Physician Executives Straddle the Digital Divide.

e-Health is here to stay and experts predict that the Internet will became the hub of health care. Rapid advancements in biotechnology and medical research, increasingly curious patients who surf the Internet for medical information, and pressures from managed care companies to contain costs and speed treatments are the central components driving e-health. Despite physician reluctance to embrace the e-revolution, many hospitals and medical groups are employing the Internet and in formation technology to improve their customer interface, as well as to reduce business costs. This article offers seven e-strategies for health care performance improvement: (1) Supply chain management; (2) e-transactions; (3) care management; (4) improving quality; (5) boosting revenues; (6) outsourcing; and (7) provider networks (Intranets). By helping to incorporate these key e-solutions, physician executives can position their organizations for success in the new millennium.

KEY CONCEPTS

* Information Technology

* Integrated e-Technology Solutions

* Physician Reluctance to Embrace e-Health

* Characteristics of the "Most Wired" Hospitals

* Company Intranets

* Electronic Data Interchange (EDI) Networks

"THERE ARE PERHAPS few industries that have more to gain from the Internet revolution than medicine... [but doctors and] hospitals are real laggards when it comes to the Internet. What e-health has to be used for is to transform the whole process of delivering care."

Russell Ricci, MD,

General Manager of Global Health Industry, IBM [1]

"We are not there yet."

Anne Seger, MD,

Medical Director of System Integration, UMass Memorial [1]

The visionaries, entrepreneurs, and venture capitalists are gone, after the collapse of the "e-health" bubble. Now the real work begins, transforming 5,000 hospitals and 20,000 medical groups into electronically-integrated health care systems that manage patients with "seamless" care. The health system of tomorrow may never be entirely "paperless," but progress is being made, despite the legendary reluctance of physicians to accept changes in the way they practice medicine. Rapid advancements in biotechnology and medical research, increasingly curious patients who shop the Web for medical information, and pressures from managed care companies to contain costs and speed treatments are just the central components driving, in the industry patois, e-health. [1]

Despite physician reluctance to embrace the e-revolution, many hospitals and medical groups are employing the Internet and information technology to improve their customer interface, as well as to reduce business costs.

In Portland, Maine, doctors at Martin's Point Health Care, a four-site primary care practice, are relying on the Internet for patient education, drug and treatment queries, and scheduling. [2] Assisted by MediVation, an e-health company based in Needham, Massachusetts, the Maine physicians can punch a diagnostic code for diabetes, for example, and a collection of relevant medical literature will be electronically routed to the patient's personal website. Updates of information will be automatically routed-- "pushed"--to patients. Patients can visit their personal website any time ("24x7") and ask questions that nursing staff and physicians answer on a daily basis.

Physician executives must straddle the "digital divide" between doctors and hospitals who have embraced information technology, versus the "show-me-the-data" skeptics among physicians and administrators who will be the last to use a computer in the executive suite or medical office. The shocking collapse of the Internet companies has thrown a wet blanket on a health industry already reeling from Medicare budget cuts, managed care's constant fiscal pressures, and the Institute of Medicine's report that one in three patients is likely to be harmed during an average three-day hospitalization.

The business case for e-health is not hard to understand. E-solutions can lower costs by improving physician productivity, reducing clerical and administrative expenses, contracting electronically to cut supply and pharmaceutical expenditures, and treating patients more cost-efficiently. Sharing data on the Internet is a better, faster, cheaper solution. But e-health strategy gets complicated when hospitals and medical groups try to figure out how to integrate their "legacy" information systems and software with the new Internet applications. Many e-vendors offer "plug and play" ease of installation and use, but few applications hold up to the realities of harried staffers, technoskeptical physicians, and limited capital due to fiscal hits from managed care and the Balanced Budget Act.

In New York's Westchester County, the 20-doctor Katonah Medical Group is typical of many physician practices. [3] They are getting wired slowly, on a more cautious pace than the plan recommended by their information technology consultant. The group is spending incrementally, $20,000 to $30,000 at a time for selected upgrades, rather than going directly for a "full Internet solution," which could cost between $100,000 to $300,000.

Dot.com era in the rear-view mirror

This is the "post-dot.com" era. Only a year ago, information technology stocks drove the Dow-Jones average to dizzying heights above 10,000, creating thousands of dot.com millionaires among investors and options-laden executives. Health care was one of the vertical niches that held high potential for a digital transformation. Dozens of companies were created overnight, filling this "space" with business-to-consumer (B2C) and business-to-business (B2B) Internet strategies, all promising "killer applications" that would slash transaction costs and create new channels to customers and trading partners. Internet startups shimmered with double-digit growth potential.

When earnings failed to materialize in stocks trading at 50 to 100 times earnings, Wall Street finally put on the brakes. Market values for dozens of e-companies plummeted. Among those whose prices, and capitalization, crashed and burned were Healtheon/WebMD, Medscape, and Drkoop.com. Today, the revolution is over. Healtheon pioneer Jim Clark and WebMD founder Jeffrey Schwartz recently resigned from their merged company, signaling a new phase of cautious growth and continuing consolidation within the industry. And no one is making money yet.

The Internet-- the "hub of health care

The business assumptions on which health care organizations have been managed are in the process of being undermined, or replaced, by new Internet-based assumptions. The Internet is changing the "way the game is played," with new opportunities for cost savings and revenue enhancement. [4] e-Health experts at Superior Consultant, an integrated IS/IT consulting firm based in Southfield, Michigan, project savings in a number of areas, such as: [5]

* Supply chain management strategies give purchasers the lowest-cost access to all products, saving 10 to 15 percent on every purchase.

* E-managed care connections reduce the cost of verifying insurance eligibility from $32 per patient to $.60; authorizing treatment electronically slashes provider back-office expenses from $16 per case to $1.60.

* Internet-connected care management programs speed lab results to physicians, provide computer based care plans on admission, and lower length of stay by 0.5 to 1.0 days, cutting the cost-per-case by $400 to $1,000 for each patient.

* E-cash systems accelerate electronic claims and payments, reducing days-in-receivables and pumping millions of dollars into hospital cash flows.

* Outsourcing information systems saves 10 to 15 percent per year, and sale-leaseback of information technology can free up millions of dollars of capital for alternative investments or improved profitability.

* Creating a hospital or health system Intranet for physicians reduces IS/IT operating and capital investment expenses for doctors, and browser-facilitated access to real-time data on their patients enhances physician loyalty, resulting in 10 to 15 percent improvement in physician referrals.

In the new millennium, the Internet will become the "hub of health care," predicts John Morrisey, Information Editor for Modern Healthcare. [6] The rapid growth of Web-based connectivity is a strong "push" factor for deploying e-solutions in health care. Web-based systems are far easier and less expensive to acquire, maintain, and service than client-server or mainframe-based systems.

Information technology guru Marshall Ruffin, MD, predicts: "Forget all that you have heard about community health information networks that require your organization to contract with a vendor of proprietary software, supply a copy of that software to every potential user of the network, and support that network with staff. Consider instead what a global open standard network can do for you, your patients, your organization, and your community." [7]

Many chief information officers believe that the Internet makes provider organizations an offer they can't refuse--lower costs widespread access, and interface engines for in-place hardware and software. Within this decade, Web technology will eventually replace most traditional models. [8] Already, the health care market is seeing a consolidation of legacy information technology providers with newer Intranet companies to offer integrated e-technology solutions. [5]

E-solutions--seven strategies for health care performance improvement

I. Supply chain management--Integrated delivery networks, hospitals of all sizes, and physician group practices are beginning to recognize the value of e-business strategies in managing workflow and materials management activities across their service areas. Business-to-business activities, such as supply-chain management, can reduce the costs of supplies and equipment and facilitate other savings using strategies such as "just-in-time" inventory.

In addition to the Internet, more vendors are handling supply transactions by exchanging electronically through either point-to-point computer connections or value-added networks--private networks that store and forward electronic messages. Provider organizations could reduce supply costs by $11 billion a year across the nation, by using electronic data interchange (EDI) links with supply chain partners for an away of purchasing activities--checking product availability, sending purchase orders, receiving invoices, and processing payments--predicts John Glaser, CIO of Boston's Partners HealthCare system. [4]

Sophisticated provider organizations have been using private EDI networks for years, through national group purchasing organizations (GPOs), such as VHA and Premier. Now the Internet is acting as an equalizer for smaller hospitals and physician groups, with Internet e-commerce vendors giving them similar cost reductions and as-needed delivery services that formerly were only available to the largest purchasers.

Larger purchasers may use the Internet for comparison shopping, even while they continue to rely primarily on private EDI networks with GPOs or direct electronic interchanges with vendors. Many hospitals buy between 30 and 50 percent of their supplies and equipment outside of their group purchasing organizations. There is a lot of purchasing going on where the volumes are low, buyers prefer a non-GPO alternative product, or demand is highly variable, for example, the operating room, central supply service, and business office.

These purchases could migrate to the Internet, believes Jamie Wyatt, Director of Healthcare Solutions for PeopleSoft, a Pleasanton, California-based software vendor that offers a Web-enabled materials management system. [4] An array of new companies is emerging in health care's supply-chain management/e-commerce space, such as Medibuy.com, which offers providers the opportunity to submit requests for proposals to a number of vendors. MedicalBuyer offers an Internet buying service, enabling providers to shop for medical products from many different suppliers. MedSite.com offers a variety of Internet services to medical practices.

Allegiance, once a part of Baxter Healthcare, has launched ASAP.e.Comm, a website that enables providers to order medical and surgical supplies online.

The Internet is providing a new marketplace for buying and selling medical equipment. Neoforma, a Santa Clara California-based company, provides an online marketplace for buyers and sellers. The Internet marketplace is a real advantage for large organizations, which often wrote-off used equipment because it was a hassle to find buyers, as well as small organizations that had no effective way to resell their used medical equipment. In Hemet, California, Valley Health System, a three-hospital IDN, is using Neoforma. William Carik, Director of Materials Management, relates: "People in my position tend to go the path of least resistance and just trade in used equipment to a dealer, even though we know we are not getting the price for it." [4]

2. E-transactions--A growing number of managed care companies are jumping aboard the Internet, and rapidly migrating their enrollee and provider relationships to the Web. Many health plans believe that the low-cost, universally accessible Web will reduce their enrollment costs, link patients with providers, improve customer service, monitor quality, and slash the cost of back-office functions, such as eligibility, prior authorization, and physician monitoring. Among the market leaders in the Internet revolution are Aetna U.S. Healthcare, Blue Shield of California, and New York-based Oxford Health Plan.

Internet-based enrollment systems are designed to make signing up for a health plan a quick, low-cost process that can be done directly from an employee's work site or home computer. Blue Cross of California cut the enrollment cycle from 25 days to 24 hours using online sign-up by brokers through the company's website, blueshieldca.com, with consumers getting almost immediate access to their health benefits. [9] Aetna U.S. Healthcare permits consumers to sign-up directly on the "Ezenroll" area of its website, using employer-supplied ID and passwords to employees. In the first six months, Aetna extended Ezenroll to more than 400 employers and 18,000 enrollees and is doubling its plans for Internet-based enrollment.

Automating medical claims and electronic payments can accelerate payment, lower the average number of days in receivables, and significantly reduce manual labor in the back office. Health care providers are increasing efforts to connect with health plans to save money and speed payment. Five of the "100 most wired" hospitals in America routinely submit more than 80 percent of their claims online, like Neptune, New Jersey-based Meridian Health Systems. E-claims submission tripled last year among the "most wired" facilities, but the "less wired" submit less than 1 percent of claims electronically. [10]

The gap between the most and less-wired hospitals is growing, according to the second annual survey by the American Hospital Association. Hospitals ranked among the best e-connected accomplished 22 percent of pre-certification online, as well as 33 percent of insurance eligibility checks. Less-connected hospitals managed barely 10 percent of their managed care transactions over the Internet. Dwayne Jordan, CIO of Rehobeth McKinley Christian Hospital in Gallup, New Mexico, predicts: "We expect to move toward handling all transactions online." [10]

3. Care management--Many health care organizations are using the Internet as a customer channel and communications network, but fewer hospitals and health plans have harnessed the connectivity and distributed computing power of the Internet for day-to-day care management. For years, hospitals beefed up their financial information systems, while the automation of medical record-keeping lagged. Now the priorities are reversed. Clinical care management is the baseline strategy for helping hospitals regain profitability in the new millennium.

In Louisiana, the SMA Health Plan manages costs and coordinates care for its 75,000 enrollees utilizing the Clinical Care Viewer, an Internet technology from W3Health, based in Wilmington, Massachusetts. [11] This Web browser-based clinical reference system speeds up utilization management reviews by the health plan's care managers, with increased productivity, less training, and more time for other value-added tasks, such as continuing care management.

To get there, fundamental improvements are needed in the information infrastructure that supports care management. Nothing less than wholesale process re-engineering is required to apply fiscal discipline to clinical costs and significantly reduce the incidence of medical errors. Dave Garets of the Gartner Group believes that incrementally improving hospitals' existing care processes through TQM won't go far enough or happen fast enough. [12] A computer-based patient record is the essential building-block for clinical re-engineering. Care delivery organizations need to accelerate their plans to purchase and implement an enterprise.

Internet-connected care management programs can significantly improve clinical and financial performance. Intranets--e-connected networks within an organization--can facilitate the presentation of clinical information for doctors and nurses. Data from different "legacy" systems can be integrated over Intranets for presentation, all on one screen simultaneously, reducing the need for costly interfaces between once-competing software and hardware. [8]

Web technology, with its platform independence and common user interface, permits clinicians to view data from different systems, such as lab, radiology, and electronic medical records. Some hospitals have begun to provide Web-based browser access to legacy databases. Even for physicians and other caregivers who are not "computer literate," the point-and-click simplicity of browser technology can make anyone a Web information user with minimal training.

In Savannah, Georgia, Memorial Health System has engaged WebMD to link physician offices in a solution that incorporates access to the "Star" system, the hospital's clinical database from McKesson HBOC. [13] For $36,000 a year, Memorial received WebMD and Star Clinical Browser connectivity for a core group of 150 physicians.

A year later, some 447 Memorial physicians are connected to WebMD, and one-third can directly access patient records in the McKesson HBOC database through the Star Clinical Browser. Although WebMD and McKesson HBOC appear to be going in separate directions, Memorial's physicians are gaining confidence in the new system and are asking for two-way Internet communication so they can place orders over the Net.

4. Improving quality--The recent "medical errors" study by the Institute of Medicine may ultimately drive enactment of new federal rules for error reporting. Media attention has been critical and providers have been understandably defensive against charges that 48,000 to 98,000 people may die each year from medical mistakes. The American public believes that a serious problem has been uncovered. Industry observers warn providers that "local Bob Woodwards will be investigating your hospital." [14]

Major employers are throwing their purchasing clout behind the move toward quality. Nearly 60 companies have joined the Leapfrog Group, which will encourage their 20 million employees to use hospitals that employ quality-enhancing systems, such as computer-assisted medications. [15] General Motors, IBM, AT&T, Boeing, and the Pacific Business Group on Health plan to identify and favor hospitals where medical errors are actively reduced and doctors have excellent outcomes in high-tech procedures such as open-heart surgery.

Improving quality could save money, maybe lots of it. Quality is a major contributor to success in the annual ratings by HCIA of the "top 100" best financially-managed hospitals in America. Despite the impression that medical errors are widespread, few institutions are using available technology to reduce mistakes. The Institute for Safe Medication Practices estimates that medication errors could be reduced by 85 percent utilizing simple technologies, such as hand-held scanners and bar codes, but only 9 percent of U.S. hospitals have purchased this technology. [16] The Institute also reported that one-third of American hospitals have evaluated robot technology for drug dispensing, but fewer than 10 percent have purchased it.

In Michigan, the Borgess Medical Center of Kalamazoo was dismayed to discover a higher than expected mortality rate for non-surgical heart cases. [17] According to data published annually by the Michigan Hospital Association, the hospital's mortality data was above expected benchmark levels. Cardiology is a major service line for Borgess, which is nationally recognized as one of the top 100 hospitals for interventional cardiology, but the non-surgical mortality experience for a group of 15 DRGs and 1,500 patients was unexpectedly high.

The hospital brought in CaduCIS.com and its Institute for Management Development, a division of CareScience, a Philadelphia-based quality management consulting firm that has developed a risk assessment methodology. Three DRGs for management of Acute Miocardial Infarction (AMI) were found to account for the greatest deviation from risk-adjusted predicted mortality. The researchers recommended a number of actions, including targeting non-cardiologists for continuing medical education in the latest treatment protocols, such as the use of beta blockers. In the three-month period following the implementation of improvement strategies for AMI patients, the mortality decreased from 19 to 8 percent.

5. Boosting revenues--The Internet can be a revenue pipeline and cash accelerator. Currently, the time lag between when a patient goes to a doctor, the claim is filed and adjudicated, and the data (and revenues) get back to the provider is two months. [18] Ideally, providers should get treatment authorization, claims submission and review, and electronic payment within 48 hours.

The Health Insurance Portability and Accountability Act of 1996 may be a key enabling factor in promoting e-commerce in health care. Newly promulgated federal regulations for HIPAA are intended to standardize and facilitate electronic transactions. Although many providers are confused about the HIPAA requirements, the move towards universal standards for transactions between providers and plans is inevitable. The new regulations have a two-year implementation timetable, with exceptions for small health insurers and rural hospitals. The American Hospital Association is arguing that the deadline be extended to three years for all providers.

6. Outsourcing--In the "build versus buy" equation, more health care providers may choose to purchase their information system and technologies through outsourcing arrangements. Financial pressures from Medicare budget cuts and managed care contracts are compelling managers to reassess outsourcing as a cash flow and expense reduction strategy. Consultants predict that "hospitals are getting to the point that they don't want somebody to come in and tell them how to do it, they want somebody to do it." [13]

Outsourcing offers a number of advantages to provider organizations, including:

* Predictable costs of IS/IT as guaranteed by the vendor

* Enterprise-wide assessment of IS/IT needs by the vendor

* Strategic plan for information systems upgrades and new technology

* Access to preferred prices for new technology through vendor

* Reliance on the vendor to provide all needed management and technical staff

* Move provider IS/IT staff off the payroll, eliminating salaries, benefits, and long-term commitments

* Ability of the vendor to recruit, retain, and flexibly deploy staff

* Access to the vendor's preferred business relationships with major IS/IT suppliers

* Performance guarantees from vendor

In Monroe, Michigan, the Mercy Memorial Hospital recently announced a five-year outsourcing partnership with Superior Consultant. Under the $10 million, five-year arrangement, Superior will systematically upgrade Mercy Memorial's information systems, lead digital technology initiatives, and achieve cost-beneficial performance in the hospital's information systems. Outsourcing enables a community-based hospital to have access to the latest tools, technologies, and wide range of technical staffing assistance, at a lower cost and greater performance efficiency than the hospital could have likely achieved on its own.

7. Provider networks--Building Intranets between a hospital and its physicians may be one of the most effective physician-bonding strategies of the millennium. Doctors are overcoming their reluctance to use computers in medicine, but few MDs want to make significant information technology investments on their own. Hospital-sponsored Intranets that connect physicians for minimal up-front or subscription fees are popular. Reliance on a hospital-sponsored Intranet can solve many physicians' HIPAA problems, giving them a HIPAA-compliant network and standards for transmitting patient data.

But few physicians are e-linked with their hospitals. Even among the "100 most wired" hospitals and health systems in America, according to the Hospitals & Health Networks survey, only about one-third provide clinicians with online access to patient data. [10] One in four of the "most wired" institutions offers lab or radiology reports online, but many hospitals cannot handle online order-entry from doctors' offices (please see Table 1).

The Wisconsin Health Information Network (WHIN) is a provider-sponsored health information system that links hospitals, doctors' offices, labs, employers, pharmacies, and insurance companies. [19] The WHIN network uses Claimsnet, a proprietary online transaction processing service, to batch and speed up medical claims electronically. Network sponsors hope to achieve the 20 percent savings predicted by Boston-based consultants Arthur D. Little.

A pilot study of the WHIN system at the University of Wisconsin-Milwaukee showed that health care providers can achieve substantial savings. Physician practices can save $17,000 to $68,000 per year, based on an average cost reduction of $2.62 per information request via WHIN. Hospitals in the WHIN study achieved savings of $5.10 per information request, generating $400,000 to $1.1 million per year, depending on the volume of data requests.

Conclusion

Another metaphor for "straddling" the digital divide is "bridge." Physician executives can provide a bridge between clinicians and management in the sometimes noisy debates over selection and upgrading of health care information systems. Practicing physicians may be slow to accept the Internet and computers in the office, but physician executives need to lead by example. It's going to be a "wired world" very rapidly, from the critical care unit to the physician office. Physician executives must be at the vanguard of the digital transformation of health care.

Russell C. Coile, Jr., is National Strategy Advisor for Superior Consultant, an integrated health care information management company based in Southfield, Michigan. He is a faculty member in the ACPE "Physicians In Management" series, and the author of seven books on the future of health care and medicine, including New Century Medicine (Health Administration Press, 2000). He is the Editor of the monthly newsletter, Russ Coile's Health Trends.

References

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             Physicians' Online Access to Clinical Information
Online access to data                     100 most wired All respondents
Access patient data                             29%            13%
View radiology results                          26             12
View lab results                                25             12
View pathology results                          24             12
Decision support, e.g., clinical pathways       18             9
Lab order entry                                 13             5
Pathology order entry                           12             5
Pharmacy order entry                            12             5
Radiology order entry                           12             5
Solovy, Alden. Is There an E-Commerce Gap
Emerging among the Nation's Hospitals?