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Digital health push woos tech firms, pains doctors

June 14, 2011|By Russ Britt

LOS ANGELES — Two years ago, Dr. Gonzalo Venegas decided to bring his medical practice into the Information Age.

But the move turned out to be so costly that his business, which employs five physicians, ended up on financial life support.

An obstetrician-gynecologist, Venegas and his colleagues specialize in treating women in a low-income section of Dallas. They wanted to take advantage of government incentives that would pay them back for the investment they made in digitizing their medical records.

The group installed a system from a small vendor based in Georgia, at a cost of $80,000 per doctor, or $400,000 in all. As if the capital outlay wasn't enough, the practice now is contending with a smaller income because the doctors are struggling to adapt to new ways of treating patients. And Venegas said it looks as though he'll recover roughly only one-sixth of his investment through subsidies.

"If I had known what I was going to go through, I would have waited until the very last minute," he said.

Under a government-led effort tied to the 2009 economic stimulus, doctors across the nation will spend on average $40,000 on software to build digital databases of patient records. But even after all that expense, few physicians will be able to send patient records to other doctors who could benefit from having rapid access to medical histories, according to interviews and government advisors.

Meantime, dozens of healthcare technology companies large and small are making their pitch to doctors, to provide patient-history systems where none currently exist at clinics, private practices and other medical offices.

Billions of dollars in software revenue are at stake in the plan, which is backed by $30 billion in federal money.

But before any of this will benefit patients, the program must get past some big hurdles springing up in what some compare to a Wild West frontier market.

Critics said the architects of the plan left out a means of ensuring that the systems in the emerging patchwork of proprietary software will be able to talk to each other. On top of that, the very act of digitizing millions of patient histories represents a technological leap for the legions of doctors who remain attached to paper record-keeping.

"It's been slower than other industries to evolve," said Judy Hanover, analyst with International Data Corp., which says $90 billion will be spent on the software alone that is needed for the effort.

Federal officials estimate that more than four-fifths of all doctors and hospitals had yet to adopt even the most rudimentary means for digitizing records when it started the stimulus program. The idea was to get caregivers to digitize patient records that could be exchanged to improve efficiency and care across the nation.

Two years later, the process is proving to be profoundly ambitious.

It's as if the Information Age was beginning all over again, if on a smaller scale.

The U.S. medical community is widely known for sparing little expense when creating state-of-the-art tools for patient care. But most doctors' offices and hospitals are in the digital equivalent of the Stone Age when it comes to patient records, and tech executives said bringing that entire industry up to date will be formidable.

"You've got all these disparate entities that have never been tied together in an efficient system," said Rich Garnick, chief executive of Anthelio, a Dallas-based consultant in health information technology.

There's no uniform code by which the medical community is operating, and no widely used software standard like Microsoft Corp.'s Windows being used.

"Capitalism and free markets are a little messy," Garnick said.

Big companies such as McKesson Corp., a San Francisco-based drug distributor, and Germany's Siemens AG are some of the names looking to sell their systems in this emerging market. Others like Cerner Corp. in Kansas City, Mo., are specializing exclusively in health IT along with upstarts like Athenahealth Inc. in Watertown, Mass.

Their market goes beyond software. Virtually all doctors and hospitals are acquiring new, customized hardware and are building their own data pipelines.

David Hamilton, senior vice president for enterprise services at Siemens, said you won't find the usual tech suspects in the health IT space. There's no Microsoft, Intel Corp. or IBM Corp. However, Oracle Corp. has made a foray.

"The health IT space is very specialized," Hamilton said. "If you look at their business model, they look at the horizontal (market)."

Anthelio's Garnick said many medical professionals feel they don't have the time or the inclination to abandon their paper-based record-keeping, and they want the technology built around them. They're also looking to preserve patient privacy, which makes sharing of information difficult.

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