Technology: The Best Remedy

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Technology: The Best Remedy
Technology's benefits become keys to profitability in an era of industry reforms

By Tom Dellecave Jr.
Issue Date: Sept. 18, 1995

rom client-server computing to document imaging to wireless technology, health-care providers and suppliers are exploring ways to use informatio n technology to cut costs while improving care. Health-care information systems budgets, traditionally small compared with other industries, are growing. For the first time, it's not uncommon to see hospitals investing millions in hardware, software, and large IT outsourcing contracts.

"These organizations are feeling the pressure to get their acts together," says Larry Pawola, executive VP at Sheldon I. Dorenfest & Associates, a technology consulting firm in Chicago. "It's the only way they're going to make any money."

The introduction of managed-care plans, which predetermine what providers can charge, and capitated plans, which cover individuals at set rates, have redefined the way health-care providers and suppliers make money.

According to a February survey of health-care executives by Modern Healthcare , redesigning computer networks to account for managed care is their No. 1 IT priority. About 93% of the respondents said they anticipate increasing their spending on IT over the nex t three years.

As the health-care industry moves through this transition, technology will be key to maintaining profitability. "The CIO is for the first time becoming a very important member of the executive team," says Andy Pasternack, editorial director of the Health Care Information and Management Systems Society (HIMSS) in Chicago, an organization for IT professionals in health care.

Shrinking Profits?
Health care accounts for more than 14% of the U.S. gross national product, nearly $885 billion in spending per year, according to Dorenfest & Associates. But insurance carriers are slowly chipping away at that figure by setting fixed prices and refusing to pay providers' inflated rates. While that is bringing down costs, it has also left health-care organizations scrambling to recoup shrinking profits.

Hospitals and their suppliers seek ways to increase efficiency without sacrificing care. The solution appears to be part economies of scale and part IT. Meanwhile, hospitals, suppl iers, and insurance carriers are swallowing each other through acquisitions to remain competitive by using size to drive down costs. The task of chief information officers is to turn that size into a competitive advantage.

"The market for health care is not getting any larger. We grow through acquisitions," says Steve Clark, VP of operations and communications at Columbia/HCA Healthcare Corp. in Nashville, Tenn. "Each company has a different system. Our job is to make them all work together."

That will be quite a challenge. In the past two years, Columbia has gone on an acquisition binge, buying four companies to become the largest health-care provider in the country. Columbia has grown from 37 hospitals to 323, with an additional 100 outpatient surgery centers.

It's Clark's responsibility to make sure that disparate computer systems from five companies work together seamlessly. His long-term goal for Columbia is to centralize billing and accounting operations and to deploy regional data centers t hat will serve as a clearinghouse of clinical information for hospitals in the area. A doctor will be able to sit in front of a terminal in, say, Richmond, Va., and pull up the record of a patient visit in Las Vegas.

Columbia has been able to consolidate its mainframes at a single-site, mixed-IBM environment in Nashville, and put in place five data centers running Data General Corp.'s Aviion processors and Meditech's patient-care system nationwide. In addition, the company has set up an enterprisewide, TCP/IP communications network now used by 55 hospitals.

Columbia has also turned to other cutting-edge technologies to get a leg up on its competition. It instituted a pilot project in Fort Myers, Fla., to use document imaging to transfer medical records to optical disks. Wireless technology is being used at the Nashville data center to test a limited-range voice system. The company also is experimenting with handheld computers for materials management.

While Columbia has carried much of the burde n, other health-care providers have looked outside to fill their IT needs.

When National Medical Enterprises merged with American Medical Holdings in March, the newly formed company, Tenet Healthcare Corp. in Santa Monica, Calif., found the best way to manage the integration of information systems was through outsourcing. Tenet hired Perot Systems in Dallas to integrate its systems. "Speed is really what we were after," says Steve Brown, CIO at Tenet. "By working with a technology company, we could move faster."

Tenet, which has 83 hospitals across the Sun Belt, will spend $250 million over the next seven years on its outsourcing contract. In that span, the company wants to see all its hospitals networked and easily exchanging clinical and accounting information. "What used to be a single hos-pital operating in a single setting is turning into a network of hospitals," Brown says.

Since signing on with Perot, Tenet has consolidated its mainframes at a single site in Dallas and established eight reg ional data centers running IBM AS/400s to track patient management functions.

Building Alliances
The key to Tenet's long-term integration plans will be interoperability and multiprotocol networks that can easily incorporate other systems after future acquisitions or mergers, Brown says. The company anticipates it will save more than $100 million by using Perot.

While competitive advantage in health care is becoming a matter of size and how technology can be leveraged to exploit that size, smaller players are also finding ways to compete. Larger companies like Columbia and Tenet will continue to gain advantages by adding to their girth, but smaller providers compete by building alliances and using technology to work together.

The clearest example of this is the community health information network (Chins). Through Chins, the purchasers, payers, and providers of health care are able to exchange information. While larger providers are using proprietary networks, Chins are open to partici pation by the providers and payers operating in the community. Chins organizations are not yet operational in the U.S., but some 75 are being built. "These will be so intrinsic that people won't recognize what it was like before we had them," HIMSS' Pasternack says.

Key To Success
Like the hospitals, health-care product suppliers have learned that success requires a commitment to technology. One key is using computer systems that integrate easily with those of customers. "Every one of the hospitals we work with looks for integration from a systems perspective," says Phil Greth, CIO of pharmaceuticals distributor Cardinal Health Inc. in Dublin, Ohio. "We're seeing more of a need to communicate directly with our customers' systems."

To meet that need, Cardinal has implemented a nationwide infrastructure that allows it to fill an order from anywhere in the country within 24 hours. The infrastructure includes 30 distribution centers that incorporate warehouse management and order fulfillment, and three regional data centers that handle accounting and serve as router hubs.

The distribution centers primarily use IBM AS/400s, while the data centers use HP 3000s. Everything is linked through a TCP/IP network. At the heart of the network is a home-grown PC application called CardinalChoice. The DOS-based, order-management program serves as the front end and gives users a simple interface for entering purchase orders, tracking inventory, and automatically transmitting data to Cardinal. "It's critical to our business," Greth says.

Like Cardinal, Baxter International Inc. uses technology to work more closely with customers. "The goal is to integrate the U.S. health-care business with our business practices so that we can better serve our customers," says Kathy White, CIO at the Deerfield, Ill., hospital supplier.

Data Drivers
That not only builds efficiencies into Baxter's business practices, but it also makes the health-care providers more efficient. At Intermountain Health Care's 24 hospitals and 36 outpatient clinics, Baxter truck drivers use handheld computers for inventory management and order entry. For IHC, that means drivers enter orders into their computers before unloading supplies.

At day's end, data from the machines is downloaded to Baxter's databases. Then, an invoice is sent electronically to IHC in Salt Lake City, and a list of the materials that need to be restocked is sent back. With Baxter's help, IHC has been able to track inventory more closely without having to keep tabs itself.

As IT continues to bring the pieces of the health-care puzzle together, the last hurdle may prove to be the greatest. Experimentation in handheld, pen-based, wireless technologies will have to receive a serious commitment from doctors and nurses who have been slow to adopt new technologies.

"The technologies that allow caregivers to interact with their systems just aren't there yet," says Charles Saunders, a principal with EDS Consulting Services in San Francisco. While the sy stems are reaching maturity, the greatest inefficiency may prove to be getting information into the systems to begin with.

Assuming that IS departments get the same commitment from practitioners as they have from the executive suite, IT will continue to redefine the industry.

"We're moving into an era where size can deliver advantages," Tenet's Brown says. "The sophistication of IS is going to be a very big factor.

(To view the Health Care chart in PDF format click here)

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