Wal-Mart + eClinicalWorks Electronic Medical Records | An Odd Couple with Good Intentions

The Wal-Mart / eClinicalWorks (eCW) partnership to sell electronic medical records (EMR) software in Sam’s Club strikes us as an odd couple. While we think eCW will benefit from this marketing coup, we don’t see the relationship lasting over the long term.

Certainly, the intent is good: simplify a traditionally complex and expensive purchase by distributing through a low-cost distribution channel. Moreover, eCW is as good a partner as any for Wal-Mart:

• The product is a comprehensive system built on solid technology;

• eCW has great momentum and viability; and,

• eCW has already succeeded as a value leader.

However, we don’t think EMR software presents the same economies of scale that Wal-Mart relies on to deliver “everyday low prices.” Wal-Mart can sell a wide range of products at low prices because they negotiate massive bulk purchases, run dramatically efficient logistics and efficiently manage inventory.

Those strengths may make a difference for the Dell hardware they are selling as part of this deal, but it doesn’t mean much when it comes to software. Software is essentially intangible – it can be delivered on a CD or via the Internet – and it is easily “manufactured” such that there is almost no variable cost of goods to be whittled down.

As a result, transportation and inventory optimization are irrelevant when it comes to eCW software. Sam’s Club members may assume they’ll get better prices through this deal, but from what we can tell, the $25,000 price tag is about the same as what they would pay through any other channel (i.e. eCW resellers or direct from eCW) for the same bundle of software, hardware and services.

Furthermore, we do see some very real sales and services challenges arising from this partnership. Simply put: sophisticated, $25,000 EMR systems don’t sell themselves. Get a Wal-Mart “greeter” involved and things could get ugly. Wal-Mart has already stumbled a bit trying to support the relatively complex sale of iPhones. EMRs are a far more complex sale. My mind goes to the horribly awkward image of a brilliant, yet intolerant, cardiologist interrogating a greeter about eCW functionality. The mismatch of intellect and clinical expertise could be incendiary.

A $25,000 EMR is a “considered purchase”; for example, a physician practice needs to consider if the system meets their functionally requirements, integrates to other systems (e.g. RHIOs or diagnostic systems) or qualifies for subsidies such as the recent economic stimulus package. eCW certainly does meet many, many providers’ needs; however, a physician will not likely buy the system if there isn’t a highly qualified representative available to give them comfort through a consultative sales process.

Sam’s Club has over 600 locations, which is almost how many employees eCW has. It is highly unlikely that Wal-Mart or eCW would be able to staff up fast enough or effectively enough to provide sales support across a majority of these locations. Nor does that level of staffing seem efficient; I doubt there would be enough physicians coming through Sam’s Club door to keep that staff busy.

When eCW is available in Sam’s Clubs this spring, we expect that thousands of physicians will stop by to check it out. But they won’t buy on that visit. Instead, they’ll go back to the office, Google the system and start considering their purchase. They will seek out answers by calling eCW directly and eCW will find itself performing the sales process as usual. The Wal-Mart buzz may drive sales, but it won’t lower the inherent cost of sales, which is the critical element for an effective Wal-Mart partnership. Competing EMR companies, meanwhile, will enter the fray one way or another, and the economics of software will allow them to match the Wal-Mart price.

The bigger challenge for eCW will come from the impulsive buyer. We expect that a significant number of physicians will fail to consider their purchase. For one reason or another – a peer recommendation or the Wal-Mart endorsement – will give impetuous buyers enough comfort to buy the system.

Unfortunately, it is highly likely that these buyers will purchase with irrational expectations. They will expect to open the box and be ready to go and they will be disappointed when they see how much work lays ahead, even with a great product like eCW.

In these cases, the eCW product will not be to blame. Instead, it will be the product’s inability to meet the expectations of a buyer that never had their expectations set by a straightforward representative. They won’t realize that templates need to be configured, data needs to be migrated, staff need extensive training, etc. I fear for the eCW support reps that have to field those calls.

We don’t expect this partnership to be a failure. Instead, we think it will accelerate eCW’s already impressive growth and position in the market. The awareness generated by the relationship will be well worth it for eCW. As for Wal-Mart, we expect them to realize sooner rather than later that they can make more money elsewhere. They’ll give this program a year or so, and then put something a little more traditional on the shelves.