The clinical information management applications sold by Per-Se Technologies were designed and created more than 16 years ago around a novel idea: Data should be organized around an episode of patient care, not stored separately and restrictively in a scattered set of departmental computers.
It stayed a novel idea for about a decade. "I don't think our customers yet were ready for this kind of solution," says Karen Andrews, president of Per-Se's application solutions division. "It was a solution before its time."
Not anymore. Requests for proposals from prospective customers, which had averaged 10 to 12 a year, increased to eight to 10 a month in the past year, Andrews says. And the Atlanta-based company's 40 existing provider customers are looking to get more out of what they bought, now that emerging priorities of clinical cost control are highlighting features of the complex system that haven't been exploited, she says.
"We're going to be challenged," Andrews acknowledges. "We're going to have to deliver and execute. But that's a problem I'd like to have."
Other healthcare information technology companies large and small are either poised for the same "problem" or eager to position themselves for it. Led by interest in physician-based order entry systems, providers have shown increasing interest in clinical-care management technology and have revised their budgets accordingly, says Shane O'Kelly, an Atlanta-based associate with McKinsey & Co.
In extensive interviews with 30 top information officers at provider organizations, McKinsey found budgets increasing for information technology in general and for clinical projects in particular. Asked where they plan to spend IT allocations, "resoundingly it was to put it into these order-entry systems," O'Kelly says.
A McKinsey scan of vendor sales activity confirms that clinical computerization is in demand. "Companies that have it are doing well, and companies that don't (have a clinical line) are going out and trying to expedite it," he says.
The market shift has been a boon to Cerner Corp., a clinical information systems and services company that's had its ups and downs during the past six years but is now raking in revenue and racking up installations at provider sites.
Once mainly a vendor of laboratory information systems, the Kansas City, Mo.-based company launched a $350 million investment in a comprehensive clinical strategy in 1995. "We made a bet-your-company decision" to rewrite the entire product line, says President Trace Devanny.
The effort employed more than 1,000 software developers and 700 clinically trained people to come up with an interlocking array of applications for physicians, nurses and other healthcare professionals to use in their work and share data produced by all users. Customers implement a foundation of database and data-entry capability according to their business needs and add components over time.
Clinical elements of the Cerner product line have been fully implemented by 148 provider organizations representing 280 hospitals or other clinical sites, says spokeswoman Ashley Crosby-Davidson, and another 30 clients have implementations in progress with a clear completion date. Hundreds of other clinical applications have been ordered by customers but do not have an estimated completion date for implementation, Davidson says.
The rise in business has tested Cerner's capacity to handle the load of implementing a complicated set of systems that can significantly change the work process for clinicians. "We appreciate a chance to have that problem," Devanny says.
Cerner has 1,000 implementation-focused specialists on the payroll, but the company also has contracted with four consulting firms and with IBM Global Healthcare to handle the overflow. "Our momentum has probably not been greater," he says. "We don't want to have our momentum derailed by implementation (problems)."
The company, which has budgeted 23% of after-tax revenue on research and development, will spend $100 million on product development this year and $125 million next year, Devanny says.
For the first nine months of 2001, Cerner earned revenue of $391 million, a 37% increase compared with 2000. That puts the company on target to post annual revenue of more than $500 million for the first time.
Competitor Eclipsys Corp. came together five years ago with a stable of separately acquired clinical and financial applications and a parallel development of integrated clinical management applications. The new line, called Sunrise Clinical Manager, is operating at 60 organizations representing about 100 facilities, says spokesman M.F. MacKinsey.
Meanwhile, an older-model clinical information system running in about 100 organizations and an acquired decision-support system used in 400 organizations are being enhanced gradually in a phased effort to become part of the Sunrise foundation over time, he says.
At the other end of the spectrum, privately owned Epic Systems Corp. expects revenue of $75 million to $80 million in 2001 from its integrated range of information systems for clinical, revenue cycle and health plan management, says Judith Faulkner, president and chief executive officer. The Madison, Wis.-based company, which pursued an integrative approach to inpatient and outpatient clinical systems more than 10 years ago, now has 30 provider organizations using Epic applications at a total of 45 hospitals.
Up to now, "healthcare organizations regarded clinical information systems as something new and promising," Faulkner says. Purchasing them meant getting ahead in areas of quality, cost control and regulatory compliance.
"Now they're seeing clinical information technology not as a luxury anymore, not to get ahead, but as a basic need," she says.
"The last four or five years have been excellent for us-except for the Y2K year, which was a flat year," Faulkner says.
Y2K: a hit, then a run
The race to correct computer problems associated with the rollover to 2000 hit the healthcare industry hard, but it may have been a blessing in disguise for proponents of clinical management.
Led by Medicare reimbursement constraints from the Balanced Budget Act of 1997, "money came out of the system between '97 and 2001, and during that time what money they had was spent on Y2K remediation," says Harvey Wilson, chairman and CEO of Eclipsys Corp., Delray Beach, Fla.
"Y2K was a huge distraction," Devanny says. But it created pent-up demand for solutions to operational inefficiency after "a catch-your-breath period of about six months," he says.
In the interim, medical-quality issues raised by two Institute of Medicine reports, one on medical errors and another on fundamental problems with the state of healthcare delivery, combined with payer clout from the Leapfrog Group to alter executives' priorities for information technology, Wilson says.
"I think it gave them focus," he says. "Why are you in business? It's to provide patient care." But hospitals, he notes, had been automating everything else but patient care.
Some provider organizations have begun to re-evaluate how much they can afford to do well, giving serious thought to attaining a reputation for a targeted set of services and building an information technology initiative around it, says Mikael Ohman, an associate principal with McKinsey.
"We're starting to see some pretty forward-thinking institutions saying, 'What is my market strategy? What are my product lines?'|" says Ohman. "They need to become excellent in a few product lines, and the quality is important to it."
Financially the healthcare industry's operating profit margins are still stuck at around 2%, but executives McKinsey interviewed seem to think the worst threats to their profitability have come and gone. "Providers are feeling that, 'you know, we've probably reached the bottom here,' " he says.
Volatility is often a stronger influence on capital decisionmaking than the size of the margin predicted in a budget, he says. If the industry is on a downward slide, a 3% margin could become zero easily. The climate for new investment activity is better if a fiscal officer feels confident about a lower margin of 2% and considers 3% at least an outside possibility, Ohman says.
In addition, healthcare is experiencing an "overhang effect" from not spending in the months after the Y2K crisis passed. "That can serve to kick-start the market," he says.
Some restrained enthusiasm
For all the optimism now seeping into the marketplace, some of the more notable restraint is coming from vendors with clinical information systems to sell.
3M Health Information Systems, Salt Lake City, has experienced "a little bit of increased tempo" in the pipeline of sales leads for its Care Innovation line of clinical systems, says Vice President James Burgess. But as he charts sources of momentum in the healthcare industry, "a lot of energy is still being spent in the area of cost."
That's one of four drivers of IT sales activity, along with quality, revenue and risk, he says, and "the pendulum can swing from one of these to another." There has been a lot of talk about quality, but Burgess judges the intentions of providers "by their actions, not their words."
3M was an early entrant in the clinical information systems sector, commercializing a set of applications dubbed the HELP System developed in the 1980s by Salt Lake City-based Intermountain Health Care, a clinical-care management pioneer (See Eye on Info, May 28, p. 18). That product line was scrapped in favor of the Care Innovation products, developed during the past five years.
Elements of that product suite are operational in 19 healthcare organizations encompassing 150 locations of care, says spokeswoman Mollie Houns. 3M also has a contract with the U.S. Defense Department to implement the applications at 104 hospitals and about 300 medical clinics worldwide.
The roster of 3M's applications does not include pharmacy, laboratory or radiology systems. Instead, the approach centers on integration of departmental systems into a cohesive clinical information scheme throughout a provider organization, Burgess says.
The Y2K crisis forced healthcare organizations into upgrading or replacing vintage financial and patient-accounting information systems that literally would not be able to stand the test of time. Despite that flurry, Burgess says many customers remain very busy replacing older business applications, which are "at a breaking point."
Other core healthcare IT replacement activity, he says, might be triggered by provisions of the Health Insurance Portability and Accountability Act of 1996.
"We do foresee a significant shift over time," Burgess says, but adds, "I don't see a huge shift occurring from our perspective in the near term."
That puts him in agreement with Richard Tarrant, CEO of IDX Systems Corp., Burlington, Vt. "The real surge I think is still two or three years away."
The company has an integrated clinical and financial approach to hospital-based applications called LastWord. The clinical component, which includes physician order entry, clinical documentation and decision support, is operating in 56 provider organizations representing 177 hospitals and 745 clinic sites, says spokeswoman Catherine Sweeney.
Clinical information technology will "gradually inch ahead" and provide a new base of medical intelligence within healthcare, Tarrant says. "There's a lot of new technology being sold and there will be some false starts," he says of the clinical offerings in the industry.
That's the wild card in the play for clinical-care business, Ohman says. Because the technology is "still in infancy," a lot depends on whether it provides a noticeable difference after providers take vendors up on their assumptions of significant impact on the care process, he says.
Success determined by clinicians
The prospect for a significant impact hinges on how physicians are prepared for the introduction of computers to their work routine and how they take to it, says Paul Taheri, M.D., who's involved in bringing doctors into the computer era at University of Michigan Hospitals and Health Centers.
"In the field, at the point of line management, they'll kill it-they'll kill anything that doesn't work the way they need it to," he says.
Focusing on clinical performance improvement as the message to clinicians is critical to reaping benefits, says Stephen Furry, managing partner of V4 Consulting, Indianapolis.
"You will never get clinicians to change behavior for the sake of cost reduction or profit enhancement," Furry says. "They will change if you are able to provide them with better information to enable their clinical decisionmaking and quantitatively improve patient care."
An advanced clinical information system by itself "will not accomplish anything except for failure," he says. "The focus of the initiative needs to be clinical performance improvement with technology as an enabler."
Information specialists at Rush Presbyterian-St. Luke's Medical Center in Chicago kept re-engineering a physician-oriented order-entry system until they got it right, says Patricia Skarulis, vice president and CIO. And that was after a long development process with substantial advice from a highly respected staff physician and a nurse with 16 years of information systems experience.
"We thought we had it, and we brought it out and found out we didn't have it," Skarulis says about the initial introduction in 1994. After three months of well-attended design reviews and a few substantive system revisions, the order system underwent three successive trial runs of less than a week each that incrementally revised the system according to feedback and had doctors try out the changes.
By the third go-around, users "started saying, 'No, leave it up, leave it up" when the time came to take it off line for final revisions, she says.
Skarulis now hosts frequent visits from other institutions seeking to know mainly about how to overcome cultural barriers rather than the technology behind it. "You have to manage change, building up support as you go along," she says. Hospital managers examining successful clinical information systems "need to look at the factors that led to their success. It's not just the system you buy."
That's not a rap on vendors but rather a message of support for a collaborative effort. "Customers are going to have to acknowledge that there's an investment due on their part," says Andrews of Per-Se Technologies.