movement, they're going to get penalized by the government and get paid less."

Still, Gold said his business is having one of its best years ever because even though he's losing healthcare clients, other businesses are spending money to upgrade their IT infrastructure. "In the small business market, which is very big in Vermont, clients moving on from Windows XP, for example, is really pushing business," he said.

Trahan said Land Computer, which specializes in managed services, is also seeing revenue growth this year. But, the healthcare industry, he said, has been one of the few blemishes in an otherwise strong year.

The advent of EMRs is already having a profound effect on the healthcare industry. An Accenture survey released earlier this month found that 41 percent of U.S. consumers would be willing to switch doctors to gain online access to their own electronic medical records. In addition, the survey of more than 9,000 people showed that 84 percent said they believe consumers should have full access to their EMRs -- while just 36 percent said they had full access to their EMRs.

PUBLISHED SEPT. 26, 2013