The proposed purchase of GTE Health Systems by the largest information systems vendor in healthcare is further assurance that upgrading to a new era of computer integration need not involve junking the existing investment.
By early October, Shared Medical Systems plans to complete the purchase of GTE's MedSeries information system, which runs on an IBM minicomputer.
SMS and its close competitor in size, HBO & Co., have been developing a new breed of clinical information systems and integrative technology that integrated networks must have to operate effectively under fixed-fee contracting.
But until recently, neither vendor had products that ran on the AS/400 minicomputer, which has an 800-client base that's so loyal and sizable it's worth fighting over, industry observers said.
The AS/400 is a smaller computer platform than a mainframe but with nearly as much processing power. Neither company was successful in getting the AS/400 users to switch to a newer breed of client/server computing networks that would run software from SMS and HBO & Co., said Mark Gross, national director for healthcare information technology at KPMG Peat Marwick's Radnor, Pa., office.
But earlier this year, HBO & Co. moved to bridge that gap by purchasing Ibax Healthcare Systems, gaining 240 clients operating the Ibax Series 4000 for the AS/400 (May 9, p. 10).
Now SMS is zeroing in on the same market with its plan to purchase GTE and inherit its 300 clients of AS/400-based patient accounting and financial software. What's more, SMS said it's going after the other 500 users of AS/400 platforms in an effort to market its clinical and system-integration products, said Michael Costello, vice president of administration and corporate communications. That would include hospital clients in HBO & Co.'s domain.
"Once HBO made its move, SMS was faced with making a move just to keep from abdicating that market to HBO," Mr. Gross said. "We're seeing the two market leaders going after 800 customers in a shrinking market."
As potential and existing hospital customers merge or become part of larger networks, vendors have fewer customers to sell to, he said. Buying access to a significant market sector is a crucial step in getting good position for future sales.
That's prompted software vendors to find ways to make their products compatible with the computer platforms that hospitals already operate. The approach promises a protection of investments instead of forcing institutions to replace their computers, Mr. Gross said.
So AS/400 users not only won't be saddled with incompatible computers, but they're likely to have "high-quality choices to make as vendors vie for their business," he said.