The digital transformation of health care. (Health Care Meets E-Commerce).

KEY CONCEPTS

* The e-health Era

* Information Economy

* Adapting e-health Technology

* e-Medicine Changes the Patient-Physician Relationship

* Telemedicine and Cyberconsultations

* Internet Strategies for Managed Care

EMAIL AND THE INTERNET have created an 'X-factor' that has stimulated the U.S. economy through increased productivity and efficiency It's time for an 'X-factor' in health care, where Internet technology is used to keep costs in check while deepening/patient-provider] relationships through increased communication and care.

--Andrew Grove, Chairman of Intel (1)

The arrival of the Internet offers the opportunity to fundamentally reinvent medicine and health care delivery. The "e-health" era is nothing less than the digital transformation of the practice of medicine, as well as the business side of the health industry. Health care is only now arriving in the "Information Economy."

The Internet and information technologies have radically reshaped other sectors of the economy, such as banking, airlines, and retail shopping. The use of the Internet to support true electronic commerce is accelerating in most industries, while [the health industry] and managed care seem to be stuck In first gear. (2) That is changing rapidly, as the health industry is targeted by a wave of "dot.com" companies, such as drkoop, Healtheon, Carelnsite, PlanetRx, and WebMD. Wall Street experts tell investors to focus on the "three C's--connectivity. content, and commerce." (3)

Health care is a high-transaction business. An estimated 15 percent of all data transmissions in the U.S. are related to health care. (4) A simple doctor visit can generate five transactions, while a more complex cardiac work-up involves 23 transactions. The Internet can lower these transaction costs. Electronically verifying insurance eligibility could reduce the transaction cost from $5 per patient to $0.60 per patient, with an annual savings of $10000 for a busy doctor seeing 500 clients each month. (4)

The Internet is the next frontier of health care. Health care consumers are flooding into cyberspace, and an Internet-based industry of health information providers is springing up to serve them. A recent Harris Poll reported that in the past year, 70 million (74 percent) of the estimated 97 million people online have visited one or more of the Web's 20,000 health-related sites for medical information. (4)

Some consumers are turning to their local hospitals or health plans for health information, but many are employing the Web to search on a global basis for the latest medical research or evaluated treatment data (please see Table 1). "B2C" (business-to-consumer) e-commerce is an emerging health care market for drug refills, durable medical equipment, or alternative medicines. An estimated 60 percent of consumers using health websites have purchased other products online. (5)

Today's rapidly rising Web traffic on health sites is only the beginning. A recent study by Northwestern University and KPMG in Chicago affirms that Baby Boomers are the quintessential generation to demand what they want, fueled by Internet-available medical information. (6) Health care providers with well-developed websites, like Houston's MD Anderson and the Cleveland Clinic, will reinforce their brand identity and gain customer loyalty by providing easy Internet access to detailed health information. Many hospitals and health systems are just starting to focus resources on Web-enabled e-commerce and business applications, such as marketing, physician directories, and employee recruitment, according to national data from the Health Information Management Systems Society.

Although "B2C" (business-to-consumer) Internet solutions are growing rapidly, the real opportunity for the Internet is "B2B" (business-to-business). The next wave of e-enabled applications will focus on creating new customer channels, e-commerce, e-engineering core processes, and supply chain management (please see Figure 1).

An estimated 25 percent of the nation's $1.2 trillion health budget is considered to be excessive administrative costs or unnecessary medical treatments. (5) That is a $300 million business target of the e-health economy, using Internet-enabled processes like disease management and supply chain management. Only 6 percent of the health care industry uses the Internet for buying supplies today, compared to 25 percent of companies in other industries. In the digital marketplace, buying medical products on the Internet can reduce costs 5 to 15 percent, or more, taking advantage of Web-enabled comparison shopping through companies like medicalbuyer.com.

e-medicine reinvents the doctor-patient relationship

The Internet's global networks offer just what the health field has needed, a low-cost technology that would bridge competing hardware and software to provide a "seamless web" of communications pathways. In the process, they are reinventing medicine. Dot.com companies are moving rapidly to create new information sources and value-added transaction channels for health care providers, payers, purchasers, and suppliers.

Internet technology may rank with antibiotics, genetics, and computers as among the most important changes for medical care delivery, which futurist Jeffrey Bauer calls the "seventh revolution" in medicine. (7) Some 20 to 60 percent of patients of some specialists are arriving at the physicians' offices with articles from the Internet, including "cyber-chondriacs," who have spent too much time on the Web and now imagine they have the diseases they have double-clicked. (4)

America's 700,000 doctors are logging on the World Wide Web in record numbers. Market research data by the Healtheon Corporation show a 300 percent jump in regular Internet physician usage in the past two years. (8) In 1996, only 15 percent of U.S. physicians went on the Internet for clinical reasons. This figure climbed to 50 percent by mid-1997, and increased to 70 percent of American doctors by the end of 1998.

In past surveys, doctors have cited "lack of time" as a primary reason for low use of the Internet for clinical information. But the latest report on physician usage of the Internet indicated that doctors now cite that "lack of meaningful content and services" is the number one reason they do not rely on the Web more often for clinical purposes. These data suggest that issues of access and computer literacy are being overcome. In the future doctors may increasingly turn to the Web as a primary source of clinical information and medical data.

Sensing that doctors are ready to use the Web for business as well as clinical purposes, the American Medical Association launched a new for-profit company, Medem, which operates websites and provides services that compete with drkoop.com, Medscape. and WebMD. "We're trying to put the doctor back in the information loop," says Joe Sanders, Jr., MD, Executive Director for the American Academy of Pediatrics, which is a co-founder of Medem. (9)

Health care consumers are turning to the Web as an increasingly trustworthy source of health-related information, and consumer choices are rapidly expanding. (18) Primary uses of the Web by health consumers in the future will include:

* Disease-specific health information

* Directories of providers

* Health plan eligibility and benefits information

* Report card ratings of health plans and providers

* Patient support groups, "chat" rooms

* Online health advice and counseling

* Personal health risk assessment

* Ordering books on health-related topics

* Searching medical literature for latest medical advances

* Participation in clinical studies for pharmaceutical manufacturers

* In-home monitoring of chronically ill by disease management programs

* Ordering prescription drug refills, over-the-counter remedies, and durable medical equipment

* Developing a personal electronic medical record

* Monitoring personal health improvement and fitness programs

Internet access for patient self-scheduling is likely to be a popular service enhancement, allowing patients to scan their doctor's calendar and make an appointment. The system can also provide Internet reminders electronically to patients, 24 hours prior to their appointments. The convenience of the Internet contrasts with today's appointment process, which often requires waiting long minutes on hold, or following confusing voice-mail instructions for help from a telephone-based central scheduling system.

Internet-based patient records allow consumers to "own" their electronic medical records. Internet health information providers like drkoop.com encourage consumers to register their health history, and to build a record of their health status over time. Universal patient identifiers such as Social Security numbers can provide an Internet address for future medical data from providers to be electronically compiled. The goal is informed consumers who are empowered to monitor and manage their health improvement.

Patient support groups and "chat rooms" are creating communities of customers. Internet advocates believe that the ultimate use of the Internet in health care is to build learning communities of consumers and providers, More fundamentally, Internet-empowered consumers can take a leading role in promoting their own health and making effective use of their health plan and providers.

This is not a vision; it's already happening across the nation. Support groups of patients who share a diagnosis or treatment are among the most active health care users of the Internet. Patients share the latest medical literature and research findings, and provide commentary on the efficacy of their treatments. Pharmaceutical companies and device makers are actively working with Web-based support groups in collaborating on research studies to obtain active participation in clinical trials, as well as facilitating the early distribution of newly-approved drugs or devices. These Internet-linked "communities" of patients, providers, plans, and purchasers offer hope for collaboration and cost-efficiency in providing medical care in the new millennium.

What's next? Online health advice and telemedicine. With little regulation in place yet, some health care consumers and providers are venturing into new territory--dispensing health advice online, and even prescribing pharmaceuticals, for a fee. The practice is frowned upon by professional organizations, and the focus of frustration for state-based regulators is concern about health professionals doing business across state boundaries without state licenses. Online consultations for patients seeking Viagra are already available, through websites such as viagrapurchase.com, with 48-hour delivery of the drug.

Internet-based telemedicine could become widely utilized in the coming decade. At the Veterans Administration. CIO Robert Kolodner, MD. states: "Much of our telemedical clinical activity could be translated to the Internet," based on the VA's substantial telemedicine experiments in cross-country pathology and remote medical consultation. (10) Low-cost Internet-based telemedicine will become a cost-effective method for remote diagnosis, patient information, case management and monitoring, and remote medical consultation.

Virtual chains of providers

Imagine a national network of the finest cardiac surgeons and cardiologists, available at a mouse-click. Or the nation's world-class cancer centers, all organized in a virtual network and contracted to the nation's largest health plans. Thanks to the Internet, it's possible. Ambitious efforts to link doctors and hospitals into national companies have failed in part due to the lack of a low-cost communications architecture that could integrate them into truly nationwide firms. The Internet offers an opportunity to restructure medicine and hospital care beyond regional or state boundaries.

One Internet-startup company is organizing a national network of 40,000 physicians to provide house-calls for a premium fee. Many of medicine's sub-specialists and specialized clinical facilities can be expected to organize virtual chains and market them through the Internet on a national and international basis, for example, oncology, diabetes, plastic surgery, women's health.

The Internet may become an online catalog for choosing providers. Many consumers do not have a regular source of health information or medical care until they get sick. Hospitals and health plans are employing the Internet to match patients with providers. A growing number of HMOs and health plans offer physician directories, searchable by zip code as well as clinical speciality, such as Anthem Blue Cross and Blue Shield, at anthem-inc.com.

Most Web-browsing health care consumers will ultimately choose a local provider, but some patients will use the Internet to find "world-class" medical organizations with top physicians and research projects. The Internet allows nationally recognized hospitals like the Mayo Clinic in Rochester, Minnesota, and Houston's MD Anderson to advertise across the nation, and on an International level.

Health plans and hospitals have been the first to offer provider directories, but other health care services are catching up. Consumers seeking information on long-term care providers can turn to SeniorPlace.com, a Portland-based firm. We are "building electronic bridges between acute care and long-term care," says Jeff Pentacost, MD, founder of SeniorPlace." Offerings from SeniorPlace include a patient referral network, listings of providers, and service profiles, with links to websites of long-term care providers.

Low-cost Internet connectivity is transforming the expensive ($21 billion in 1999) "client/server" business of traditional "legacy' information systems. (12) After Y2K and the Balanced Budget Act, many hospitals and medical groups are looking to defer or reduce information systems capital investments by as much as 40 to 60 percent this year and lower IS operating costs below pre-Y2K levels. (4)

The Internet is being seen as a lower-cost alternative to "legacy" health information systems, already in place in every hospital and physician office in America. E-health solutions can provide connectivity using the "thin client" concept, where vendors own the hardware and may also provide data warehouse storage. In this business model, providers may rent software instead of owning it, paying ASPs (application service providers) for the use of the software on a transaction or subscription basis.

Creating new revenue channels

There are dozens of potential applications and e-commerce opportunities for Web-enabled business in the health field, ranging in a spectrum from information display and advertising to online commercial transactions and payments. Many health care providers and HMOs have websites, but few are using the full potential of the Web for Internet electronic commerce.

Innovative companies are beginning to demonstrate the commercial potential of the Internet in the health field. In Houston, American Oncology Resources, a physician practice management company, developed an extranet application, AOR SecureNet, that allows the company's member practices to scan patient information and match patients with clinical trials of advanced cancer treatments. (13) The first day one of AOR's practices in Tulsa, Oklahoma had the system installed, it received seven trial matches in different cancers.

Internet advertising may be the most cost-effective method for reaching health care consumers. Pharmaceutical companies that are already spending 50 percent of their marketing budgets on direct-to-consumer advertising are expected to invest heavily in the Web. The World Wide Web can connect health care consumers and providers at a mouse-click, expanding health care to be a truly global enterprise.

Patients and families searching the Web for information about a recent diagnosis or injury bring a higher level of interest than the average Web surfer to their Internet searches. Michael Spector, MD, of the University Hospital in Cleveland, Ohio reports: "When you talk to a patient about something major [health problem], they may remember 10 percent. The Internet allows them to ask questions again and get information that was once hard to get without access to a medical library." (14)

Philanthropy is being reinvented on the Internet. Hospital-sponsored foundations are discovering a new way of reaching donors--the Internet. Health care foundations are opening Web pages on their hospitals' websites, describing programs, and soliciting contributions. One Web surfer in the Midwest sent $5,000 to the Cleveland Clinic after a visit to ccf.org, the Clinic's popular website that attracts 65,0000 hits a day and 2 million hits a month." More sophisticated fundraising pitches, like deferred giving, can be introduced on a website with telephone and direct mail response to Internet consumer interest. Disease-specific fundraising organizations, such as the American Cancer Society and American Foundation for Urologic Disease, are rapidly catching onto the growing use of the Web for health information. Foundations are just a "hot-link" away for Internet consumers interested in conditions such as heart disease, and breast and prostate cancer.

Online shopping has just begun to focus on health care as a broad consumer niche. Health-related products and services likely to be sold widely on the Web include:

* Prescription drug refills

* Over-the-counter drugs

* Medical supplies for the chronically ill, for example diabetics

* Durable medical equipment

* Vitamins and homeopathic medicines

* Home fitness equipment

Pharmaceutical refills have been identified as a high-volume, high-dollar niche that could be just right for the Internet. (19) Mail-order pharmacies may rapidly become obsolete in the face of Internet competitors. Firms like drugstore. com are just getting started. Selling pharmaceuticals requires state licenses, which has slowed down the arrival of online access to drug refills. Prices will be competitive with the deepest discounts available, but with the convenience of next-day home delivery. The nation's most active health website, drkoop.com, offers pharmaceutical refills and bundles a free "drug checker" software screen for drug compatibility.

Internet strategies for managed care

Health insurers and HMOs are targeting the Web as a future channel for consumer registration, eligibility verification, and transaction processing. The Internet will be widely used by health plans, hospitals, and large medical groups to provide customer service. Many types of service could be provided online, including:

* Verification of health plan eligibility

* Explanation of health plan benefits

* Search for a plan-approved provider

* Off-hours questions from patients or enrollees

* Requests for referral information, for example long-term care

* Online registration of new enrollees, for example a new spouse

* Notification of changes in status, for example a new address

Internet-savvy health insurance customers in the future may shop for a health plan from discount Internet brokers, a Web-enabled market already widely used for online purchase of automobiles, life insurance, and airplane tickets. Consumers like the price savings of "disintermediation'--cutting out the middleman. Online stock purchases are rising rapidly, accounting for 14 percent of all equity trades in 1998. (13)

Web-sold health insurance could become a national business, leap-frogging state and local markets. Internet-empowered consumers have both information and the ability to take their business elsewhere at the click of a mouse. The biggest health plans and HMOs, which are already licensed in multiple states, could most quickly jump to national marketing. Companies like United Health care, Aetna U.S. Healthcare, CIGNA, and the Blue Cross-Blue Shield Associations have the multi-market presence and local networks to service customers on a national basis.

At the same time, these big health plans could be vulnerable to new Web-based "virtual insurers" with low overhead who would contract at wholesale prices with local provider networks and revolutionize the health insurance market. Medicare HMOs and PPOs could be sold online to a national market of the "wired retired," the estimated 40 percent of seniors who now have online access. These national Medicare HMOs could become licensed by the Health Care Financing Administration (HCFA) in every state. Medicare PPOs are authorized by the Balanced Budget Act of 1997, but have not yet been implemented by HCFA.

Managed care organizations are creating Internet-based "help desks" to assist consumers to navigate the health system, find a physician, or check their health plan's benefits. United Heatthcare, based in Minneapolis, offers "Optum Health Forum," a sophisticated website where enrollees can search for information, ask about benefits, or check their doctors' status as a participating provider.

A Web page is vastly cheaper to operate on an hourly basis, notes health care consultant Douglas Goldstein, President of Medical Alliances. (10) Other large health insurers like Aetna are investing heavily in providing consumer information and referral through the Web. IntelliHealth, one of the most popular consumer websites for health information, is a joint venture of Aetna with Johns Hopkins, which provides much of the site's medical content.

Predictions for the proliferation of electronic medical records (EMRs) are finally becoming realized. Dozens of companies are offering electronic medical records. The paper medical chart is not obsolete yet, but the "virtual medical record" is arriving. There are no "paperless" hospitals in the U.S. today, but the Mayo Clinic's new Scottsdale hospital, opened in Fall, 1998 hopes to become virtually paperless within five years.

Medical information will be universally accessible to participating providers in data warehouses" with huge electronic storage capacities, which may be operated by payers, providers, or joint plan-provider ventures. Patient information can be accessed on a real-time basis for diagnosis and treatment. Health plans and provider-sponsored integrated delivery networks (JDNs) can "mine' their databases to assess and predict risks, as well as to measure their medical care against clinical and economic benchmarks. Providers, health plans, and patients can share an EMR housed in a regional data warehouse.

Increasing efficiency/productivity

The development of intranets and extranets will open dozens of possibilities for expediting business processes and expanding the number of trading partners--physicians, health plans, consumers, pharmaceutical manufacturers. (13) Examples include:

* Clinical trials--Conducting drug studies and clinical trials is becoming a major industry. Hospital and physician networks can create extranets that directly link patients in the trials via the Internet, resulting In a seamless web of telemedicine and clinical research.

* Clinical protocols--Hospitals and physicians can share clinical protocols, update algorithms as new research becomes available, track costs and outcomes, communicate with patients, provide reports to health plans and employers, and demonstrate quality improvement.

* Disease management--Internet linkages between providers, patients, and disease management programs can Improve outcomes, reduce costs. And prevent early onset of acute symptoms.

* Reducing clinical variation and costs - The biggest target for Internet-based cost strategies is clinical care. Profiling software can quickly identify cost-effective practitioners, using national standards and "best-of-breed" benchmarks. Health insurers like Indianapolis-based Anthem Blue Cross are applying electronic assessment tools in cardiac surgery and only offering contracts to those heart surgery centers that meet Anthem's standards. (15)

Barriers to an e-health future

Despite the extensive media coverage bout "dot-corn" companies on Wall Street, the information age is still arriving n many parts of America. Health care providers and health plans seeking to promote their services by Internet linkages may have to wait for some consumers to catch up with the information age. Some e-commerce applications have drawn a quick and positive response, like purchasing books. For e-commerce to reach its full potential, the availability of Internet access must become universal and consumers must be trained in Internet communication skills.

Even if every home had a computer or other Internet access device, some customers still "would prefer to talk to a live person rather than interact with a personal computer," says Doug Whicker, project leader for e-commerce at Wellmark Blue Cross and Blue Shield in Des Moines, Iowa. (16) Market research by Aetna U.S. Healthcare showed that consumers are definitely interested in accessing a website for service availability information such as physician location, but more reluctant to share their medical history or discuss a diagnosis online.

Leading barriers that must still be overcome for e-commerce to be widely employed in health care include:

* Lack of universal Internet access

* Computer illiteracy

* Limited knowledge of how to surf the Web"

* Cost of purchasing computers

* Service costs of online access providers

* Security/confidentiality concerns

* Unwillingness to share personal/medical information

* Unwillingness to put credit card information online

* Compatibility of systems between customer and Web-based organization

* Desire to do business "face-to-face"

* Failure of the organization to array its products/services for online commerce

The "dot.com" era is here

The greatest barrier to widespread adoption of e-health strategies may be health care's precarious "BBA-era" finances. Hospitals and doctors reeling from Medicare payment cutbacks under the Balanced Budget Act may be reluctant to invest in Internet strategies.

A recent survey of academic medical centers by the University Health System Consortium found that 40 percent were losing money and could wind up clients of the Philadelphia-based Hunter Group, a turnaround management company that is operating the University of Pennsylvania, as well as the Stanford University-UC San Francisco Health System. (17) The Hunter Group typically slashes 15 to 20 percent of capital and operating costs like information systems. For those with capital, it's very clear that "dot.com" initiatives reward the "early movers" who reinvent their market and leave competitors in a cloud of e-dust.

It seems like only yesterday since the arrival of "dot.com" companies in health care--and it was! Most e-health enterprises are barely two years old. Yet already the new e-health economy is moving into a second generation, escalating past "B2C" (business-to-customer") based on mouse clicks and advertising to industrial-strength "B2B" (business-to-business) strategies, where revenues are based on transactions or subscriptions. Web-based solutions may apply to both sides of balance sheet--to reduce expenditures and create new revenue sources.

Utilizing e-health strategies will expand exponentially in the next five years, as America's health care executives shift to applying IS/IT (information systems/information technology) to the fundamental business and clinical processes of the health care enterprise. Internet-savvy physician executives will provide a bridge between medicine and management in the adoption of e-health technology. (1)

Table 1.

ONLINE HEALTH CONTENT USED BY CONSUMERS


Illness support groups     13%
Children's health          15%
Fitness                    28%
Women's health             32%
Online health newsletters  33%
Pharmaceuticals            35%
Diet and nutrition         37%
Disease information        52%

Cyberdialogue, cited in Daren C. Marhula, e-Health: Surf's Up--Time to
Catch the Next Wavel New York, New York: U.S. Bancorp Piper Jaffray,
1999, p. 14

References

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(2.) Schaich, R.L. "Internet commerce and managed care." Health Management Technology. 19(7):43-47. June. 1999.

(3.) Dreaderman, D. "e-Health: can the Internet cure malignant spending?' Dreaderman's Internet Research Trends (d.i.r.t.). Nov. 1, 1999, pp. 1-8.

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(9.) Carrns, A. "Move over. drkoop.com: AMA launches for-profit web venture." The Wail Street Journal. Oct. 28, 1999. p. B4.

(10.) Baldwin, G. Pushing the electronic envelope: Physicians and patients connect over the internet. American Medical News. 41(28):19, July 27. 1998,

(11.) Brock, K. "Website offers long-term care information." Business Journal-Portland. 15(27):6. Aug. 28, 1998.

(12.) Dornfest, S.I. "The healthcare industry in transition: What it means to HIT (Health Information Technology) users and how the Internet will help." Health Internet 2000 Conference, Presentation outline. Nov. 1, 1999.

(13.) "Other things equal: How the Internet is changing the economy." Businessworld Online article. Mar. 2., 1999. pp. 1-2.

(14.) Santiago, R. "Supply and demand increase for Internet health resources." Grain's Cleveland Business. Dec. 7, 1998, p. 18.

(15.) Wennberg. J. "Managing the costs of clinical practice variation," Presentation to the RAND Healthcare Roundtable, Key West, Florida. November 5, 1999.

(16.) Schaich. R.L. "Internet commerce and managed care." Health Management Technology 19(7):46. June, 1999,

(17.) Freudenheim. M. "Bitter pills for ailing hospitals." The New York Times. Oct. 31. 1999, pp. B1. 12-13.

(18.) Simons, J. "New Internet privacy laws appear less likely with release of new survey." The Wall Street Journal, May 13. 1999. p. B9.

(19.) Tedeschi, B. "CVS makes an Internet move, acquiring on-line drugstore." The New York Times, May 18. 1999, p. C2.

Russell C. Coile, Jr., is Senior Vice President and National Strategy Advisor for Superior Consultant, a national health care information technology and strategy consulting firm based in Southfield, Michigan. He is a faculty member for ACPE's Physicians in Management program, and is the author of six books on the future of the health field, His next book, New Century Healthcare: Strategies for Providers, Plans and Purchasers, will be published this Spring. He can be reached by calling .972/403-i945 or via email at [e-mail].

If you are included in father discussing this article with Russ Coile, please email him at [e-mail]