Vendor Ratings, VDR Michael Davis, Cynthia Burghard, Thomas Handler, M.D., Barry Hieb, M.D., Jim Klein, Joanne Galimi
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1 Vendor Ratings, Michael Davis, Cynthia Burghard, Thomas Handler, M.D., Barry Hieb, M.D., Jim Klein, Joanne Galimi Research Note 14 November 2002 Vendor Rating: McKesson Information Solutions McKesson is creating new healthcare provider products using its Horizon Clinicals common application architecture. The architecture has been well received, but an evolving product migration strategy is a challenge for new sales. McKesson Overall Rating: What You Need to Know: McKesson has made solid progress with its Horizon Clinicals products, but it must continue to extend the architecture to its financial products to: 1) resolve its current integration challenges for disparate product lines; and 2) provide a consistent enterprise architecture/product line that enables it to compete more effectively against market competitors for new customers. Care delivery organizations (CDOs) seeking enterprise clinical applications should add McKesson to their evaluation lists. CDOs evaluating McKesson for financial solutions should be diligent in negotiating contracts that clearly define the data integration needs of the business environment and identify contract penalties for failure to meet those specified integration needs. The goal of Gartner s ratings is to provide clients with a concise summary of Gartner s view of a vendor s strengths and challenges. We encourage clients to consider our vendor ratings, as well as all other research, as part of an overall evaluation process, which should also include an evaluation of how a vendor s strengths and challenges match the enterprise s specific needs and requirements. Analyst Comments: The enterprise healthcare IT market has entered a phase of increased buying by care delivery organizations (CDOs) to improve reimbursements, reduce costs and advance patient safety. McKesson is positioned to succeed in this market. Detailed Rating: Corporate Viability Strategy Financial Marketing Organization Channel Partnerships Product/Services/ Technologies Product/Service Initiative Rating Gartner Entire contents 2002 Gartner, Inc. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.
2 Technology Pricing Customer Service/ Product Support Sales/Distribution Support Services Corporate Viability: McKesson has the financial strength and a new enterprise solution strategy that positions the vendor for market success. McKesson Information Solutions is successfully migrating its client base to the new Horizon Clinicals products, but it is not winning as many net new customers as some of its competitors. The Horizon Clinicals architecture must also be extended to its financial, patient management and departmental solutions, if it is to improve its ability to add clients and effectively compete against vendors with common architectures for financial and clinical applications. Vendors, such as McKesson, with broad product portfolios that contain computer-based patient record (CPR), revenue cycle, ancillary, ambulatory and supply chain management (SCM) products are best positioned to survive and thrive in the market. Vendors that manufacture medical devices (Siemens and GE Medical) may provide a challenge to the established enterprise vendors (such as McKesson, Cerner, IDX Systems, Eclipsys, Per-Se Technologies and Epic Systems) if they can effectively bundle medical devices with modality-specific software to improve the workflow for clinicians using the medical devices, and lower the cost of deploying medical devices and software. The vendor has improved its IT business unit financial results since Customer service is also improving. McKesson continues to sell new Horizon Clinicals products to its client base. The longer-term challenge is to add new customers. The Horizon Clinicals products are well-positioned to compete with products from McKesson s competitors. The threat to McKesson and other enterprise vendors in this market is the potential of the medical device manufacturers to disrupt the market with bundled medical device and software solutions that could drive down system costs and win physician favor by improving automation workflow. By 2006, McKesson will deliver a complete enterprise Horizon product line financial and clinical products (0.6 probability); it will continue to promote its legacy products for financial solutions (0.3 probability); or it will divest the IT business unit (0.1 probability). Products/Services/Technologies: Horizon Clinicals McKesson s Horizon Clinicals-based integration strategy appears to be paying off. Long known for a strategy of acquire and then integrate, McKesson has finally begun to deliver a product line internally developed on a competitive architecture. By establishing a single data model across all of its clinical products, and by implementing a Web-based set of integration tools, McKesson appears to finally have positioned itself to provide integrated capabilities for its clinical clients. Although there are still a significant number of questions concerning McKesson s capability in certain focused domains, such as workflow and controlled medical vocabularies, it is clear that the new generation of Horizon Clinicals-based products will offer McKesson clients a significantly greater set of capabilities. If McKesson also is successful in demonstrating the clinical value of the knowledge base that it has acquired from Vanderbilt University, then the product line will be positioned to make an impact on winning new clients in the CPR market. Revenue Cycle Management (RCM) McKesson has competitive products that provide the foundation for RCM. Its Pathways Decision Support and Contract Management systems are proven and stable products. These products have been used effectively by McKesson to provide RCM improvements within its legacy patient accounting environments 14 November
3 (Star, Series 2000 and HealthQuest) as well as to new customers. To successfully compete for new business, McKesson will have to migrate these products to the Horizon Clinicals architecture. Until it completes this migration, McKesson will be competing to win new business with disparate architectures, which is a competitive disadvantage. McKesson provides claims clearinghouse functions with its EC2000 product, which has exhibited consistent annual growth in transaction volumes. The U.S. Health Insurance Portability and Accountability Act s (HIPAA s) transaction regulations and compliance requirements will provide additional growth for this product line through However, the standard transactions defined by HIPAA and nextgeneration patient financial systems that employ payer rules and edits will create more direct transaction linkages between payers and providers, which will reduce claims clearinghouse transaction volumes after 2005 (driving the claims clearinghouse market into a commodity market). McKesson has created a partnership with Quintiles Transactional VeriSpan to capture, aggregate and apply business intelligence to transaction data to assist in evaluating care delivery processes. Data ownership issues between providers and McKesson will have to be resolved to the satisfaction of the providers before VeriSpan can achieve market success. Horizon Clinicals McKesson continues to make strides toward delivering the vision of a truly integrated clinical product line. Horizon Clinicals are emerging to be a comprehensive, integrated suite of products that includes Horizon Care Record, the common clinical data repository for all McKesson products. The nursing documentation module, Horizon Clinicals Documentation, is one of the more-robust nursing packages available. When combined with Horizon Admin-Rx, a point-of-care medication administration solution, this application can automate much of the nursing workload. McKesson, like most of its competition, is working toward improving its clinical documentation module. Horizon Care Alerts, the vendor s rules-based clinical expert system, adds necessary value to the overall package. When generally available, the new physician order entry product, Horizon Expert Orders, will represent a significant step forward in the Horizon Clinicals portfolio. Through Horizon MobileCare Messaging and HorizonWP Physician Portal, McKesson is extending access to clinicians who cannot be tied to a fixed set of terminals. When McKesson makes these products generally available, it will have a CPR that can compete with any of its competition. However, for some of the modules, McKesson still must get beyond the beta phase to prove their competitiveness. McKesson is one of the few enterprise clinical vendors with an extensive portfolio that includes most of the applications in the CPR environment. These include: Horizon Surgical Manager, Horizon Ambulatory Care, Horizon Emergency Care, Horizon Lab, Horizon Medical Imaging (bolstered by McKesson s recent acquisition of ALI, a good picture archiving and communication system product), Horizon Meds Manager and Horizon Patient Folder. SCM McKesson has the largest market share of legacy material management information systems because of its acquisitions (mainly ESI). This positions McKesson with a client base to sell add-on applications, such as supply cabinets and robotics, and the vendor is having some success in this area. However, McKesson is ill-equipped to compete with the enterprise resource planning (ERP) vendors (such as Lawson, PeopleSoft, Oracle) for foundation SCM transformational capabilities. McKesson has general ledger, accounts payable and materials management applications, but they reside on disparate applications. McKesson does not provide these applications based on a common architecture or a common logical data model the ERP model. This is a serious flaw for the long-term success of 14 November
4 McKesson in this market. McKesson will have to acquire or pursue a partnership with an established ERP vendor to maximize its potential in the SCM market. Medical Management McKesson s Medical Management division is part of McKesson s Health Solutions business unit, a wholly owned subsidiary of McKesson. The division offers a suite of medical management products and services to help healthcare payers and providers manage the cost and quality of care. Within this division is a suite of CareEnhance solutions that include nurse triage services, outsourced disease management and software tools that support an organization s clinical workflow, analysis and reporting processes. The Health Solutions business unit employs 1,339 of McKesson s 25,000 employees. In April 2002, McKesson announced the creation of its Medical Management Platform, an information infrastructure containing all of the data structures and interfaces required to aggregate a set of information about healthcare delivery in a single system. The Medical Management Platform will support integration across McKesson s suite of medical management applications and provider, employer and application-specific databases. Although the new platform is promising, release dates for moving the Health Solutions products onto the medical management platform have not been announced. Technology/Architecture The Horizon Clinicals technical architecture is solid, and should enable advances in clinical products. Specifically, the database division into three separate databases is well-defended from a functional standpoint. The division of live records from longitudinal records appears to be a good solution for addressing possible performance problems that more-monolithic relational database designs could experience. It is absolutely essential that the logical schemas for the two databases remain identical. The third database stores information necessary to enable several provider organizations to deploy a single integrated patient record system. This is where an enterprise master person index lives, if required, and where profile information is stored for each institution. Centralizing this enterprise configuration in a database represents a step forward from the industry s tradition of storing such profile information with each application (often redundantly) in data structures that are not accessible outside of the application. McKesson refers to the latest version of its thin-client, n-tier architecture as the Dynamic Client framework. It is a very solid Enterprise JavaBeans-based, network computing approach that proved quite flexible and scalable in the ambulatory CPR of Abaton.com (acquired by McKesson), where it originated. Its middle tier consists of an innovative use of Linux and low-cost Dell Computer servers. The migration of Horizon Clinicals to the Dynamic Client framework is still under way. Anytime a vendor introduces a new technical architecture, as McKesson is in the midst of doing, there are increased technical risks for early adopters. The architecture can look solid on paper, and Horizon Clinicals does, benchmarks can turn in promising numbers, and Horizon Clinicals have, but until several customers deploy the full suite of applications in the new architecture and process transaction volumes typical of the target market for the product line, the jury must remain out on performance and scalability. Answers to these critical questions for Horizon Clinicals will emerge during the next 12 to 18 months. Customer Service/Product Support: McKesson has improved on its customer support during the past year. Gartner expects that customer service will continue to improve as McKesson continues to prune its broad portfolio of products and moves toward a product line with a common architecture. McKesson has invested in Support Center Practice certification to provide world-class customer support, which has resulted in significant improvements to customer support satisfaction. However, one recurring complaint 14 November
5 is that customers frequently have to be routed to several different McKesson units to resolve some issues. This has been an ongoing client problem for disparate products that have not been effectively integrated. Related Research and Ratings: McKesson s Financial Maximization Solutions On Target Enterprise CPR Magic Quadrant 2001: Generations in Sight Patient Accounting Magic Quadrant 2002 Rating Definition: Strong Caution Strong Negative Solid provider of strategic products, services or solutions. Customers: Continue investments. Potential customers: Consider this vendor a strong strategic choice. Demonstrates strength in specific areas, but is largely opportunistic. Customers: Continue incremental investments. Potential customers: Put this vendor on a short list of tactical alternatives. Shows potential in specific areas; however, initiative or vendor has not fully evolved or matured. Customers: Watch for a change in status and consider scenarios for short- and long-term impact. Potential customers: Plan for and be aware of issues and opportunities related to the evolution and maturity of this initiative or vendor. Faces challenges in one or more areas. Customers: Understand challenges in relevant areas and begin to assemble contingency exit plans as needed. Potential customers: Note the vendor s challenges as part of due diligence. Difficulty responding to problems in multiple areas. Customers: Exit immediately. Potential customers: Consider this vendor only if there are no alternatives. Acronym Key CDO CPR ERP Care delivery organization Computer-based patient record Enterprise resource planning 14 November
6 HIPAA RCM SCM U.S. Health Insurance Portability and Accountability Act Revenue cycle management Supply chain management Core Topic Critical Healthcare Applications for Business Efficiency and Improvement ~ Healthcare McKesson Headquarters: San Francisco, California Web Location: 14 November
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