How the health IT gold rush game will be played

Health IT markets will not be driven by speeds and feeds, or feature comparisons. They will be driven by the power of large regional institutions to dictate what both public and private groups in their area do.

Smart vendors know this, and are acting accordingly.

North Shore and Long Island Jewish Hospitals have done their "alliance" deal with Allscripts. They put a $400 million price tag on automation through the SaaS vendor, with hopes that 7,000 doctors will start using Electronic Health Records (EHRs) over the next five years, with help from $40,000 each in government money funneled through the hospitals.

The deal is the hospitals will push Allscripts down their own doctor supply chains, paying 50-85% of implementation and subscription costs, then getting that sweet, sweet HITECH stimulus money once results are proven.

As The New York Times notes this is not all altruism. It doesn't just cement Allscript's bottom line, but could assure the hospital group of market dominance as well.

Cerner has a different way of doing this. It has signed a deal with the University of Missouri to take on 100 MU employees as what it calls the Tiger Institute for Health Innovation. (MU's athletic mascot is the Tiger) The Institute claims it will bring $1 billion in benefits over the next few years.

By aligning with the state university, Cerner gets the upper hand in selling its software across the state. The deal puts political pressure on doctors and hospitals across the state to favor Cerner, which is based in Kansas City, Missouri.

Both these deals have the same goal, to make one IT vendor dominant within a geographic region. This is the way the insurance and hospital businesses run, through regional concentration rather than a truly free and open market, so it's no surprise health IT vendors are playing the same game.