Behind the high-profile, Wall Street-powered march on healthcare by Internet information companies, a quieter development is poised on the industry's horizon, ready to revolutionize the way providers are computerized via the World Wide Web.
It tackles a problem more fundamental than providers' lack of access to medical information and clinical results, which a number of start-up Web "portal" companies have announced in the past month that they are ready to solve.
Those solutions inject information into healthcare delivery but don't do much to overcome an underlying lack of cutting-edge computerization in physician offices and other nonhospital sites, a deficiency that affects the overall efficiency of a health system.
But a new breed of Internet service proposes to deliver that fundamental computerization-healthcare software applications-directly to provider sites through an Internet feed.
In exchange for a monthly subscription or transaction-based fees, the Web-based delivery route can get a practice management information system or clinical application operational in a fraction of the time it normally takes to implement it at a site the conventional way, industry experts say.
Providers also don't have to deal with two major obstacles to assuming ownership: the upfront capital investment and the ongoing operational challenge of building and maintaining their own computer networks.
The prospect of gaining the latest information technology without having to own or ante up for a big system is especially valuable for physicians in small practices, said David Pedersen, a Chicago-based consultant with First Consulting Group of Long Beach, Calif.
After struggling for years with paper charts or an old DOS-based computer billing program because high-end software was out of reach, physicians can now tap an Internet-based application for a large percentage of transactions. That is "a huge change in the dynamic of processing support in the industry," Pedersen said.
Over the long term, it's unclear whether so-called application service providers will provide information systems at a lower cost, observers say. Under the model, a vendor aims to recoup over the life of provider contracts the development and operational costs of running applications on computer servers for many customers from a central geographic location.
But the point is not necessarily to save money but to keep providers competitive in the face of pressures to operate more efficiently, said Jean Caulfield, vice president and executive director of Provider Network Solutions, a West Chester, Pa.-based management services organization. Besides controlling costs, physician offices in particular need to capture as much reimbursement as possible by, for instance, managing accounts receivable better, she said.
The MSO, a subsidiary of the Health Network of Chester County Hospital in West Chester, was formed to preserve the independence of about 350 physicians in local practice by providing access to sophisticated services-such as information technology-that doctors might otherwise be able to obtain only by selling their practices to a larger organization with deep pockets, Caulfield said.
Under an agreement with VHA, an Irving, Texas-based healthcare alliance, the MSO has contracted to receive a high-end physician practice management application developed by Medic Computer Systems through a secure Internet connection called PhysicianLink Online.
It's the first use of an Internet data center established by VHA and Dallas-based Perot Systems Healthcare Group to deliver healthcare applications over the Web. Caulfield said the first group to use the Medic application will be a high-volume specialty practice of six physicians, and the "go-live" date is Oct. 1.
Beating business problems. In Chester County, a terrain of horse farms and stately residences on large acreages, physicians who practice at not-for-profit Chester County Hospital need ways to aggregate their data and computer power while maintaining their prized autonomy, said Caulfield.
Physician staffs now have a rudimentary billing program, but it's oriented toward a disappearing fee-for-service approach to business. Referral requests and authorizations are done mainly by phone.
Provider Network Solutions initially investigated purchasing a physician practice management information system, which would operate on workstations in physician offices over a wide-area telecommunications network. But the projected expense was $800,000 to $1 million upfront, including implementation and training costs. The MSO was concerned that physicians didn't have the volume of business spread over the small network to afford the initial investment.
That expense didn't include the vendor's $50,000 annual charge for software maintenance or the increase in information technology staff required to operate the network, Caulfield said. "Today IT resources are, A, scarce, and B, expensive," she said. The contract with VHA and Perot resulted in a monthly charge per physician that's "not cheap but manageable," she said.
Information technology becomes a predictable operational expense, enhanced by the MSO's billing and practice management expertise but without the day-to-day network headaches. "Each office doesn't have to pay for a database manager," Caulfield said, because financial and management reports will be run from a central office.
Software upgrades also will be made and tested at the central location, eliminating the usual tour of individual computer workstations involved in installing a newer version and making sure it works correctly.
The approach, in summary, is a workable financial model that "provides the very best we can for our physicians for the price they can afford to pay," she said.
The same approach can make parts of a complex and expensive information system available to physician practices that otherwise couldn't dream of affording the entire system, said David Ray, marketing communications manager of MedicaLogic, a Hillsboro, Ore.-based clinical information systems company.
The company's principal product, an electronic medical record for physician practices, called Logician, is operational in 40 integrated delivery systems and isn't feasible for small medical groups, Ray said.
The upfront costs of hardware, interfaces to other information systems, implementation and software licenses equate to a minimum of $10,000 to $15,000 per physician, he said. In addition, use of the system calls for a change in the traditional work flow of a physician practice as paper-based patient charts are eliminated.
But a key component of the system helps physicians document their encounters with patients electronically and then use a battery of rules based on HCFA advice to determine the allowable level of intensity for which a visit can be billed.
That's something all physicians can use regardless of whether their practices pop for the full-blown clinical information system, Ray said. MedicaLogic plans to deliver an Internet-based version of that computer function this fall after the completion of a pilot project that starts at the end of July with 500 to 1,000 doctors across the country.
The documentation system can substitute for medical record transcription by weaving identified observations and data into a narrative similar to what a doctor would dictate into a recorder. The result: a completed encounter summary by the end of a visit, without the delay and expense inherent in sending tapes to a transcription service, Ray said.
The computer program also recommends the billing level of a visit after weighing all that was done. If a doctor wants to know why a higher level wasn't appropriate, the program lists which tests or services are missing.
The decision to provide those extra measures for the higher fee is up to the physician, said Ray, emphasizing that "we're not assisting them to upcode in any way." But he said the opposite has been happening in physician practices as fears about federal billing crackdowns lead to over-conservative interpretations.
"Our goal is just to make sure they don't downcode just to be safe," Ray said.
Delivered on the Web, the documentation and compliance application can be made available to small medical groups or even a single physician, Ray said. All they need is a Web browser, a phone line and a computer with access to the Internet, he said.
The monthly subscription price hasn't been set, but it will be "much less" than the average monthly cost of transcription, which can run $1,500 to $2,000, he said.
Market mobilization. During the past few months, a spate of deals between healthcare software vendors and Web technology companies has signaled the growing momentum toward delivering applications over the Internet (See chart).
In some ways, the healthcare software industry is going full-circle. Hulking computer systems may be commonplace at healthcare organizations today, but the systems originally developed for hospitals were operated remotely on huge mainframe computers shared by many customers. That's the name history behind Shared Medical Systems, a Malvern, Pa.-based software company that still has some customers using those remotely run applications.
But aside from the remote processing, there's little similarity to today's emerging technological approach, experts say. "The Web is the big difference. It permits access without networks," said Stephanie Massengill, spokeswoman for Eclipsys Corp., a Delray Beach, Fla.-based information systems company that's developing a plan to become an application services provider.
The switch may be jarring to established companies with a big base of provider customers requiring a lot of support for their individual computer networks, said First Consulting's Pedersen. For example, upgrading versions of software is a big job in itself that takes away from new initiatives such as retooling for Internet-delivered applications, he said.
By contrast, new companies such as iTrust in San Francisco are forming purely as providers of applications developed for Internet delivery. Two-year-old iTrust has shunned publicity while it pilots and perfects software for a target market of independent practices with 35 or fewer physicians, said Chief Executive Officer Rick Peters, M.D.
"The real obstacle in the industry is the infrastructure itself," said Peters, referring to the complex networks that have to be built to deliver complex programming throughout provider organizations.
The vendors dependent on that approach have to be careful about how they maneuver into the Internet-delivery market, because it means tossing out a financial model based on getting most of their money upfront instead of over time, Peters said.
But they also have to respond quickly to a cheaper, easier way of bringing products to healthcare organizations. "Unless they react quickly, they'll be pre-empted," he said.