The Medical Web

Why the Internet and companies exploiting its power may hold the key to taming the chaos that reigns in clinical management.

It's easy to argue that the United States has the best healthcare system in the world. Our medical training, our basic research, our advanced technology are all second to none. But there are grave concerns about the state of U.S. healthcare and where it may be headed in the future. Can we fight cancer without having to mortgage the home? Can we get more than 10 minutes with our doctor? How can we afford to provide health insurance for everyone? Obviously, we are still trying to discover a rational economics for this most complex system. No fewer than 270 million Americans, 600,000 physicians, 20,000 nursing homes, 20,000 home health agencies, 5,000 hospitals, 5,000 managed care organizations, 3,500 rehab facilities and clinics, not to mention pharmacies and ancillary facilities such as laboratories, radiology and surgery centers, and emergency rooms are part of a healthcare system that many describe as broken.

Efforts to pull costs out of the system through managed care programs worked for a while, but they have generated public outcries and political intervention that suggest there are real limits to this approach. And thus far the use of information technology, with its promise of efficiency and process improvement, has been disappointing in healthcare. Though many administrative and financial functions have been automated in the last few decades, the inefficiencies remain. If anything, information systems in healthcare seem to reflect the very chaos they should have expelled.

Perhaps it is millennial fever, but we believe that significant change is now afoot in the healthcare industry. Much of that conviction is owed to the Internet and the way it fundamentally alters communication and relationships. But the Internet has changed other industries in the last five years while leaving healthcare virtually untouched. Now economic pressures are forcing the issue, and the Internet is providing the means to bring new efficiency to this $1.2 trillion industry. We reported last week on efforts to rationalize the procurement of medical supplies ("Healthy Exchange," October 18, 1999), which accounts for as much as half of hospital operating expenses. Savings in that department will help, but the biggest opportunity to cut costs lies elsewhere.

Waste not

Anywhere from a quarter to a third of all healthcare dollars is wasted on inappropriate care or unnecessary expense. Sure, we've successfully wrung out a number of excesses, like egregious hospital stays, but we can't travel much farther down that road. Consumers have already shown they will not tolerate further cuts in the care they receive. The images of new mothers driven out of hospital rooms or cancer patients denied one more round of chemotherapy are becoming potent political fodder. Yet the prospect of rising costs, coupled with an aging population and more demanding consumers, make serious changes in clinical care an imperative. That means taking a fresh look at the way doctors exchange clinical information and diagnose and treat illness.

Judging by the public market's recent treatment of the two best-known startups taking on that challenge, investors may be having some second thoughts about the prospects for success. Both CareInsite and Healtheon have seen their stock decline sharply since peaking earlier in the year. Even so, market caps for both companies remain above $2.5 billion, and dozens of others, including many fresh-out-of-the-gate startups, are following in their wake.

Themes and variations

Though it would be misleading to say each company is unique in its approach and business model, there is healthy variety in the technologies and strategies being tested. Some are looking to realize the dream of the electronic medical record, others are focusing on reaching the "point of care" with handheld devices. Still others believe that in order to improve clinical management, it must be tied to the administrative and financial aspects of running a healthcare business. And then there are those that are most concerned with the development of clinical applications that use the Internet in novel and powerful ways.

The greatest challenge for all these companies is getting providers to use clinical systems. We've heard estimates that usage of legacy-based clinical information management systems runs under 10%Ñand under 2% for Internet-based ones. The variance in strategy and business models reflects the fact that so far no one has really figured out how to lead skeptical physicians into the promised land of information management.

Is EMR dead yet?

If anything epitomizes both the ultimate promise and the grim reality of clinical information management systems, it is the electronic medical record. In a recent profile of MedicaLogic ("Private Profiles," July 12, 1999) we noted that, after 15 years and $85 million in equity financing, the company still has only 7,000 clinical users. But this represents 40% to 60% of the penetrated EMR market and makes MedicaLogic a leader in its field. MedicaLogic's plan to develop Internet versions of its Logician application should help overcome two significant barriers to widespread adoption of EMRÑcost and maintenance. MedicaLogic recently filed for a public offering, which if successful would provide the wherewithal for a significant push to raise market penetration.

Despite the promising signals from MedicaLogic, however, the word on EMR remains mixed. Some think EMR is hopeless because it will always require too many clicks for a doctor to use. Another camp concedes the inherent flaws of EMR but sees both the technology and incentives improving enough to compel use. Then there are others that do not beat the EMR drum per se but offer it implicitly in their products. Axolotl, which provides Web-based clinical messaging products that link healthcare organizations and physicians, and Confer Software, which offers a suite of Web-based tools and applications for both clinical and administrative management, are two such companies.

Try it, you'll like it

MedicaLogic is not alone in believing that the Internet will spur EMR adoption. KnowMed and iTrust are two examples of companies delivering EMR over the Web. They face the same problem: convincing physicians to use the system. Dr. Rick Peters, the founder of iTrust, admits that physicians are never going to be faster on a computer than they are at dictating and handwriting. Even if EMR takes only 90 seconds, with the average patient visit being 10 minutes, that is a 15% decrease in productivity, says Dr. Jeremy Nobel, a professor at Harvard School of Public Health and cofounder of NaviMedix. No doctor or provider would tolerate that, he says, so the issue becomes one of giving back value in other areas.

iTrust's strategy is to integrate EMR with administrative functions like scheduling, patient registration, billing and reporting, and to provide the option for outsourced back-office functions. The value proposition for clinical usage becomes reduced administrative overhead. KnowMed, like MedicaLogic and iTrust, is providing Web-enabled electronic medical software as an application service over the Web and is integrating clinical decision support into its offering.

One company that remains skeptical about EMR adoption, regardless of incentives, is PMETS (an acronym for paperless management empowering technologies), which operates as an application service provider. PMETS proposes to let doctors keep doing what they're doing, but have administrative staff scan and code all the paper that is generated. Physicians then have the benefit of being able to find charts with complete records, but do not have to act as data entry clerks. This is a far cry from the healthcare revolution many have imagined, but it is a small step toward change.

For those who have given up on the physician, but not on EMR, the consumer is an alternative. Companies like Dr.I-Net, HealthMagic, and WellMed are all providing consumers with tools for keeping medical records. With more than 80 million adult Americans online, according to IntelliQuest Research estimates, this is not yet a universal solution to the problem of cutting paperwork. But for those who want to take charge of their health, the medical record on the Internet is a compelling idea. Harish Kapoor, founder and CEO of Dr.I-Net, puts the value proposition thusly: Care is a function of time. If a patient has a cardiac or diabetic emergency, the faster an emergency room doctor can access the patient's medical records, the better the chances for survival. Possibly this could be a factor in reducing health premiums in the future, Mr. Kapoor imagines, but there remain deep concerns about storing an individual's medical records on the Internet. Furthermore, physician compliance is still necessary if electronic medical records are to be of any use. It remains to be seen whether pressure from both payers and consumers can force doctors to use EMR.

Bits and stethoscopes

If EMR relies too heavily on getting physicians to change their behavior, there are several companies trying to take technology to physicians where they workÑat the point of care. Allscripts, ClinEffect Systems, ePhysician, and iScribe are all creating software for handheld devices that facilitates clinical processes such as ordering prescriptions or lab workups, or capturing patient charge information. Criticisms of handheld devices concern their limited ability to connect in real time as well as the small size and readability of the display. To the extent that these factors can be mitigated, the upside potential for handhelds at the point of care seems large.

Important savings could come from automating some of the three billion or so prescriptions that are filled each year in the U.S. We understand that 40% of the prescriptions filled at retail pharmacies need some sort of reworkÑat a cost of $400 millionÑbecause the drug prescribed is not covered by the patient's insurance, the drug can cause potential drug-drug interactions, or the prescription is illegible. Allscripts' goal is to eliminate the costs of rework and the danger to patients with its point-of-care products, both wall-mounted and handheld. On the front end, doctors have the freedom to go from exam room to exam room with a palm-sized device that captures and transmits data in real time thereby eliminating the need for rework. On the back end, prescription orders are connected to payers and pharmacies. Although pharmacies are not yet fully connected enterprises, the benefits once they become so will be significant.

Hand it over

ClinEffect, which is offering a handheld Internet-based platform that enables doctors to capture diagnoses, treatments, and other billing information, counts on simplicity and economics to sell its system. Dr. Lloyd Hey, ClinEffect's CEO, compares the company to an ATM machine for healthcare: "You push a few buttons and your check comes out." The rationale for doctors to use this system is simple: Inaccurate bills don't get paid. Once they begin to use a device or application that directly affects the bottom line successfully, Dr. Hey reasons, doctors will accept other productivity applications and functions. ClinEffect has captured more than one million transactions from physicians directly, and some 140 doctors at Duke University and University of Massachusetts are using the system.

Talking to themselves

Healthcare is not just about doctors, though. Yes, they control over 80% of the healthcare dollar, but there are nurses, administrators, and many others who play an active and critical role in the delivery of care. Bill Kazman, CEO of Global Telemedix, a telemedicine company that operates a wide area network for the exchange of medical records with visual images, puts the quandary of the connected healthcare enterprise in simple terms: "It's hard to deliver everything before you deliver anything." But that is how it must be. A lone connected enterprise is an oxymoron. What's needed is a critical mass of them, all functioning as nodes on a network.

Hoping to get from here to there are perhaps dozens of companies that are engaged in building networks for integrated clinical and administrative transactions. Abaton.com, asterion.com, Axolotl, CareInsite, Healtheon, Kinetra, NaviMedix, and PointshareÑthe startup profiled in the accompanying articleÑare just a few in this class of companies. The differences among these players, we must admit, are not easily grasped. They all provide "connectivity" between healthcare constituents through either a private network or a secure Internet connectionÑa significant difference in and of itself. They all offer a suite of applications as a service, perhaps in addition to software licensing. But who they are selling toÑhospitals, payers, or physician practicesÑand the extent to which they customize their offerings or integrate with legacy systems are the finer points that merit attention.

CareInsite and Pointshare are taking a geographic approach to connectivity, leveraging the local nature of the healthcare business. Patients go to local doctors and hospitals, hospitals have locally affiliated physicians and trading partners such as labs, imaging centers, and pharmacies. Companies like asterion.com and Kinetra sell to one managed care organization or one hospital at a time and can offer a high degree of customization, which is important given that each hospital's version of a legacy system and each payer's rules are different. Kinetra's CEO Tim Hargarten sees both customization and integration as key selling points in the healthcare environment, because not everyone is going to have browser-based capabilities as soon as the millennium hits, and providing value for these organizations may mean giving them connectivity capabilities on Unix, Windows, and even DOS if they want it, until they're ready for the Web.

The degree to which companies assist affiliated physicians matters as well. NaviMedix embeds a trading partner's unique business rules and processes into the physician office workflow. Hospitals sponsor the systems of their affiliated physicians under Kinetra's model. Axolotl's clinical messaging offerings target healthcare organizations that supply their affiliated physicians with communication, collaboration, and automation tools over the Web. The point of these companies is to help each individual healthcare organization act like a healthcare enterprise by facilitating communications and transactions with its partners.

Different strokes

Starting from the physician's end, Salu.net applies the same enterprise principles to small practices by specialty. What drives this particular business model is the vast difference in methods and processes from one practice to another. According to Salu.net CEO Jim Steeb, about 70% of physicians belong to practices consisting of nine or fewer doctors, which means they have different needs than those practicing in large groups. Salu.net provides services spanning the whole range of practice management and patient interaction functions. The company has achieved about 15% penetration among cardiologists and 35% with allergists and has more than 15,500 physicians using its Web site development, medically oriented e-mail, or small practice intranet services.

Carelinc is another specialty-focused company, providing Internet-based clinical and enterprise management applications for outpatient-focused physicians in high-end specialties like ophthalmology. Carelinc's selling point is that it has developed knowledge bases customized to each specialty and even subspecialty. CEO Al Vega contends that the company's applications accomplish in a few minutes what would normally take physicians more than an hour in manual lookups for diagnosis and treatment. Eventually, he sees the ability to have systems that are capable of taking data from instruments themselves, thereby streamlining the process further. One approach that integrates aspects of telemedicine by specialty is the picture archiving and communications system, or PACS. Examples of this genre are CardioNow and eMed Technologies, which provide Internet-based PACS for cardiology and radiology, respectively.

Chaos theories

All of this is encouraging, but as Harvard's Dr. Nobel warns, "The potential for Web-based chaos is tremendous." There may already be too many healthcare information systems vendors, which has made choosing a solution difficult. The Internet, it would seem, has become a problem for many healthcare professionals. They know they have to be on it, but how and with whom? In order to maximize choice but not get lost in it, Medwired.com provides physicians with a free Web management platform that serves up selected content and applications in a single integrated user interface.

Even with such advanced distribution channel assistance, healthcare still has "too many moving parts that don't move together," argues Dale Sakai, CEO of Confer Software. Confer, which we profiled last spring ("Private Profiles," May 10, 1999), takes lessons from supply chain management to formulate what it calls the care chain and develops Web-based tools and applications that cover the clinical and administrative spectrum. The applications are modular, working with both legacy applications and any application developed with its tool set. Mr. Sakai sees clinical management as the big opportunity for this approach, given that the market is virtually unpenetrated. As he points out, only recently has the software become robust enough to handle real-life case management of patients that have multiple diseases and providers.

Rules of evidence

We don't like to say it, but this is just the beginning. After we master the capture and transmission of data, then we get to the heart of clinical careÑevidence-based medicine, which entails measuring practice patterns against standards of care, and employing decision support technology alerts, consultations, and reports. Just 18 months ago, evidence-based medicine was considered pie-in-the-sky or nice-to-have, according to Nelson Rosenbaum, CEO of ValuMed. But it is, after all, the next logical step in consumer Web healthcare delivery to let a patient see the general standard of care applied to his own care. ValuMed views all the other e-health efforts, from claims to EMR, as a boon for evidence-based medicine, as the data that is captured feeds directly into ValuMed's system providing a quasi-contemporaneous view of diagnosis, treatment, and outcomes. We can see numerous drivers for the adoption of evidence-based medicine: It offers a basis for cost improvements, provides predictability, and may help defend against lawsuits.

More questions than answers

That the Internet opens up the opportunity for profound, revolutionary change in healthcare is obvious. But equally obvious is the fact that the application of Internet technology remains a great challenge both technically and socially. One thing we can expect is the emergence of well-publicized metrics that will help us answer questions of effectiveness and use. Who is using applications, when, and where? How many doctors, how many patients, how many payers? How many transactions will be captured? Where is revenue coming from? We don't have the answers yet, and until they arrive this will remain an industry of promise and little more.

And we can't ignore the critical role of the healthcare information pioneers. The value and installed base of legacy healthcare information systems vendors, like HBO and Shared Medical Systems, will not be easily displaced. Already we're seeing large players make significant moves toward the Internet. Cerner, a clinical information systems company, owns 19% of CareInsite and roughly half of Health Network Ventures, a developer of Web-based clinical and administrative applications. Eclipsys and VHA launched portal community creator HEALTHvision, which recently acquired Internet clinical management application developer U.S. CareLink.

While we do not purport to know what the clinical management landscape will look like in the next five years, we do believe that this most crucial piece of the medical puzzle will change dramatically, with a constant parade of partnerships, joint ventures, and acquisitions. The momentum on all sides is too great to resist. What we have now are trickles and streams of clinical information. What we will have in the future are rushing rivers that will make the healthcare landscape, we hope, healthy once again.