The American Hospital Association's foray into e-commerce has been put on hold since its business partner in the venture filed for bankruptcy.
The AHA was left "holding a large empty bag," it said, when Darwin Networks of Louisville, Ky., restructured itself and could no longer meet terms of the partnership. Darwin signed on with the AHA last September to provide technology that sends electronic information over a secure pipeline rather than the vulnerable Internet.
The plan hatched by the AHA's for-profit Financial Solutions division was to help member hospitals worry less about the safety of electronic patient data and as a result exchange information with one another and business partners more routinely.
"We want to be in a position to offer healthcare organizations the resources that allow them to succeed in today's digital environment," AHA President Richard Davidson said when the two companies announced their venture. "The first step is to build the secure network that will allow that to happen."
That plan, while still alive, is now on hold. In January the AHA terminated its agreement with Darwin and is now seeking a new partner. The AHA made no public announcement that its e-commerce venture had hit a roadblock.
"We were taken by surprise," said Richard Wade, the AHA's senior vice president of communications. "We are now in the process of deciding among a bunch of candidates to find someone who will do what Darwin did."
The AHA had yet to officially sign any customers, Wade said, but did field interest from at least 60 hospitals. "We had members that said `Sign me up' but we weren't at the point of putting people on the dotted line yet."
Ironically, the financial failure comes at a time when hospitals may need the service most-with medical privacy regulations now officially moving forward, the task of safeguarding electronic information is not merely good practice but a matter of law (See story, p. 4).
Darwin filed for Chapter 11 bankruptcy protection on Jan. 11 in federal bankruptcy court in Delaware. A company spokesman declined to comment on Darwin's relationship with the AHA or divulge details about recent financial performance.
According to its bankruptcy filing, Darwin had $122.2 million in assets and $62.8 million in debts as of Nov. 11, 2000. The AHA is listed in the filing as one of Darwin's creditors but doesn't owe the association any money outside of the $850,000 AHA invested in the company last year, Wade said.
The AHA does not anticipate having to invest in the next company with which it partners, Wade said, because candidates on the list "are of a size that that won't be necessary." As for recovering its $850,000, Wade said the AHA is "optimistic."
In a statement Darwin issued last November, the company announced a corporate restructuring that involved narrowing its focus to provide high-speed Internet access to apartment complexes and small- and medium-sized businesses.
One group that may have expressed interest in Darwin's network service, sources said, was the Greater Dayton (Ohio) Hospital Association, but officials there could not be reached for comment before deadline.
The AHA has issued proposal requests and is waiting to hear back from a growing group of companies that focus on providing Internet and network technology to the healthcare industry. Wade declined to name any of the companies the AHA has contacted.
By summer the AHA hopes to have a partner chosen, but Wade was not ready to specify when members will be able to buy the secure network service.
Some were unsure that an association like the AHA is properly equipped to delve into technology services. "(The networking business) is not something AHA should be getting into," said Michael Davis, vice president and research director of the healthcare practice at Gartner, a Stamford, Conn.-based information technology research firm.