There is a huge, hard-to-serve market for healthcare information technology in small medical offices. But a 73-physician Utah group practice and a Chicago-area electronic medical-records vendor have come up with a scheme their officials say overcomes some of the formidable barriers on both the buyer's and seller's sides of the IT transaction.
The arrangement, devised by Central Utah Multi-Specialty Clinic, Provo, Utah, and Allscripts Healthcare Solutions, Libertyville, Ill., soon may yield a batch of IT supply contracts between Central Utah and its smaller physician group-practice neighbors.
The plan calls for Central Utah to purchase software licenses at a discount from Allscripts for the vendor's TouchWorks electronic medical-records software and resell the licenses, as well as staff-training, database and technical-support services, to other groups.
In effect, Central Utah would become a value-added reseller, a marketing arrangement common in the software industry between two IT companies, but rare between an IT firm selling EMRs and a medical group practice.
Central Utah's first IT agreement could be reached in a couple of weeks, and it would be with an 11-physician primary-care group about 25 miles from Provo, according to clinic leaders.
Another area group of 18 physicians is reviewing a proposal to receive the same services, and a four-physician group has seen the service offer but hasn't begun price negotiations, according to Scott Barlow, chief executive officer of the clinic. And, oh yes, a 240-physician independent practice association, of which Barlow's group is the largest member, also has expressed interest in offering EMR services to its members through Central Utah.
"There is no question there is potential," Barlow says. "The market wants it. There are more (groups) asking than we can reasonably accommodate right now. I think we can effectively do at least two groups a quarter. We envision we'll get up to 150 to 200 physicians on it over time."
Central Utah will pass on a portion of the discount it receives on software licenses to the local groups and keep a 10% to 12% margin for itself, Barlow says. It also will sell its support services on a similar cost-plus basis, he says. In addition, the customer groups will benefit from Central Utah's experience in configuring the EMR to their practice management system and its proven approach to EMR staging.
Central Utah's successful EMR rollout, completed last summer, recently earned it an award for outstanding achievement in applied medical informatics from the 1,300-member Association of Medical Directors of Information Systems.
"What it took us nine months to do, they'll be able to acquire the basic package and be able to go paperless in 90 days," Barlow says. "We're going to lower the hassle factor. They'll get a better price as well."
Since Allscripts doesn't typically market its modular TouchWorks EMR to small practices, it is unlikely the buying group, which Barlow was reluctant to name until the deal is complete, would have purchased the software without Central Utah's discount. If they had, Barlow says, "My guess is they'd pay $250,000 to $400,000 to buy this system. With us, they'll get it for under $100,000."
Some tech-savvy hospitals have been extending EMR and Web-portal services to affiliated physicians for a while now, primarily using IT as a bonding agent. Barlow says though his group's EMR extension plan is unusual, it won't be for long. "I think you're going to see others do this as well."
Several other multispecialty groups that are Allscripts customers are interested in providing EMRs to neighboring smaller groups and are "running right along with Central Utah" with their plans, though none has installed an EMR yet, says T. Scott Leisher, Allscripts' executive vice president of sales and marketing.
He confirms that the company isn't marketing its TouchWorks EMR to groups smaller than 25 physicians--it offers an EMR with fewer functions for such practices--"but this is a way for those practices to get a high level of functionality and higher ROI without having to make the investment."
A tough nut
Half of practicing physicians in the U.S. work in offices of six doctors or fewer, according to the American College of Physicians. A 2001 American Medical Association survey found that fully one-third of 514,000 patient-care physicians are in solo practice.
David Brailer, M.D., the new national health IT coordinator at HHS, has stressed the importance of bringing IT to office-based physicians--in one recent speech he called them "the flexion point" from which other IT adoption will occur.
According to a 2003 study on the use of IT in the outpatient setting, sophisticated systems each year could prevent an estimated 2 million adverse drug events and 130,000 life-threatening events.
The study by the Center for Information Technology Leadership, or CITL, at Partners HealthCare System, Boston, says only the most sophisticated--and expensive--clinical IT systems, carrying a minimum cost of $29,000 per physician and annual maintenance at $12,000 per doctor, provide a fairly rapid two-year return on investment, and then only in a highly capitated environment.
Low-cost and lower-function systems, which are more affordable to small physician groups, require longer ROI periods, and without capitation these systems do not pay for themselves under existing reimbursement schemes, according to the study.
In addition, physicians in small groups face formidable challenges installing and maintaining any EMR system. Vendors of electronic medical-records systems have their own problems selling into this market.
So far, the best available estimates say a minority of small-group and solo-practice physicians have embraced electronic medical-records system technology.
Overall, EMR penetration at the group level runs between 10% and 20%, even lower in the smaller offices, according to some experts. A recent survey of 788 members of the American Academy of Family Physicians indicated nearly 40% either had an EMR or were in the process of implementing one, though David Kibbe, M.D., director of the academy's Center for Health Information Technology, conceded the survey lacked scientific rigor.
Brailer complained in a report he wrote for the California HealthCare Foundation last fall about the unavailability of solid market data on EMR usage.
Jamie Steck, director of information technology at Central Utah, says the 11-physician group could receive its system by Nov. 1. He leads three other full-time employees, including a trainer, and three contract workers used as needed. Steck says he expects to hire one more worker next year to handle increased demand from the new groups.
All data from those groups will be housed on partitioned databases on Central Utah servers connected by T-1 lines, Steck says. The clinic's IT system already serves nine sites, so adding more will not present a major change in operations, he says. Steck says southern Utah, a high-tech Mecca, is blessed with an abundance of high-speed data lines.
Barlow says the idea for sharing IT services came as word spread last summer about Central Utah's successful EMR.
"I've got 70 physician champions," Barlow says. "The reason (other groups) are coming to us is because they've heard from our physicians what an enhancement to their practice this system is."
It didn't make economic sense to bring some of the groups into the Central Utah fold at present, but "we had a hard time saying no to our colleagues," Barlow says. So expanding the EMR was seen as a way to serve the community, make some money and forge relationships for the future.
Bigger, brawnier, better
Informaticist Blackford Middleton, M.D., chairman of CITL at Partners and lead author of the 2003 survey on outpatient IT systems, says the Central Utah scheme sounds like "an interesting way to get into the small-office environment."
Middleton says any data partners naturally would need to sign privacy contracts mandated by the Health Insurance Portability and Accountability Act of 1996 and that the relationships likely would survive or fail on Central Utah's ability to provide high-quality technical support.
Middleton says he encourages potential small-group partners, just as he did IT buyers in the 2003 survey report, to buy a system that has outcomes-analysis capabilities and sophisticated decision-support tools, "not just drug-on-drug reaction alerts."
"You really have to have a full-fledged EMR to get the full bang for the buck," he says.
Barlow says he sees that as a huge advantage for growing the system across the region.
"The more physicians we get, the more data-mining we can do to demonstrate the care, value and cost efficiency we really have," he says.
Dan Michelson, Allscripts' chief marketing officer, says there will be multiple approaches to spreading EMR technology, but the resale scheme should have an impact.
"It turns out there really is no silver bullet, no single idea; but healthcare tends to be local, so if you can get providers working in a collaborative setting rather than a competitive setting, those markets seem to do a little bit better," Michelson says.
Meanwhile, Allscripts will move ahead slowly with the group re-licensing plan.
"We're walking step by step rather than running," Michelson says.