First the dot-coms crashed. Then healthcare organizations learned they really would have to comply with sweeping new patient-privacy regulations. It wasn't too much longer before an Institute of Medicine report said the industry can and should use information technology to prevent patients from being harmed as a consequence of care.
The three events, all within the past year, may seem unrelated, but they're not: Each represents a challenge to employ information systems for more than registering patients and sending invoices. Often viewed as an industry that neglects or even abstains from such technology, healthcare finally may have little choice but to embrace computers and automation. And, for the first time, not doing so can mean running afoul of the law as well as putting patient safety and confidentiality at risk.
As some hospitals aggressively use information technology to prevent medical errors, enhance communication among caregivers and cut administrative costs, the ballyhooed bells and whistles have yet to extend across the industry. Strides in efficiency are beginning to surface, but they come in isolated bursts of innovation.
Vendors of advanced clinical and financial information systems, meanwhile, must sell to a hospital community still battered by the federal Balanced Budget Act of 1997 and hampered by board members who are tough to convince that IT initiatives will pay off.
Still, the message that IT can improve care and reduce costs is slowly but surely getting out. Two Institute of Medicine reports on the prevalence of medical errors and how to fix them, one in 1999 and the other earlier this year, highlighted the need for using automation to prevent mistakes. And some hospitals have acted by implementing technology such as bedside medication systems that double-check nurses, pharmacists and even doctors before drugs are administered.
Finding the time and funding for such bold steps is still a challenge for many healthcare delivery systems, however.
"Tell us where we're going to get the money," says Pamela McNutt, vice president and chief information officer at Methodist Hospitals of Dallas. "Do we not buy the latest CT (computed tomography) scanner?"
Compounding the shortage of capital dollars is the industry's struggle to effectively implement new systems. Many hospitals buy new technology only to stack it on top of the old-something that often must be done to preserve a familiar workflow. As a result of this particular problem, some executives say, healthcare organizations may be heading toward an information earthquake that will shake the industry so hard that routine functions such as sending claims and registering patients will become painstaking if not impossible tasks.
"The lack of flexibility for modifying (legacy systems) to address rapidly changing business needs can have serious repercussions on service, reimbursement and patient satisfaction scores for healthcare organizations in highly competitive environments," writes Michael Davis, vice president and research director for Gartner, a Stamford, Conn.-based IT research and advisory firm, in a company report.
The information imperatives
Whether hospitals successfully turn the corner or find themselves reduced to rubble by information management gone awry remains to be seen. Regardless of which scenario plays out, however, bringing computers into the care process and using automation to slice through the bureaucracy are increasingly viewed as strategic and clinical imperatives.
In its annual assessment of healthcare IT trends, the Healthcare Information and Management Systems Society found that 35% of hospitals surveyed expect their IT budgets to increase in 2001. Another 35% said their budgets probably will increase.
"The outlook is positive," says Steve Lieber, executive director of HIMSS. "It's not a free-wheeling spending environment, but there's cautious optimism."
Of the hospitals that expect their IT budgets to increase, about 41% say the reason for the increase is overall growth in the number of systems and technologies they manage. Twenty-two percent say their budgets will grow because of an increased emphasis on IT in the strategic plan.
Although Lieber is cautiously optimistic, not everyone is. The difficulty now of securing funds to spearhead IT projects compared with the difficulty two years ago is "night and day," says Methodist Hospitals' McNutt. In the near term, she says, healthcare organizations "are going to hunker down and try to optimize what they have."
Patient-privacy regulations completed in April could be one reason for such frugal plans. Mandated by the Health Insurance Portability and Accountability Act of 1996, those regulations impose tough data protection standards on healthcare organizations. Nearly two-thirds of HIMSS survey respondents-57%-say upgrading their systems to comply with HIPAA is their No. 1 IT priority.
Complying with HIPAA may be an expensive proposition. Estimates of how much it will cost the industry to bring systems and procedures up to par range from $4 billion to $22.5 billion.
"People are coming to grips with the requirements of HIPAA," Lieber says. "At the same time they're looking at other issues in terms of innovations related to patient care."
The new and the old
Before hospital executives embark on new clinical system purchases, however, they need to end the practice of "spending too much time in the board room and too little time in their delivery system," says Sheldon Dorenfest, president of a Chicago-based information systems consulting firm that bears his name.
In a study Dorenfest released last month, the firm predicts that annual healthcare IT expenditures will gain momentum in 2002 and 2003, reaching $23 billion by the end of 2003. That compares with spending of $7.5 billion in 1993, $13 billion in 1997 and $20 billion last year.
Having seen many of their previous IT investments fail to generate expected returns, according to the Dorenfest study, buyers will be much more cautious in upcoming years.
As they consider new technologies, hospitals should perform a "thorough examination of their work processes and systems to clarify how much redundancy and duplication is really there and to (place a value on it) and start digging it out like decay in a tooth," Dorenfest says.
One of the industry's chronic problems, according to Dorenfest, is its tendency to install new systems on top of existing ones. We can just phase out the old system once we're accustomed to the new one, the thinking usually goes. But when they do that, hospitals often find they have to run both systems simultaneously, which can actually decrease rather than increase efficiency.
"When hospitals put in the next layer of cool stuff, if they don't take out the manual system in the process they're just going to confuse their organization," Dorenfest says.
Dallas' Methodist, which has a 2001 IT operating budget of $7.4 million, knows that story. The two-hospital system early this year completed a multimillion-dollar installation of new financial and payroll software. When Methodist realized the new system didn't have some features the old one did, it had to "paper-clip together" the two systems.
"We are living in two worlds," McNutt says.
If this trend of duplicating systems in the name of technological progress continues, "the healthcare system is in jeopardy of having its work processes and support systems fall apart," Dorenfest contends. "With a triggered IT investment to reduce that redundancy, hospitals would save money and improve quality."
Hope amid the dot-com debacle
As in other industries, the Internet has been viewed as one way hospitals and physicians could improve quality. Wall Street invested billions in new dot-com companies-many of which later went under-as a result of the supposed opportunity to reduce administrative overhead and improve clinical communication.
But also as it happened in other industries, there was a highly publicized dot-com crash. WebMD-the company that promised to streamline the healthcare industry's massive bureaucracy by moving it to the Web-lost more than one billion dollars in both of its most recent two quarters (May 28, p. 22).
Despite moving into the doghouse on Wall Street and Main Street alike, dot-coms represent a trend that has not died. In the HIMSS survey, respondents named Internet technology as their second most important IT priority in the coming year. Specifically, they said they plan to use the Web to schedule patient visits, provide communication with physicians, offer health assessment tools and purchase supplies.
Although 45% said the Web was a top priority, that's down from 63% in the 2000 survey. Some of that reduction could come from the more pressing priority of HIPAA, but vendors are optimistic that the dot-com crash didn't leave a sour taste in the mouths of healthcare executives.
"Providers get a bad rap for being technology-averse. But they understand the Web," says Robert Zollars, chairman and chief executive officer of Neoforma.com, the San Jose, Calif.-based online supply marketplace affiliated with giant group purchaser Novation, based in Irving, Texas.
As of early July, Neoforma.com had signed up 441 hospitals to buy supplies through its online marketplace. Despite Neoforma.com's substantial cash losses and slumbering stock price, Zollars is confident hospitals are beginning to realize the cost savings they can achieve by centralizing and more diligently tracking their purchasing activities.
Medscape, a provider of electronic medical records and Web-based clinical data to physicians, also believes interest in its products is increasing as providers become more familiar with the Web.
"Ten years ago (hospitals and doctors) said, `Maybe sometime we'll have an electronic medical record.' Now they say, `We need it,' " says Mark Leavitt, M.D., chairman of Hillsboro, Ore.-based Medscape. Some 12,000 clinicians use Medscape's electronic medical record, and the company holds more than 19 million patient records in digital form, Leavitt says.
Healthcare providers will more rapidly adopt these solutions, Leavitt says, when reimbursement mechanisms catch up to the technology.
"Until we get a reimbursement system that pays for quality, the return on investment for electronic medical records is going to be a problem for doctors," Leavitt says. But as patients become increasingly aware of medical errors, he argues, it's important that physicians demonstrate they're doing something to prevent them.
"Most medical errors are information errors, not a slip of the scalpel," Leavitt says.
As hospitals work to replace old systems with new technologies, the universe of healthcare IT vendors could change over the coming years. Industry analysts say some of today's biggest players in the market-such as McKesson HBOC and Siemens Medical-may eventually lose market share to nonhealthcare companies that can provide more flexible products and services.
"After 2010, the top five healthcare provider IT application vendors, as measured by annual revenue, will be multinational, multibillion-dollar corporations," says Gartner's Davis. Those companies, he adds, "will be capable of reacting quickly to market changes (pricing models and application requirements) and will execute at superior customer service levels."