In the Sacramento area and the surrounding Northern California region, three established healthcare systems have carried on a highly competitive scramble for market share.
Figurative shoving matches in the area have been known to spill over into the courts and onto the pages of local newspapers. Now the pressures of retaining and gaining business are coming to bear on the internal efficiency of Mercy Healthcare Sacramento, Sutter Health and Kaiser Permanente's Northern California Region.
Because of contracts based on fixed reimbursement, which have been creeping into the market, each provider system will become its own worst enemy unless it can distribute key information among increasingly diverse operations in a widening geographic reach.
To stay competitive, these systems are committing huge sums to the task of building electronic information networks. All have different starting points as they scramble toward the same goal: comprehensive data availability suited to their varying internal needs.
Sutter and Mercy are moving away from a historical emphasis on hospital care and are trying to coordinate operations that were blissfully autonomous several years ago.
Kaiser's Northern California Region, one of the nation's largest HMO businesses with 2.4 million enrollees, has had a long history of coordination between its hospitals and physician operations and a financial orientation around capitation long before the term was coined. But it wants to modernize its computer connections, take its scheduling to a higher level, and get a better handle on data to and from its ambulatory side.
The capital investment committed for these tasks is breathtaking.
Mercy's five-year information systems program, begun late in 1993, already has cost $9.3 million and is projected to cost $27.5 million by 1998. That's for integrating and connecting five hospitals and a range of physician practices affiliated with Mercy.
Sutter, which has more than triple the facilities of Mercy and further to go in integrating them, anticipates spending nearly $150 million during the next seven years.
And the 57-site Kaiser HMO system in Northern California, with 30 medical complexes including 16 acute-care medical centers, is about to announce an ambitious seven-year information technology and construction project. Its estimated cost: $1 billion.
That monstrous estimate of Kaiser's capital outlay represents extensive new software development and the hardware to run it. But that's not all.
According to Philip Newbold, vice president and director of information technology services, the project estimate also represents the attendant costs of making it all happen-equipment support, construction of new facilities to house hardware and personnel, and synchronizing new products with existing mainframe computers from several vendors.
The figure also recognizes the commitment involved in implementing and continuing to support and upgrade the new class of information technology. Capitalized personnel costs are reflected in the estimate, as are the costs of replacing equipment with anticipated improvements in technology during the course of the project, Newbold said.
Kaiser already has an expansive computer network of 22,000 data terminals serving 30,000 users, including 4,000 physicians. The existing network chalks up about 210 million transactions a month, Newbold said.
But most of the computers are linked directly to large mainframe computers and are limited in their ability to present comprehensive information centered around mobile patients.
Kaiser wants to recast its organization of information away from discrete procedures or care settings and toward the overall health management of individual enrollees, said Tom Guerry, M.D., director of the clinical information systems group.
Part of that strategy relies on clinical data to identify the most cost-effective practices employed by physicians to get good results-and consequently reduce unnecessary variation in physician practices, Guerry said.
The tightly knit staffs of salaried physicians at Kaiser are trying to do that already, but they need more and better data on ambulatory care as well as the means to disseminate practice innovations around the region, he said.
Electronic capture of data for its own sake is not the goal, however. "We are not trying to build the electronic patient record. That's an outdated concept, like paving the cow path," Guerry said.
What matters is making medical record entries available simultaneously at any point in the system as well as providing a scheduling ability that improves service to members, said Douglas Jones, director of design, development and implementation for Kaiser's clinical information systems group.
Kaiser already has a scheduling system but is looking for one that's "more intelligent," Jones said. Until now, systems weren't able to take into account the flow of the patient. Kaiser wants to buy or build a system that schedules procedures and visits according to a patient's personal schedule and the most convenient interplay of locations and appointment times, he said.
Kaiser's principal technology partners are Oacis Healthcare Systems, a Greenbrae, Calif.-based healthcare software company, and Science Applications International Corp., a San Diego-based technology company serving healthcare as well as the defense and other high-technology industries.
Contract negotiations are in the final stages. Firmer estimates of the project's expense should be available within a month, Kaiser said.
Nearly two years into a combination strategic plan and information technology initiative, Mercy Healthcare Sacramento is preparing to implement a software package to manage inpatient capitated contracts, said Adrienne Edens, vice president for information systems.
That's the next step now that Rancho Cordova-based Mercy has integrated and upgraded basic financial systems such as patient accounting and payroll.
Mercy also has established standards for sending and organizing data. Those standards are crucial to exchanging information among different computer systems and simplifying the task of accepting new sources of information through future affiliations or system expansions, Edens said.
The information system for capitation was implemented first at a medical foundation that Mercy manages but doesn't own. The foundation, which has a separate strategic plan and budget for information technology, purchased a group-practice management system from Health Systems Integration of Bloomington, Minn. About 80% of the foundation's business already is capitated.
Mercy plans to buy and install the same system for its inpatient capitated business, which recently increased to 120,000 covered lives with the addition of 55,000 from a contract with Foundation Health Plan, a Rancho Cordova-based HMO.
Mercy envisions serving 400,000 health plan enrollees by 1997, using electronic information transferred where it needs to be and minimizing paperwork and red tape for its members.
Literally central to that vision is the creation of centralized registration and scheduling. Another crucial component is a software invention called a master member index that identifies information on an individual the same way throughout a collection of connected but disparate information systems.
A 90-member regional group at Mercy is working on a clinical systems design in conjunction with Phamis, a Seattle-based healthcare software company.
The clinical system, which will bring scheduling, medical records, care planning, charting and pharmacy information to all care sites, is expected to cost about $17 million. That includes the software, software licenses, hardware and capitalized labor costs of developing and implementing the system, Edens said.
In addition, $4.3 million is budgeted for building the electronic network to connect all sites, and various departmental information systems will cost another $4.3 million.
One of the key dynamics of the planning process has been side-by-side development of business strategy and information system decisions, said Vince Schmitz, senior vice president and chief financial officer.
The technology couldn't wait for the business strategy to be fully developed, but it also couldn't be allowed to run its own course and get out of step with the business side or clinical priorities, he said.
Task forces with comprehensive representation have helped move the process along while making sure their technical aims can be adjusted for changes in strategy along the way (Nov. 22, 1993, p. 60).
Mercy is becoming the technical and organizational proving ground for its parent corporation, Catholic Healthcare West, said Zed Day, vice president for information services at the San Francisco-based healthcare system.
CHW is faced with integrating three sets of information systems with the recent addition of Daughters of Charity National Health CHW extends throughout Northern California on roughly the same turf as Kaiser, and the DCNHS-West addition results in a total of 24 hospitals and 8,000 affiliated physicians in Arizona, California and Nevada.
The last two years have introduced organizational upheaval to Sutter Health, a hospital system that's been expanding outward from its Sacramento base and reorganizing into regions of vertically integrated care networks.
"Historically, Sutter had a lot of local autonomy," said Gary Loveridge, senior vice president for administrative services and general counsel for the system, which now includes 17 acute-care hospitals, five medical foundations and other ancillary facilities.
Data sharing wasn't necessary because hospitals worked alone and didn't share many patients, he said.
During an acquisition and affiliation push that began several years ago, Sutter inherited some well-developed information systems, such as the one used by Palo Alto (Calif.) Medical Clinic. But there was no need for the clinic to communicate with other facilities 100 miles away in Sacramento.
Pressure from employers and HMOs in California to take costs out of healthcare systems is making Sutter change its tune fast. The Northern California market is hammering reimbursement down to about $90 per insured member per month, about half what it was when capitation first took hold, said Loveridge.
The healthcare consulting practice of Ernst & Young came in a year ago to evaluate Sutter's information systems capabilities. It was hired to develop a strategic plan and provide an interim chief information officer to get the plan off the ground, Loveridge said.
Meanwhile an overall strategic plan for consolidation and reorganization began in January and is ready for implementation. The plan envisions reducing excess acute-care capacity, including a proposal to close 353-bed Sutter Memorial Hospital in Sacramento (July 17, p. 10).
Systems integration is one of the "vital few" areas isolated in the plan for intense treatment, said Loveridge, who is in charge of information systems and strategic planning.
Within three regions set up by Sutter during the past two years, logical "clusters" of facilities are being identified according to referral and inpatient flow.
The central region in Sacramento will have one such cluster, while the Bay Area region will have several, he said. Data repositories will be built for each one, and those databases will be tied to the overall network.
The infrastructure for the new imperative of data integration is still largely unbuilt. Except for some information linking within the service area of Sutter General Hospital in Sacramento, information systems stand alone at each facility, Loveridge said.
He characterized the expected investment as "well over $100 million," but if some existing systems can be preserved rather than replaced, Sutter may be able to get the final total under $150 million, he said.