Healthcare alliance VHA has signed a deal with a San Diego-based company that specializes in linking provider organizations' information systems.
The marketing alliance with Daou Systems is the latest in the Irving, Texas-based alliance's push to identify information needs of its healthcare membership, investigate products on the market and promote its choices through special contract terms for VHA members.
During the past two years, the $22 million VHA initiative has concentrated on bird-dogging the best available information system components of an integrated delivery network, such as clinical databases, electronic linkages to physician offices, decision support software, and scheduling and resource management systems.
The deal with Daou turns attention to the separate matter of making all those components work together and deliver information on demand. Healthcare delivery networks are beginning to appreciate the importance of building an infrastructure to make their scattered sites function as a connected enterprise (June 30, p. 112).
James Burgess, vice president of information technology solutions, said VHA identified a need for networks that support advanced technology and are capable of sending large amounts of data at high speeds.
Network-building companies are hopping from industry to industry to put those pieces in place, but Burgess said Daou's healthcare-only expertise "clearly differentiates it from other networking companies."
Last week the company moved to broaden its presence on the East Coast and increase its breadth of healthcare expertise by merging with Integrex Systems Corp., an Alexandria, Va.-based healthcare network technology firm with an emphasis on voice and video networks. Daou issued 700,000 new shares of common stock in the deal, which was valued at about $11.4 million.
Healthcare information systems companies such as Shared Medical Systems and HBO & Co. also offer network services, but Daou offers independence from vendor software and hardware, according to a research report by Michael Samols of Robertson Stephens & Co., a San Francisco-based investment banking firm.
"More important, in our view, the company has developed superior skills at connecting competing software vendors' products," Samols said in the report. "This can be critical since not only does each hospital have a plethora of different software systems, but the merging of organizations exacerbates this complexity."
Daou provides a "modestly priced but sophisticated" design for healthcare computer networks, giving clients a tested blueprint and allowing them the option to purchase network implementation from Daou or choose an alternative route, Samols said.
About 80% of network-design clients go on to purchase the implementation through Daou, and "as many as half of all implementations lead to some other project such as ongoing network management or support," Samols said.
He said the typical design project takes three to five months at a cost of $30,000 to $50,000, while the implementation lasts three to six months and has a price range of $1 million to $3 million.
VHA did not disclose terms of the arrangement but said Daou would offer its core network design, implementation and support services at "highly competitive rates."
Daou also will pay VHA a "reasonable" percentage of the value of contracts signed with alliance members, said Neal Feldheim, VHA's solutions development director.
In addition, Daou will endorse and support a national Internet-style network VHA is launching through a partnership with IBM Global Services called VHAseCURE.net. Feldheim said Daou may assist in the implementation efforts as the initiative develops a backlog of provider organizations waiting to be connected.
About 60 VHA members have signed and 40 more have declared their intent to join VHAseCURE.net (July 7, p. 42). The alliance has about 1,400 member organizations.