How Can Healthcare Software be Free? Chris Anderson has the Answer

Chris Anderson, editor-in-chief at Wired, author of The Long Tail and all around tech guru, has a new book out called Free: The Future of a Radical Price. On page 104, Practice Fusion's electronic health record application is featured as a case study:

How can Healthcare Software be Free?

Since November 2007, thousands of physicians have signed up to receive free electronic health record and practice management software from San Francisco-based start-up Practice Fusion. Enterprise software for medical practices can cost $50,000. How can one company give away its e-record system at no charge?

Freemium + advertising. Tapping the freemium model, Practice Fusion offers two versions of its software: a free one that serves ads (a la Google AdSense), and an ad-free one that costs $100 per month. Of the first 2,000 doctors to adopt Practice Fusion's e-record system, less than 10 percent opted to pay. But the real revenue lies elsewhere...

Sell access to your data. Using free software, Practice Fusion attracts a critical mass of users (doctors) who, in turn, create a growing database of patients. Medical associations conducting research on specific conditions require longitudinal health records for a large set of patients. Depending on the focus of a study (think: white, middle-aged, obese males suffering from asthma), each patient's anonymized chart could fetch anywhere from $50 to $500. A physician typically sees about 250 patients, so Practice Fusion's first 2,000 clients translates to 500,000 records. Each chart can be sold multiple times for any number of studies being conducted by various institutions. If each chart generates $500 over time, that revenue would be greater than if Practice Fusion sold the same 2,000 practices software for a one-time fee of $50,000.

You can download the audiobook version of Anderson's new book for free (of course) online.