The Near Death of the US Healthcare Software Channel

Not so long ago, the Healthcare Software Channel was flourishing in the US. Now it’s nearly extinct. What happened to it? Here’s an interesting look at its rise and fall.

In February of 2009, the American Recovery and Reinvestment Act (ARRA) was signed into law by President Barack Obama. ARRA allocated over $20B to incentivize the adoption of electronic health record (EHR) systems. The incentive payments were triggered by attestation of meeting the Meaningful Use requirements from 2011 through 2014 and in 2015 those who failed to meet the requirements would be penalized.

This prompted many Healthcare software vendors to figure out how they would help hospitals and physicians meet Meaningful Use requirements and get their piece of the pie. The timing was great for the industry while trying to recover from a recession. But serious questions emerged for healthcare vendors, hospitals and providers. How would they get to Meaningful Use? Where would they get the technology and how would they implement it?

At the time, the majority of Healthcare software vendors went to market as direct sales and service delivery organizations. Many organizations were not, however, in a positon to scale up exponentially in a short amount of time, and qualified talent for hire was at a premium. Where would the expertise come from to implement such a huge wave of business?

Waiting in the wings were healthcare information services vendors that had much at stake to retain their current hospital and provider customers. It only made sense for many healthcare technology vendors to seek out these organizations as an extension of their sales and services staff. A flurry of activity ensued to create channel programs to support sales and service delivery efforts. These programs recruited value added resellers and service delivery organizations not only in the healthcare vertical, but from other industries.

For a few years, it was all hands on deck to quickly certify these partners and chase ARRA-funded transactions. It was a “land grab” unmatched in recent memory. Beginning in 2013, however, changes were afoot. With competition steadily increasing for fewer and fewer dollars, consolidation became an industry norm. Companies with a strong direct sales force wanted to control as much as possible their share of a rapidly shrinking pie. The progressive, innovative channel programs that had sprung into place just a few years earlier were revisited with new restrictions or eliminated completely. For example, limits were often placed on who and where channel partners could sell to or service, inhibiting their ability to grow market share and disintermediating long-standing relationships with existing customers.

Partners were often further handcuffed by non-compete agreements blocking their ability to sell similar solutions. Many smaller service organizations found themselves having to re-invent not only their business models but also their industry focus areas, wasting valuable subject matter expertise gained from years of supporting the healthcare industry. As we approach 2017 the healthcare software vendor market now has only a handful of channel and partner programs. The few that exist are winding down. Not many vendors promote their loyal channel and partners on their website or through any corporate efforts. Most do not allow their channel partners to sell into large practices and hospital markets. Many of these partner organizations have been replaced by direct and telesales organizations who lack industry expertise. The talent developed by partner organizations over the last decade, or in many cases, decades, is no longer at the forefront of many sales.

Who loses? Not just the partners, but the customers. Not only are they losing hands-on skill, but in many cases, valued long term relationships.

At nVoq, we’re proud to offer a sales and delivery model for Healthcare that is 100% partner driven. We are scaling our business rapidly in North America and welcome your expertise. If you’re interested in expanding your portfolio offerings, please reach out to us today.

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