E-business shifts healthcare provider focus to patient care and physician collaboration

When analysts make lists of which industries are furthest along in e-business, healthcare seldom finishes near the top. It's usually not even in the top 10. But some major changes are afoot-such as Web-based diagnostics and physician collaboration-that could make a big difference in patient care.

On the business side, however, healthcare companies lag behind other industries in deploying e-business technologies that could improve purchasing, insurance company links, and other supply chain processes. The government has cut payments to some healthcare providers, and with most dollars directed toward medical resources and not information technology budgets, attracting and keeping IT talent has been difficult.

"The healthcare industry has seriously lagged behind most other industries in its IT efforts, particularly in Internet and e-business technology," said John Moon, CIO of Baxter International, one of the world's largest healthcare equipment suppliers. "But we believe that down the road, Internet technology holds the promise of real change for the better, both in business and in the health of the patient."

Improving patient care is the true focus of healthcare as an industry, and many providers are reluctant to trust mission- and life-critical applications to unproven technologies, not just because of the monetary cost. Miniscule IT budgets make those same potential customers hesitant to invest in supply-chain and e-business initiatives because of the lack of data showing return-on-investment.

And although virtually every healthcare company operates a public Web site and intranets, most haven't extended their e-business efforts any further, according to InternetWeek's third annual Transformation of the Enterprise survey of 1000 IT and business managers. While 92% of healthcare respondents have informational sites on the Web, only 20% are participating in extranets or supply-chain networks, and only 15% are offering enterprise portals.

Those numbers are expected to climb rapidly in coming years, however. Some 35% of survey respondents say supply-chain applications will have a substantial impact on their organizations in the next 12 months. Forrester Research predicts that Internet-based healthcare commerce in the U.S. will total some $370 billion by 2004, up from less than $50 billion last year.

Healthcare via the Web

Such projections have had a domino effect in the marketplace. Numerous healthcare dot-coms have emerged over the past couple of years, but like dot-com start-ups elsewhere, they've found the going tough-in large part because of the lack of a clear-cut business model.

Healtheon, for example, lost more than $100 million in 1999 and had to be propped up by a merger with WebMD, another struggling start-up. The merged company is now considered the bellwether of the e-health industry. Similarly, consumer healthcare site drkoop.com saw its stock price drop to less than $1 after soaring to over $40 a share following its IPO last June.

Industry experts say that while the advertising-based B2C dot-com model is in jeopardy in all industries, healthcare has been a particularly difficult nut to crack because consumers are more likely to consult their local doctor or hospital than to seek advice online. This presents a huge opportunity for regional healthcare providers.

"The smartest hospitals will be the ones that leverage their brand, the fact that they are already perceived as the best resource for healthcare, and their capital, which is something many start-ups don't have a lot of," said Jon Zimmerman, vice president of e-business at Siemens/SMS.

Toward that end, many regional hospitals and medical service providers are offering patients clinical data via the Web. The program at Partners HealthCare System in Massachusetts is an example.

The first part of the program is aimed at patients who are fundamentally well but need some basic services or information. Consumers can use the Partners HealthCare site to access clinical information, place refill orders for pharmaceuticals, or review data on hospital and physician services. The site features updates on medical research, chat capabilities, and private e-mail between physician and patient.

The second part of the program is aimed at chronically ill patients, such as those with diabetes.

"In that case, we want to provide not only information but opportunities for them to communicate with their doctors and the community of people who are dealing with that condition," said John Glaser, CIO of Partners HealthCare.

The third part of the program features remote monitoring of chronically ill patients who convalesce at home. Many medical devices, including pacemakers and home kidney dialysis machines, now offer Web interfaces that let doctors collect data on a patient's condition remotely.

Although the smallest number of consumers will use this third initiative, it has the greatest potential to improve the quality of patient care, according to Moon, whose company builds some of these Web-enabled medical devices.

Although some healthcare providers accept advertising or links on their sites, most don't expect to turn a profit on Web-based patient services.

"The main goal of the B2C efforts is to improve service to the provider's community, which is not necessarily a profit question," Zimmerman said. "By raising awareness and offering services that other providers in the community don't offer, there's a real opportunity for revenue growth among the providers that get there first."

At the same time, however, healthcare providers face limitations as to what they can do on the Web. Concerns about the privacy of patient data have slowed the rollout of services such as shared databases. The biggest problem is the lack of forgiveness for errors, according to Zimmerman.

"The technology is there, but the trust isn't," he said.

Second opinion

Many hospitals and physicians are also using Web technology to communicate with one another. Although the technology is still in its infancy, companies such as Amicas and Global Telemedix are touting Internet services to link doctors across the globe for consultations.

"Teleradiology and access to laboratory images via the Internet are showing real benefits now, not only to patients, but on the bottom line," Zimmerman said. "Telemedicine is on the brink of being paid for."

One company, SecondOpinion.com, plans to launch a comprehensive medical consultation service later this year. The firm won't reveal details, but sources familiar with it say SecondOpinion.com will let physicians share data across the Web to speed diagnoses and obtain other medical opinions more quickly.

The Web is also providing solutions for everyday hospital and equipment scheduling and helping to establish better communications between doctors and pharmaceutical distributors. Earlier this month, eMD.com, a unit of BioShield Technologies, announced a relationship with IBM to provide Internet-based medication management. Under the partnership, eMD.com will work with IBM to deliver Web-based data on pharmaceuticals and their dosages directly to doctors' offices, promising to provide correct, up-to-date information and to reduce the costs of prescriptions.

Not as far along are efforts to harness Web technology in the extended healthcare supply chain. The lack of funding for specialized IT projects has been apparent in early efforts to build global healthcare e-marketplaces for buying and selling medical equipment and services. One of the first, Neoforma, reported a loss of nearly $100 million in fiscal year 2000 as cash-strapped and change-averse providers stayed away from the B2B bandwagon. Similarly, healthcare ASP TriZetto Group lost more than $11 million in the first half of this year.

"The behavior of physicians and hospitals tends to change very slowly," said Fred Ruegsegger, chief financial officer at Neoforma.com. "They tend to find something that works and stick with it, so the adoption rate for Internet technology is slower than it might be in some other industries."

In an effort to kick-start the B2B engine in healthcare, several of the industry's largest suppliers, including Baxter, Johnson & Johnson, and GE Medical Systems, formed the Global Healthcare Exchange earlier this year. Designed to let physicians and hospitals purchase a variety of equipment and other supplies, the exchange is expected to go live next quarter.

Another obstacle to "Webifying" the healthcare supply chain is the preponderance of legacy computer systems used to exchange insurance data and make electronic purchases via electronic data interchange (EDI). EDI systems often are tightly integrated with the systems that healthcare suppliers use for accounting and other internal functions. For those companies, the need for e-business is not clear. Thus, the immediate goal is to plan for both EDI and Internet-based scenarios.

"Before they will jump into e-business, healthcare organizations need a way to demonstrate a positive return from their investments in supply-chain and connectivity technology," said Will Falk, director of the healthcare practice at Computer Sciences Corporation. "No one wants to be first with the technology and then end up being the first to lose money."

The current shortage of skilled IT professionals is another obstacle.

"There are a huge number of ideas out there on how to take advantage of the Internet," Falk said. "But most healthcare providers have only two or three talented people who can separate the wheat from the chaff and figure out which ones are really good. Without outside help, those organizations can go only as far as those two or three people can carry them."

Author Tim Wilson is editor at large with InternetWeek (www.internetweek.com), a CMP publication.

© 2000 Miller Freeman Inc.
11/29/00, Issue # 117, page 1.