Digitization Slashing Health IT Vendor Dominance

Dell says traditional health IT vendors will lose market share as the medical industry converts from film to digital medical imaging.
As the push to digitize medical imaging at hospitals and other medical facilities becomes more prevalent, many large healthcare IT vendors will see their dominant market share dwindle, predicts Jamie Coffin, VP of Dell's healthcare and life sciences division.

In an interview with InformationWeek, Coffin said big health IT players are losing ground in medical imaging, where conventional radiological film is being replaced by picture archiving and communication system technology. Moving from a film-based clinical environment to PACS allows hospitals to depend less on the hardware and software of original equipment manufacturers like Siemens and Phillips and utilize other technology vendors to store, archive, retrieve, distribute, and present digitized images in different formats.

"Historically there has been no incentive for companies like GE, Phillips, and Siemens who build these MRI or CAT scanners to make it easy for you to move data between a Phillips environment and a Siemens environment," Coffin said. "They really have been against this whole integration of healthcare because it made it easier for them to keep their footprint around the imaging machine," Coffin added.

By breaking down the barriers associated with traditional film-based image retrieval, PACS gives doctors quicker access to these images electronically and allows companies like Dell to capitalize on the changes by creating new technological solutions that more easily distribute medical images at the point of care.

For instance, Dell will be urging its hospital customers to purchase its new technology which allows hospitals to perform vendor-neutral archiving of patients' images.

"Five years ago I met with one of the big players in this space, and the president of the company said 'you know healthcare IT is 15 years behind every other industry and we are pretty happy that way because it locks our customers into our technology,'" Coffin recalls being told. "A lot of these companies are used to making 70- and 80-point margins on their software and hardware deals, and the more hardware they can sell, the more money they make," Coffin adds.

With the dynamics of health IT changing, companies like Dell are looking at new opportunities and in some cases staying away from others. For example, Coffin said his company doesn't currently see a good reimbursement model for telepresence technology, but has partnered with the American Medical Association to develop a platform that will make it easier for doctors and other healthcare providers to adopt IT associated with electronic medical records, ePrescribing, and laboratory services.

Dell's acquisition of Perot Systems for $3.9 billion pushed the company further into providing healthcare IT to large hospital systems, but Coffin says Dell still sees a sweet spot at the small to medium-sized medical practice where storage solutions are in demand. On the storage side, Dell has partnerships with companies like EMC and VMware and offers storage and virtualization solutions. The company also provides cloud computing to small and medium-sized medical offices as part of Dell's affiliated physician model.

"We don't think it makes sense for a 10-physician practice to worry about maintaining security and privacy of data, so we charge them a monthly fee. It's essentially a per-physician charge," Coffin said.

Coffin, who has spent two decades in healthcare IT, also said that most hospitals operate in the 1% to 3% profit margin, and notes that IT vendors have to understand healthcare economics as much as healthcare IT.

"When the financial crisis hit there was terror in every IT managers' eyes because they were worried about all these financial constraints that were hitting them all at once. They've delayed spending on IT for the last two or three years," Coffin said.

However, the government's push to assign billions of dollars specifically for the development of healthcare IT under the American Recovery and Reinvestment Act is the kind of bailout the healthcare sector needed.

"Now we are starting to see the market move in a very different way. We see a pickup and significant spending around critical technology [related to] storage, mobile point of care, and compliance," Coffin said.

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