IBM Corp. continued its march into healthcare this spring with two announcements: an eight-year, $402 million joint development agreement with the University of Pittsburgh Medical Center and the acquisition of healthcare information technology consultant Healthlink.
The participants are promoting both deals as positives for the broader hospital industry. In the case of the UPMC partnership, both organizations have described it as a landmark agreement that will blaze an IT path for the rest of the industry, which has been struggling to seamlessly automate the clinical and administrative sides of its businesses.
And the Healthlink acquisition will benefit Healthlink customers as individual hospitals and health systems join regional health information organizations, or RHIOs, being touted as the link in a national IT infrastructure.
"It takes a company of IBM's stature, credibility and deep technology to even play in that field," says Ivo Nelson, Healthlink's chief executive officer. "They've got the size and scale to do it, but they really need the content expertise that we have. However fast the RHIOs develop, we're going to be on top of that game."
IBM views the healthcare industry as an area of growth. While the company's first-quarter earnings, released last month, disappointed investors, revenue from IBM's health sector was up 15% for the quarter. The company hopes the move to electronic records will help boost sales even more.
Terms of the Healthlink acquisition were not disclosed. The sale of the company, which is privately held, is expected to close early this month. Healthlink's headquarters will remain in Houston.
After the sale, the company will be called Healthlink, an IBM company, through the end of the year, and then simply IBM after that, Nelson said. In addition to its 650 employees, Healthlink's management team will remain with IBM after the sale, says Nelson, who has been with the company since it was founded in 1992.
"I, as well as all the other key executives at Healthlink, have made long-term commitments to IBM," he says. "We see this as the next chapter in our future and we'll continue to grow the company as we have in the past."
Nelson says Healthlink has developed a niche in helping its customers maximize their investments in healthcare IT.
"We're very rich and deep in clinicians and people who understand those processes," he says. "IBM is the No. 1 technology company in the world. The investments that they make in (research and development) and how they're going to tie what they're doing in with their life-sciences clients, you've got tremendous synergies that will take place that absolutely will be useful for our clients."
Neil de Crescenzo, who heads the healthcare section of IBM's business consulting services, says the company, in addition to its work in life sciences, has built a large presence in the payer and pharmaceutical markets, where performance-based contracting is gaining a foothold.
IBM, which has "not only the wherewithal but also the appetite to invest in longer-term projects," is looking to bring performance-based contracting to providers.
"We believe this is a macro trend, even outside of healthcare," de Crescenzo says. He said corporations want to buy results, not just a process.
Healthlink brings with it "the intellectual capital" to make performance-based contracting possible on the provider side, he says, while IBM has the resources. "That's where we see we have the complementary nature of what they bring to the table and what we bring to the table."
Meanwhile, UPMC describes its relationship with IBM as a way to save both time and money in building its IT framework. The agreement's two major components include a $352 million re-engineering of UPMC's technology infrastructure to a so-called "on demand" environment geared to innovation but adaptable to ongoing needs, building on the medical center's electronic health-record strategy, officials say.
The second component calls on IBM and UPMC to initially jointly invest $50 million and up to $200 million in strategic initiatives to develop medical technologies and information systems that address specific patient-care and public-safety initiatives in areas such as electronic patient records, biosecurity and information-based medicine.
Under the agreement, IBM and UPMC will collaborate to commercialize these initiatives. UPMC's stake in the products or services that are subsequently developed will be determined on a case-by-case basis, says Dan Drawbaugh, chief information officer for UPMC. Together, the two organizations are "building the infrastructure of the future that can be used across all of healthcare," he says.
The transformation to an on-demand infrastructure is expected to be completed within three years. If UPMC were to do it itself, the project would cost more than $540 million over an eight-year period, Drawbaugh says.
The project aims to not only standardize IT at the 19 hospitals and among the 5,000 physicians making up UPMC, but also across the entire industry, he said.
"We want to serve as a model for the country in healthcare information technology," Drawbaugh says. "We want to show it works."
-- with the Associated Press