July 2014

Solid or Shaky?
By Lindsey Getz
For The Record
Vol. 26 No. 7 P. 10

In the midst of consolidation, the transcription industry struggles to find its footing and a new identity.

In the past few years, a substantial number of acquisitions and buyouts have consolidated much of the transcription industry. As a result of these changes, some experts fear that the business has become unstable, leading to poor results in terms of client relations, attracting new talent, and retaining key longtime professionals.

On the flipside, others say the industry remains on solid ground, arguing that the acquisitions actually have contributed to an even more stable environment, with only the strongest companies surviving the shakeout. Even so, with the playing field being narrowed considerably, it raises the question as to how long small and midsized medical transcription service organizations (MTSOs) can remain competitive.

Whether only a few large key players stand the test of time has yet to be determined, but there’s little doubt that those vendors capable and willing to adapt to a new landscape increase their odds of remaining successful. Experts say embracing EHR technology can go a long way toward reaching that goal.

A Disruptive Transition
Bill Benter, chairman and international CEO of Acusis, a Pittsburgh-based transcription company, says the industry’s frequent buyouts are, at the least, a disruption, pointing out that these transactions can put clients on edge and affect internal operations as management roles shift and changes occur.

While Acusis has completed a few key acquisitions, Benter says each purchase has been carefully planned. A smooth transaction requires several elements, including assimilating cultures if necessary, transitioning customers from legacy systems to the Acusis technology platform, communicating effectively between new and existing staff, consolidating management responsibility, and seamlessly meeting client needs. Each of these tasks is a large feat in itself, requiring constant attention from the management team.

“The idea of digesting more company than one and still addressing all those criteria is hard to imagine,” Benter says. “But I do feel there is a Pac-Man effect taking place where the larger companies gobble up the little ones.”

It appears the industry is headed toward an environment where small MTSOs will find it increasingly difficult to compete while larger colleagues thrive. “The ultimate level of consolidation in the transcription industry will depend on several factors,” says Robin Lloyd, general manager of clinical documentation at Nuance, an industry giant that sports 12,000 full-time employees. “One is the ability of large vendors like Nuance to leverage operating scale to deliver better outcomes for customers. When we provide more reliable service, higher quality, and consistent cost savings, customers benefit from our scale.”

Another factor is large vendors’ ability to tailor their solutions to the unique needs of different customer segments. “A one-size-fits-all industrial approach will not work for midsized or regional hospitals, specialty practices, and clinics,” Lloyd says, adding that the level of consolidation within the provider space also will play a role in the future of MTSOs. “Large provider organizations are rapidly acquiring smaller hospitals, clinics, and affiliated practices. The extent of provider consolidation remains to be seen, but the transcription vendor space will be influenced by it.”

One consequence of vendor consolidation is the deterioration of the medical transcriptionist (MT) talent base. “Sometimes the people that really know the business and the software are the ones that end up being let go in the consolidation of management and the cost cutting that usually follows a major acquisition,” Benter says. “I think the instability of management and operations following an acquisition are issues we need to address and make sure are not hurting the industry as a whole.”

“There is no question that the industry is losing its talent base,” says Kathy Nicholls, CMT, AHDI-F, cofounder of Coding for Healthcare Professionals, an online program that teaches both ICD-9 and ICD-10. “With the reduction in pay rates for medical transcriptionists as MTSOs strive to cut costs, many talented individuals are leaving the profession. This, unfortunately, can lead to disruption for the customers and a change in what they are accustomed to in quality of work.”

For MTs, the future is as muddled as ever. “The corporate conundrum has rocked the worlds of the MTs who have lost their jobs from corporate decisions,” says Betsy Ertel, AHDI-F, CEO of SpeedType. “Repurposing the MT is a large task at this time. Depending on whose eyes are being looked through, that one could go many different directions.”

Then there’s the stability of the industry itself. With so many acquisitions taking place, it’s difficult for many on the outside to keep track of all the changes, which can affect client relations. “Stability is really important in a service industry like ours,” Benter says. “Our personnel team members are our biggest assets. They have the knowledge, the customer specifics, and the experience. That helps us when it comes to maintaining communications with the client. Unfortunately, during a buyout, those assets tend to get cast to the wind.”

Weathering Change
While many small to midsized companies have undergone significant transitions in the last two or three years, some longtime observers believe that, overall, the industry is relatively stable. “I believe it would be more accurate to say [the industry] is struggling through a dramatic resizing driven by the switch to certified electronic health records,” says Dale Kivi, MBA, head of business development for FutureNet Technologies, adding that the buyouts actually have been positive. “The shakeout of the transcription industry over the past few years has been long overdue. No market can sustain literally hundreds of vendors, especially with the market shrinking so dramatically due to the physician self-documenting workflow schemes of most certified EHR platforms.”

He believes buyers and sellers alike have been forced to focus predominantly on cost to retain whatever market share they can hold on to, resulting in a commodity marketplace. “Unless you can compete under such market conditions, business owners have no choice but to sell their remaining contracts or go out of business,” Kivi notes. “The survivors are those who can technically integrate documents produced by their transcription services with the data-driven needs of the certified EHR environment. If all you offer is converting voice to text, your days are numbered.”

These changing market dynamics, spurred by the implementation of EHRs, are the driving force behind the industry’s consolidation, says Todd Vick, CEO of Superior Global Solutions. “Increasing use of technology and the downward pressure on pricing from customers, which has forced the use of offshore labor, have, in essence, shrunken the margins for service companies,” he says. “That environment has created a model of consolidation, and I think it’s these marketplace dynamics that we need to be more concerned about. The consolidation is just the end result.”

While these shifting dynamics have created a new landscape, Vick says the industry can thrive. “Despite years of indications that transcription was going to the wayside because of speech recognition software and the implementation of EHRs, there is still a robust market for our industry,” he says. “There is still a lot of opportunity out there. Those that are evolving with these changes are only going to come out stronger.”

John A. Langley, CPA, president and CEO of MedScribe Information Systems, believes the consolidation has produced an overall stronger business climate. “Personally, I feel the market is more solid now than before since the weaker MTSOs have either been consumed or gone out of business,” he says. “What are left are those companies that have been able to weather the storm. I think the companies that are left are basically doing well for their customers because I don’t hear a lot of complaints.”

According to Lloyd, the reduction in vendors has resulted in lower prices and higher quality standards for customers. “Service continuity is greater as vendors take advantage of redundant systems and backup teams,” he says. “The primary advantages are just now being realized, however, as customers achieve greater levels of standardization and efficiency across systems. Fewer vendors means fewer interfaces to deploy and manage, and EHR vendors can develop tighter interactions with a smaller number of partners. Also, as customers deploy a broader range of clinical documentation solutions—front-end speech, CDI [clinical documentation improvement], etc—they will benefit from tighter alignment between their transcription service and these related initiatives.”

Still, there’s room for improvement, Nicholls says. “The industry hasn’t reached a level of standardization that has a great impact on the actual production of the end product,” she says. “Until such time as there are standardized formats and standards for reports, that benefit will not truly be realized. The implementation of the ICD-10 coding system will lead to greater and more specific documentation needs. In the end, that will allow those businesses who are prepared to take advantage of offering CDI and coding services to their customers.”

Opportunity Knocks?
Is it farewell to small and midsized MTSOs or does the current environment offer intriguing possibilities? Small to midsized vendors argue that competition creates a healthy marketplace. While acquisitions of weaker MTSOs may make the industry stronger, some existing vendors fear that a total overhaul ultimately would hurt the industry. “While I don’t think consolidation is the industry’s objective, it does seem to be happening,” Langley says. “I don’t think our customers stand to gain anything with consolidation of the industry. Competition is always good.”

Ertel suggests how value is measured could be a game changer for small MTSOs. “If the proper measuring methods—how many MTs does it take and how much time is required before documentation is acceptable to the marketplace?—were put into place with data published along with the costs tallied to produce a speech engine document to the high standards of patient safety it deserves, an enlightening would take place within the transcription industry for the decision makers to more closely decipher the balance between savings and cost,” she says.

Still, even though a few major players own a large percentage of the market, some small to midsized companies say the current marketplace actually has created renewed opportunity. Larry Jackson, CFO at Acusis, says bigger isn’t always better, and there always will be those clients who prefer working with a smaller transcription company. “Clients don’t always want to work with the largest company out there because there’s this sense of getting lost in the crowd,” he says. “Our customers are a big deal to us. Large companies that consistently change through acquisitions cannot care for their clients the same way a stable midsize company like Acusis does.”

“I think that companies with good reputations and that can get very competitive on their pricing will have an advantage over the ones that can’t,” Langley adds. “We have invested huge sums of money into our technology so that we can do it faster and cheaper, but quality is still the most important aspect of what we do and the most expensive component of producing reports. I get the distinct feeling that customers don’t really care what technology we use, but that they do care that their reports are accurate.”

Dollars and Cents
Pricing structure raises several issues. The fact that most businesses feel increasing pressure to outsource at least part of their work to stay competitive has been a subject of much debate. “Because of the influence offshoring has on pricing, customers expect quality work at offshore rates, and I’m not sure you can always have both,” Langley says. “I do feel there are some good offshore companies, but we do need to recognize the high price of labor in this country and the associated costs that come with it.”

“Customers do indeed expect quality work at offshore rates,” Nicholls says. “It’s not uncommon to hear customers ask what your three rates are: one for straight transcription in the United States, one for speech recognition, and one for offshore labor. In the end, if it is the CFO who is making the decision, they are likely to go for the bottom line without a real understanding that poor quality documentation can impact patients’ lives.”

Vick believes cost considerations may have overtaken concerns about quality. “The cost pressure on the CFO has greater weight than any quality differentiation, and that’s admittedly tough for smaller companies to grapple with,” he says. “I think there has been some leveling of the playing field in that most of the companies are producing work that is pretty equal qualitywise. Therefore, in the end, it comes down to cost for many.”

Nicholls has a similar view: “You don’t find any MTSO saying they don’t provide quality documentation services. Quality is, unfortunately, no longer a differentiator in the industry; it has become about speed and pricing. Perhaps when documentation specificity begins to play a bigger role in the reimbursement cycles, this will change. I believe the jury’s out on that one and only time will tell.”

But there are situations where quality still reigns, Vick says. “I do think opportunity exists among the smaller customer set,” he says. “The larger the customer, the greater the influence of the CFO. But with the smaller hospitals or clinics, the HIM manager still has a lot of weight and that puts more of the focus on quality.”

What Lies Ahead
There’s little doubt that the transcription industry has undergone major changes. The last few years have brought turnover, with many small vendors calling it quits. Still, there was a time when the consensus was that new technologies would do away with the industry entirely. Now, that no longer seems to be the case.

“Transcription is a mature business that delivers a vital component of effective patient care,” Lloyd says. “Despite the current set of challenges and resultant industry changes, we expect transcription services to be around for years to come. We also see that technology—not just transcription technology but a range of clinical documentation tools—as becoming a key differentiator in vendor selection. Companies that can deliver efficient, usable data to support CDI and other initiatives will be more successful.”

While large vendors such as Nuance benefit from their expanse, smaller competitors believe there’s enough room at the table for others. “I do see a future of optimization for midsized companies like us,” Jackson says. “Hospitals need some variety and choice in the marketplace. I don’t see the stronger midsized companies going away any time soon. We bring stability and quality to the playing field.”

— Lindsey Getz is a freelance writer based in Royersford, Pennsylvania.