Anthony Watson says the biggest enemy to efficiently providing health-care services is paper. Watson is chairman and CEO of HIP Health Plan of New York, a not-for-profit health-maintenance organization that serves more than 1 million members and provides medical, lab, and pharmacy services to close to 20,000 physicians.

Watson estimates that about 40% of the claims HIP receives are paper-based. "It would be wonderful if we could get a paperless world at HIP," says Watson, who'd like to see more of the doctors HIP works with using electronic-claims systems. "It's a big job," Watson says. But the technological challenge is only part of it; the rest is breaking old habits. Each of the physicians works with seven or eight insurance companies. "The idea is to cut through the bureaucracy, cut down the paperwork, and simplify the processes so doctors can spend more time with the patient."

That's why Watson isn't happy when he hears others blame what he calls "health-care boogie men"--insurance providers and pharmaceutical companies--for his industry's problems, as he did last month during a talk on health-care reform by New York Sen. Hillary Rodham Clinton. "It kind of upset me. It's oversimplistic to blame health insurance," says the 62-year-old executive. There's plenty of waste in health care that doesn't grab attention, he explains, such as unnecessary hospital beds and the "duplication that hospitals perpetuate on each other with CAT scans and MRI systems right down the street from each other."

Watson believes technology can make a difference, even though health-care companies traditionally have been slow to deploy new business technology. Only the agriculture and education markets have spent less on technology than health care, according to a report by research firm the Yankee Group. The same report says the cost of health-care services will double to $3.1 trillion by 2012.

Watson and his IT team have been working hard over the past six years to make HIP more efficient by ridding the HMO of unnecessary paper and creating a highly integrated organization that improves patient care. One of his top priorities is to develop a tightly integrated information-sharing system for health services. He believes many patients would be discharged from hospitals if only adequate information were available to health-care providers about how the patients would benefit from other types of long-term, or alternative, care. "This is one of the big problems we don't talk about in health care," he says. "Just improving the information about alternative health services at the fingertips of providers could get patients out of the hospitals and save millions.

"We've only scratched the surface," Watson says. He's pushing for even more business-technology initiatives, such as an automated medical-records system that could follow HIP's 1 million members as they interact with various health-care providers to ensure that they're getting all the services they need. "When someone sees a specialist, it would be wonderful if we could send the CAT scans, medical diagnosis, and other backup medical information right to that physician's office," he says.

Watson also sees potential for handheld devices to improve health care. "Hospital nurses discharging patients would be able to use their handheld to arrange for whatever services the patient needs," he says.

HIP doesn't plan to outsource its IT any time soon. The company tried outsourcing a decade ago and learned a painful lesson. "We'd ask them for vital information on which to base medical decisions, and they'd tell us that we'd have it in six months," he says. "That was unacceptable. We couldn't even find out what procedures we had under way in our region."

Watson brought the work in-house again. Now his goal is to build business technology into the fabric of health care: "It will be the companies that develop their IT to the highest degree that will improve health care in this country."