It's been praised as the technology model of the future for healthcare information services.
It's been defined, redefined and assigned amazing powers to revolutionize how software is brought to the provider masses.
The phenomenon is remote delivery of information systems -- applications running at provider sites but operated from a megacomputer off-site and piped in through Internet technology.
Everywhere you look, healthcare software vendors old and new are lining up with laptop demos in hand, ready to explain the details of how they can be your application service provider, or ASP.
What's often overlooked in the techno-discussion is the business case for this new wrinkle in information technology, says Alan Portela, vice president of sales and marketing at Clinteligent Virtual Clinical Applications, San Diego, an aspiring ASP.
Healthcare likely will require powerful injections of clinical software to get a bad case of cost fever under control. But the industry may have a hard time affording the therapy, Portela says.
Information systems vendors had better start heeding the stark reality facing provider decisionmakers, says Michael McCoy, M.D., chief information officer of 650-bed University of California Los Angeles Medical Center. "Doing it with no money -- that's the future," he says.
That's quite the opposite of the past decade, when healthcare organizations sank millions upon millions into a basic foundation of information technology to support their administrative and financial operations. During the past few years, information technology spending on these "core systems" had to be stepped up again because of Y2K problems.
The revamped systems or their replacements are better able to deliver the right information in technically superior ways, Portela says. The next level of information technology opportunity involves employing IT in clinical and executive decisionmaking. But unlike previous years, he says, providers are no longer able to bankroll costly projects.
First the Y2K-related spending spree emptied the capital account, then federal budget cuts in Medicare spending teamed up with commercial managed-care constraints to cut off sources of resupply (Modern Healthcare, April 10, p. 72).
Unfortunately for healthcare organizations, opportunities to streamline operations using software advances "require a significant capital investment at the same time they're caught in a downward spiral that limits the capital available," says David Pryor, M.D., CIO of Allina Health System, an 18-hospital healthcare system based in Minneapolis.
Software vendors accustomed to asking for millions of dollars up front for licenses and installation costs find themselves in a different world, Pryor says. "For the first time, you get the question, `Is this worth betting the farm?' And that's a question vendors have not had to answer."
Answering it is only half the battle. Return on investment is paramount, but proof of it may not be enough.
No matter how much return a vendor can promise once an application is purchased and delivered to the places it can do good, many customers can only dream about payback if they have to spend a lot of money to get to that point.
"The real news in healthcare is: There ain't no money anymore," McCoy emphasizes. "Get used to it. And you know what? There never will be anymore."
A business model emerges. With ASP-style information technology, vendors no longer can score a big chunk of money just by making a sale. With the way their customers are changing in response to financial pressures, that model of paying a chunk upfront may be losing its support.
The business model for ASPs, on the other hand, can be appealing to those same cash-strapped customers. It allows them to negotiate the payment-for-value terms that make sense for their business, McCoy says. "This much per month per bed -- I would like to buy software that way."
He sees that as one of the attractions of contracting with Clinteligent to add clinical capability to UCLA Medical Center's existing array of healthcare information systems. "You don't pay for your phone line before you get a dial tone," McCoy says. "I'm not paying for the service until I start getting it."
UCLA last fall decided to add a clinical data repository to its medical intensive-care unit on a subscription basis through Clinteligent. The San Diego-based ASP is a subsidiary of the company that developed the repository, CliniComp International.
It's a new twist on an established relationship. CliniComp has supplied a point-of-care data collection system for the ICU for the past six years, McCoy says. But the medical center hadn't taken the next step up to a data repository because of the big investment involved in purchasing powerful computers, constructing the database on-site, hiring people with specialized knowledge and building redundant features to ensure that access would be preserved in the event of a computer foul-up.
"We frankly were skeptical of the value," he says. "You have to buy it, install it, pay for it all up front -- and maybe you'll get value out of it and maybe not."
For a fraction of that cost, "I can just use the (ASP) service for a year and see if I like it," McCoy says. "It lowers the threshold to try things."
The ASP contract also requires vendors to have what they say they have, Portela says. "You have to offer what people want on the first day. You don't have three years to figure it out." In addition, the ASP has to contend with the risk that it won't recover all its upfront costs if a customer decides for some reason to break off the subscription before the break-even point, he says.
Clinteligent hopes to counter that risk through volume and speed of implementation, working with many customers to get systems running within weeks instead of the two to three years typical of on-site installations.
But the risky business model is still a shock to the system for CliniComp and Clinteligent, albeit a necessary one, Portela says. "We're not going this way because we want to. This is what we have to do."
They have a lot of company in the ASP category, which has become the acronym on everyone's lips after being virtually unknown a year ago.
The concept first came to light in healthcare as a way to harness the World Wide Web for productive business purposes (Modern Healthcare, June 21, 1999, p. 36). Since then, scores of healthcare technology companies have sprung up to market software applications as an ASP, while scores of established vendors have adapted systems and services to the ASP model.
Though the model started out Web-based, marketers have stretched and expanded the definition until it covers any framework for delivering software applications remotely -- even methods that date back 20 to 30 years using telecommunications to deliver venerable financial applications.
By harking back to technology several generations old, that leap allows those vendors to claim decades of ASP experience in its broadest sense.
At the opposite extreme are start-ups with a purely Web-based product, built from the beginning on a foundation of Internet technology and delivered either through the Web itself or through private networks using Internet protocols and programming techniques.
Delivering the opportunity. But the discussion of what is or isn't an ASP misses the point, says Thomas Zajac, a top executive with Philadelphia-based CareScience, which has developed clinical decision-support databases accessible through the Internet.
It's not what an ASP is but what it can do, says Zajac, chief operating officer of CaduCIS.com, a decision-support subsidiary of CareScience.
The attributes of ASPs that make a difference, Zajac says, are the pliable technology features of Web-based applications and the accompanying ASP business model:
* The technology enables quick setup, rapid revision and flexibility to match information systems' enhancements with corresponding provider needs.
* The business model opens up myriad avenues for gaining those enhancements in small bursts or steady streams. Organizations get results almost immediately from applications or data treasuries in return for fees that are within their budgets, Zajac says.
Purchase-of-service arrangements can include not only subscription-based contracts but also pay-as-you-go approaches -- per report, for instance, or per transaction. That allows providers to start addressing costly operational problems or yawning gaps in their information capabilities right away, he says.
In some cases, the ability to access information from a data-processing center on the Web makes a healthcare service not only affordable but viable.
For example, CareScience spent about $50 million on analytical software and related database elements that would have been impractical to duplicate for individual customers, says David Brailer, M.D., chief executive officer of CareScience.
The Web was critical to the project, he says. Given all that went into the product, the company could not have distributed it any other way. Customers would have to accept a lower standard of capacity and service to make the clinical database replicable, which would have made it less valuable and less marketable, Brailer says.
Wedded to the Web, the CaduCIS decision-support offering can be maintained centrally for all customers and economically improved and upgraded in a single development effort with universal benefit.
ASPs such as CaduCIS.com also can provide clinical analysis and other interpretation of a healthcare customer's captured data as part of the subscription fee. For example, medical-record chart reviews can be conducted by specialists employed by CareScience whom providers couldn't afford as full-time employees, Zajac adds.
That's just one of a thousand ways ASPs can put clinical decisionmaking or diagnostic ability in the hands of the right people. The ASP model can help execute a clinical strategy and blunt the longstanding preoccupation with administrative and financial information systems improvements, says Larry Blevins, president and CIO of Mercy Information Services, which manages information for nine hospitals in Arkansas.
"We have optimized them, tuned them, revisited them and put decisionmaking in them," Blevins says of financial systems. "But we have ignored the clinical, which is our core business."
A handful of adventurous organizations are trying to change that. Allina Health System, for one, became a testing ground for an Internet-oriented distribution channel for clinical results developed by a start-up company called Abaton.com. The Bloomington, Minn.-based vendor was sold last November to McKesson HBOC for $95 million in cash.
At Allina, Abaton.com's Web-based application for ordering lab tests and reporting the results was installed in 15 clinics within three months and quickly reached an average daily volume of 48,000 lab results.
Allina CIO Pryor says the project has brought "a phenomenal return" to clinical operations, estimating the return-on-investment at 35% to 40% so far.
In keeping with Allina's approach to information technology (See related article, p. 22), "The group accountable for the installation is in the laboratory group itself," Pryor says. Leadership from the clinical staff helped make the initiative succeed, with support from information professionals, he says.
By compressing the time and complexity of installations and generating excitement about the prospect of quick benefits, healthcare organizations can gain support for ASP services at the outset from the employees who will use the applications, says Mark Anderson, CEO of Seattle-based ARC Consulting Group.
In theory, the remotely delivered services can target current weaknesses and supplement existing information systems with the types of clinical applications that increase accuracy, broaden access, improve timeliness and reduce clinical risks such as medication errors, Anderson says.
And the piped-in programs can be proven good or bad in less time than it used to take just to get applications up and running, he adds.
Partners with the right idea. The potential appears to be considerable, especially as provider organizations warm to the idea of using emerging technology such as the Internet to advance their information strategies.
In Modern Healthcare's 10th annual executive survey of information systems trends, use of emerging technology was the top information systems priority for the next 24 months (Modern Healthcare, April 10, p. 76).
And although the ASP option had barely surfaced when the survey was conducted in early 2000, 14% of respondent organizations said they had signed or intended to sign a contract with an ASP for clinical-data capturing and reporting. Another 22% had not made a decision but were considering the option.
That doesn't mean, however, that providers are ready to rush into the market. For one thing, they're wary of volatility in an information technology industry upon which much of their cost-control and quality improvement activity depends. "I don't like it when companies are constantly being bought and sold and changing their business plans constantly," says McCoy of UCLA.
With so much at stake in clinical-care delivery, hospitals have to consider the consequence of becoming dependent on an ASP, he says, adding that start-up firms will have to prove they're something more than "a couple of kids in the back room with a (computer) server."
By comparison, Clinteligent has an "extraordinarily good service record at UCLA" and it's "conservative in the right way, with reliability the No. 1 issue, not moving to whatever is fashionable," McCoy says.
Zajac of CareScience says the complex healthcare industry is looking for solutions to information deficits, not a particular method of delivering that information. ASPs "have to make sure that the process of care is what they're concerned with, not the physical delivery of technology," he says.
That may call for mixing elements of ASP-style off-site operations with more traditional on-site computer capacity in some situations, says Portela of Clinteligent. For example, the critical-care data repository at UCLA includes database servers onsite.
The servers duplicate computer capacity, which adds to the overhead and precludes the ASP from maintaining and upgrading the entire application service from a central location. But it also safeguards the clinical priorities of reliability and quick response time in high-intensity clinical situations, Portela says.
Those priorities could be compromised by a slowdown or failed connection at the wrong time, he says.
In this case, the ASP approach is more important for its business model than its technology.
UCLA pays no money up front, clearing away the obstacle that prevented the medical center from signing up. But as part of the subscription agreement, it has to be willing to pay higher fees for departing from the purely remote technology model and its built-in economies, Portela says.
In return, the ASP delivers a higher level of performance through the addition of small servers and high-capacity network connections within the medical center.
Creative new arrangements. The marketplace is casting a spotlight on ASPs as a service hawked by vendors, but some provider organizations are finding they can stage-manage their own ASP operation to meet challenges caused by internal growth.
In one case, a physician specialty network in Florida called Borland-Groover Clinic developed a central information systems network as the only constant in an organization expanding rapidly through acquisition.
In another, Allina installed new systems for hospital transactions and for financial and materials management at a data center the traditional way but expanded them throughout the network by establishing Internet-style connections with other hospitals -- in effect becoming their ASP.
The Florida network of gastroenterologists, headquartered in Jacksonville, grew to nine offices, 20 physicians and 70 practice employees through three mergers since 1993. Struggling to keep up with demand for medical-record and billing information, the practice maintained 32 modem connections to its computer server, says Christy Hill, manager of information systems.
The dial-up method of communicating practice information was costing $1,600 a month, plus the lost productivity that comes with waiting for modems to connect throughout the day instead of having continual online access, Hill says.
In addition, she says, the modem links were not reliable: Frequent problems getting the connections established with outlying locations were "making me go absolutely bananas."
At a loss for even a scenario to replace the unworkable situation, Hill leafed through the local Yellow Pages more than two years ago to fix the most obvious deficiency. "We wanted to have connections at all times without having to dial up," she says.
That eventually led to an upgrade of computer capacity and the hiring of an outside contractor, Jacksonville-based SOMA Systems, with the expertise to run the IT operation.
Ultimately Borland-Groover decided to house the computer operation with the contractor so its computer professionals could handle problems quicker -- they didn't have to report to the clinic site whenever problems occurred, Hill says.
The clinic and its IT partners had no term for it at the time, she says, but their partnership had evolved into an ASP.
For a monthly fee of $5,000, the clinic gets e-mail service, Internet access and troubleshooting, as well as the basic operation of its computer network on five servers.
The off-site operation can be expanded to handle additional sites, so new acquisitions can be absorbed into the Borland IT network by adding connections to the network and extra processing capacity, Hill says.
The clinic locations are connected through T-1 lines to a wide-area communications network. SOMA Systems works with i-NOC.com, a Web-based network operation center, using server-based applications from Citrix iBusiness of Fort Lauderdale.
With annual revenues of $12 million, Borland did not have personnel trained for the type of operation it now has, nor the money for an internal IT department. "We could not have done it if we had to hire people to do it. Period," Hill says.
Central data centers are becoming common at large healthcare systems such as Allina, and Internet technology is helping to bring standardization to core information systems, Pryor says.
In one instance, the information department centralized the operation of an admission/discharge/transfer system on computer servers in its data center for 13 hospitals by using Internet technology, he says.
In another example, Allina installed a materials management and general ledger system at the data center and used Web techniques to provide the application to nearly 100 locations. "We went soup to nuts, did a whole general-ledger installation throughout the organization in a year," Pryor says.
The arrangements create fundamental economies of scale -- the systems are managed centrally instead of at each location -- and increase reliability. Instead of dealing with a failure rate for each system multiplied by 13 hospitals, Allina focuses on performance of a single application plus a backup in case of problems, he says.