The best-laid schemes of mice and men often go awry.
So, roughly, wrote the poet Robert Burns back in 1785. And so it was when Penn State University's Milton S. Hershey Medical Center merged with nearby Geisinger Health System in July 1997 to create the Harrisburg, Pennsylvania-based Penn State Geisinger Health System.
The merger made sense at the time, of course. The two hospitals were hoping to cut costs, combine purchasing power and create economies of scale. To that end, CIO Patricia Thompson was charged with making one information technology department out of two. And she knew just how to do it. Mere days after the union was announced, she unveiled an aggressive, $20 million project to standardize applications and integrate Hershey's and Geisinger's technology platforms. Her goal: seamless integration before Y2K.
By spring 1998, Thompson had integrated more than 40 separate systems, eliminated redundancies and increased efficiency across the board. But late last year, after months of squabbling over policy decisions such as relocating data centers, members of the new organization's board of directors decided that the merger had been a mistake. Citing "irreconcilable differences," management agreed to dissolve the merger.
The board told Thompson to undo everything she had done two years earlier. At an estimated cost of approximately $20 million, she has to replicate all systems by June 30, 2000. "I'm not looking forward to taking everything apart," says Thompson, "but what else can I do?" (Shortly before press time, Thompson announced that she had accepted a position at Epic Systems Corp. of Madison, Wisconsin, starting May 15.) While Thompson's task is uncommon and uniquely frustrating, she is not the only health-care CIO with serious problems. Across the industry, dwindling reimbursements and financial pressures brought about by managed care have wreaked havoc on organizations of every shape and size. Costs are rising like a day trader's blood pressure, optimistically begun mergers are failing and breaking up, and hospitals and health maintenance organizations (HMOs) are faltering like never before. More than 15 HMOs went under last year alone.
Perhaps the biggest casualty to date occurred last January when the 1.1-million member, Wellesley, Massachusetts-based Harvard Pilgrim Health Care was thrown into court-ordered receivership after discovering it had underreported its $177 million 1999 loss by about $77 million.
No matter where you look, the condition of the country's health-care system is best described as critical. As losses mount, and seemingly with nowhere else to turn, many health-care leaders are now looking toward their CIOs, hoping that technology can stop the hemorrhaging. So far, most CIOs have responded with aplomb, engineering a bevy of far-reaching efforts to contain costs, increase standardization, improve the quality of care and prepare for the future. Many of these efforts have helped, but none has proven to be foolproof. CIOs, meanwhile, say that while IT isn't a panacea for the ills of the health-care system, it just might be the best way to reverse the downward spiral and give it a chance to start anew.
HOPE FOR THE FUTURE Many cios have tried stop-gap measures such as cost-containment and information standardization, but if a lasting remedy is to be found, a majority believe it will be found down the road, on the internet.
Indeed, technologists and administrators alike see web-enabled electronic medical records (EMR) systems as the holy grail of health-care IT. These systems standardize patient information by digitizing every page in a patient's file, from old prescriptions to height and weight charts. CIOs say that with all patient records in one web-accessible format, disparate standardization efforts will be a thing of the past. Rather than employ dozens of efforts to standardize dozens of different data sets, EMR will let health-care technologists invest in only one. What's more, experts say that by 2010, EMR will replace paper records entirely, saving the industry hundreds of millions of dollars every year in clerical staffing costs.
The technology also answers the call for increased customer service, since patients can access personal information online. Because EMR files are based on extensible markup language, doctors and patients can view records from any browser, on dynamically generated webpages. People on the payer side can use them too; after stripping the information of its HTML tags, technicians can plug it into pre-existing financial systems as raw data.
"Talk about flexibility," says Mary Paul, CIO at Milwaukee-based Columbia St.
Mary's Inc. "EMR could change everything. We'll be able to access the information online and be able to plug it into any of the systems or databases we already have. It won't fully resolve health-care computing issues, but it will certainly better support patient care and should make our lives as technologists a lot easier."
Some health-care organizations have already started the switch to EMR. At Providence Health System in Portland, Ore., CIO Rick Skinner partnered with a local software developer to build an EMR system for the organization's ambulatory patients. Skinner says that since 1994 he's spent more than $8 million on the system and adds that he plans to spend another $2 million on it this year. The payoff? Total automation. Physicians at any of Providence's seven hospitals in Oregon can access a chart or document from any patient's file at any time. With internet access and the right passwords, doctors can even access these files from home, say, in an emergency in the middle of the night.
Skinner says he's already seen the system pay huge dividends. At a time when most health-care systems in the Pacific Northwest are shrinking, Providence is growing each year. Costs are down, profit margins are up, and Skinner says his IT budget has risen steadily over the last two years. "EMR is where the industry is going," he says. "By getting a head start, we really put ourselves in great shape for the future."
EMR, however, is just the beginning of the internet revolution in the health-care industry. What really excites health-care CIOs is e-health, the insider term for web-based health care. CIOs across the industry say they've set aside money to expand their websites, hoping that programmers can build dynamic applications that will enable patients to schedule appointments, submit insurance information and fulfill prescriptions from their living rooms. A number of health-care CIOs have even signed up for services such as WebMD, Healthvision and eMD.com, all of which link patients, payers and providers in privately funded, virtual environments. Meanwhile, some of the biggest health insurers are reportedly developing their own online project, according to The New York Times.
But even EMR and e-health cannot be described as magic bullets to cure our sick health-care system. CIOs at smaller hospitals say that these technologies are still far too expensive to implement and they have no confidence that the price will ever come down significantly. Other CIOs, particularly technologists at large health systems and HMOs, say they're worried about patient privacy once the records go online. At conferences and association meetings all over the industry, these technologists are trying to figure out how to increase security without compromising performance or access to information.
THE PENNY-WISE PRESENT Still, most cios agree that wide-spread adoption of EMR and e-health is at best about 10 years off. For a majority of CIOs, these options sit on the back burner while they address more pressing issues. Perhaps the biggest of these is cost containment. Business and clinical systems for health-care organizations cost big bucks, and because most organizations are so big, systems that cost millions to buy cost nearly as much to maintain. With reimbursements at an all-time low, CIOs have found that the best way to pay for the new stuff they need while maintaining what they already have is to be tight.
At Baptist Health System in Birmingham, Ala., CIO Charles Jones asks his IT managers to report on the state of every system in the organization. If they cost too much to support, Jones says he'll do what he can to scale them down.
If his managers discover underutilized systems, he says he'll try to consolidate them or eliminate them and redirect the savings toward other projects.
And forget costly best-of-breed procurement strategies. Partnerships are in; comparison shopping is out. After years of using as many as eight different vendors for core applications, Peter Strombom, CIO at Meriter Health Services in Madison, Wis., recently decided to partner with 3M, HBOC, and GEAC Computer Corp. of Markham, Ontario. The results, he says, have been good. This year, by leveraging the volume and size of his organization, Strombom estimates he may save as much as $1 million in pricing deals alone.
In order to contain costs, however, you first have to know what they are.
Surprisingly enough, that's not always easy. Case in point: Harvard Pilgrim.
After acquiring a number of smaller health-care organizations in the early '90s, Harvard Pilgrim never bothered to integrate their separate billing systems, causing it to grossly miscalculate its losses. As health-care organizations continue to grow in size, standardization and integration will become increasingly important.
"A lot of health-care organizations are growing wildly, with no plans to integrate systems or to make sure data is compatible," says Christopher Caton, first vice president at Robert W. Baird, an investment bank in Milwaukee.
Caton, who covers the health-care industry from an investment point of view, says that from an IT perspective, large organizations, like large ships, can be hard to steer. "Growth itself isn't a problem," he says. "It's the way these organizations incorporate that growth."
Growth yields disparate systems, and disparate systems yield disparate data.
Many CIOs say the key to integrating these systems seamlessly is making sure the data they contain is as similar as possible. Standardization is the linchpin of enterprisewide computing, and these broad systems are the technological tools CIOs expect to alter the financial environment while they wait fore-health to catch on. For most health-care CIOs, the logic is simple:
Without standardization, there can be no ERP. As a result, most health-care technologists conform to data standards established by the federal Health Level 7 (HL7) guidelines. These standards require organizations to use a formalized methodology that involves an object-oriented data model that provides a consistent view of the data being moved, as well as a view of the data's relationship to other data in business and clinical systems across the enterprise. The model ensures that all data is consistent and "usable" to applications even remotely involved in the data exchange.
At Methodist Hospitals of Dallas, Vice President of Systems and CIO Pamela McNutt has taken these standards to another level. She has added standards of her own to some of the clinical data exchanged between facilities. Early last year, McNutt installed a clinical documentation system to help nurses streamline the process of charting changes in patients. By selecting the conditions that apply to each patient on a formatted screen on desktop computers, nurses automated records that used to be filed in a free-form fashion. The new standards have enabled physicians at Methodist's main facility in Dallas to exchange case-sensitive information instantly with caregivers at the organization's secondary facility in nearby Duncanville. In emergencies, or in cases where a particular diagnosis is difficult, doctors appreciate this flexibility.
"We're always trying to use technology to improve quality of care, but with the way health care is today, that's only part of the picture," McNutt says. "The key is to improve quality of care while saving money. With these new standards in IT, we're hoping to do just that."
Physicians rely on similar standards-based systems at Rush Presbyterian St.
Luke's Medical Center in Chicago. Doctors enter medical results into a 3M clinical data repository. Separately, they are developing a system where financial data will be entered into an Oracle-based system and proprietary software will mine it for similarities and patterns in care. Every treatment has a code, and every code corresponds to a particular level of cost of care and outcomes. CIO Pat Skarulis hopes to use this system to produce report cards that notify doctors working in the same field how much money they're spending on patients who have similar illnesses. Skarulis insists that these report cards will make doctors more aware of how much they spend to treat their patients, but more important, the cards will notify doctors on how their treatment plans compare with those of their colleagues where it's appropriate.
Medical ethicists, however, say the strategy could force doctors to choose the least-expensive treatments to keep costs down. "While physicians should be conscious of costs and not provide or prescribe unnecessary services, concern for the quality of care the patient receives should be the physician's first consideration," says Dr. Thomas R. Reardon, president of the American Medical Association and a general practitioner at the Portland (Ore.) Adventist Hospital. "If [Rush] uses the system for information and education, that's one thing. If they use it to force cheap treatments, that's unethical."
OTHER SOLUTIONS However experts view skarulis's approach, one thing is clear:
As a CIO, Skarulis took matters into her own hands. Other technologists have taken a more laissez-faire approach.
After years of managing IT for nine institutions, John Glaser, vice president and CIO at Partners HealthCare System in Boston, recently decided to delegate more budgetary responsibilities among his constituents. Not every hospital in the Partners network needed the same technology, and Glaser hoped that by placing accountability for IT investments in the hands of the people who would use them most, he could keep costs down and maximize efficiency. For the last couple of years, his IT managers at institutions such as Brigham and Women's Hospital and Massachusetts General Hospital have had almost total control over areas such as procurement and hiring as long as they've remained within budget and according to standards.
So far, Glaser says, results have been mixed. While the IT departments at the individual hospitals have thrown millions of dollars into an enterprisewide provider order-entry system, they decided to reduce funds for EMR and not fund e-health, which Glaser believes to be the best long-term hope for fixing what's wrong. Glaser understands that his IT managers are so focused on meeting the challenges of today that they sometimes lose sight of the value of projects that will help the hospital over time, and that's why he retains control over 10 percent of Partners' annual IT budget, which is dedicated to corporate initiatives. He says he plans to spend this money on the computerized records and website enhancements his colleagues did not.
"Accountability is important," says Glaser, who wrote The Strategic Application of Information Technology in Healthcare Organizations (McGraw Hill, 1999). "But in this case, the future of IT at our organization takes precedence."
At New York Presbyterian Health Care in New York City, Guy Scalzi has tried to meet the challenges of health-care IT by handing over all of the organization's IT responsibilities to First Consulting Group (FCG) in Long Beach, Calif. The seven-year, $228 million arrangement came in late 1999, a little less than a year after Columbia Presbyterian Medical Center merged with New York Cornell Hospital. This, however, was no ordinary outsourcing deal. Concerned about maximizing a return on his investment, Scalzi requested a partnership in which Presbyterian could hedge its risk by sharing resources and profits. FCG responded by setting up a new subsidiary called FCG Management Services (FCGMS) to handle Presbyterian's outsourced IT and giving the health system 15 percent ownership.
Once the subsidiary was formed, FCG had to staff it. Hospital administrators didn't want to work with an IT department of strangers, so they convinced FCG to hire all of the IT employees from Columbia and Cornell. Scalzi himself left his post as CIO at Presbyterian to become vice president at FCGMS. Since November, more than 400 of the 450 IT employees he had at Presbyterian have followed him. Scalzi says that none of his employees was laid off, and that the switch enabled him to eliminate almost 50 vacancies he had had when the two hospitals merged. Better still, rather than outsourcing to an organization of people with no experience in health care, Scalzi chose to work with people he knows, likes and trusts.
Today Presbyterian keeps an IT staff of eight. These employees are mostly clerical and spend much of their time managing the outsourcing deal. At FCGMS, however, Scalzi and his employees are experiencing what one employee calls a "renaissance." Under the agreement, they had an opportunity for better salaries, stock options and better access to IT professions and colleagues within the industry. What's more, Scalzi says, the subsidiary plans to offer training programs for some of its newest people and has already pledged $6 million to rework the hospital's help desk, work on service-level agreements and reengineer its network.
"This deal was a win-win for everyone involved," says Scalzi. "We were looking for a way to continue the excellence we were providing and do it in a more cost-effective way. We were looking for a way to standardize our equipment and our data. We were looking for a way to hire and keep good people. In one fell swoop, we managed to do all [three]."
Analysts give the arrangement two thumbs up, saying that similar risk-management relationships could be beneficial for large health systems all over the country. In particular, these experts applaud the fact that the Presbyterian-FCG deal sets up a guaranteed return on investment by giving the hospital equity in a subsidiary. Though some experts wonder whether this business relationship will put cost-containment ahead of care, Caton, the analyst who covers health care for Robert W. Baird, describes the deal as ingenious and says it enables each entity to do what it does best.
"It's like they're saying, 'We know we have to increase our budgets for IT and we don't have the expertise or resources to do it, so let's look for someone who does,'" he says. "In essence, the relationship brings in a consultant to worry about the heavy stuff and allows hospitals to manage patient care and use IT as the tool it is designed to be."
WAITING FOR E-HEALTH Regardless of how CIOs choose to address the challenges brought about by managed care, most believe that anything short of EMR or e-health is just an interim measure. Statistics show that merger mania in the health-care industry is slowing down; as a result, more CIOs should be free to launch implementation efforts in these areas over the next few months. Still, with Health Insurance Portability and Accountability Act regulations on the way (see "The New Rules," Page 176) and the prospect of the new president overhauling the health-care industry entirely, experts predict CIOs won't adopt EMR systems or web-based health care on a widespread scale before 2010.
"So much of it is out of our hands," Partners' Glaser says. "We do what we can, but we're basically just waiting for EMR and e-health to change everything."
Until these sophisticated technologies arrive, experts say the burden of extending the life of the nation's health-care system lies squarely on CIOs.
"Patients want to do more of their medical management from home, doctors want to provide care quickly and efficiently, and hospitals and HMOs want to keep costs down," says Jim Gabler, a research director for GartnerGroup's Healthcare Industry Research and Advisory Services in Stamford, Conn. "All of this relates to technology, and it's up to CIOs to find a better way. People say health care revolves around doctors and patient care. Well in the months and years to come, the industry will revolve around technology and the CIO."
Do you think IT can solve health care's woes? Let us know at email@example.com.
Matt Villano, a freelance writer based in New York City, can be reached at firstname.lastname@example.org.
THE NEW RULES If you thought Y2K remediation was expensive, get a load of the new HIPAA regs Health-care executives estimate that they spent a combined $8.5 billion on Y2K.
Those same executives say they could spend four times that much complying with the Health Insurance Portability and Accountability Act of 1996. HIPAA compels hospitals, health plans and other health-care providers to reconfigure patient records into an electronic format by 2002. The intent is to standardize data across the industry and make patient information transferable and accessible over the internet.
The Health Care Finance Administration (HCFA), which first issued draft regulations in mid-1998, predicts the health-care industry will save $1.5 billion during the first five years of HIPAA implementation, mostly in switching from paper to electronic claims submission. Health-care CIOs, however, predict these overhauls could make the billions they spent on Y2K seem like lunch money.
"There's no telling what this will cost us," says Shyam Heda, CIO at 280,000-member Promina Health System in Atlanta. "All we know is that it will be substantial."
To comply, health-care CIOs must:
Embed 10-digit numbers and additional identification codes for each patient into systems across the network. These numbers will act as identifiers during data exchanges.
Follow uniform information protocols for exchanging patient information.
Establish a multifaceted security process to ensure confidentiality and privacy of patient records.
To prepare for these changes, many technologists are taking the same approach they took for Y2K. CIOs have formed exploratory committees, and many have already spent $1 million to $2 million on initial compliance attempts. At Baptist St. Vincent's in Jacksonville, Fla., CIO Warren Chandler has assigned one of his managers as Health Information Security Officer to monitor and prepare for any necessary regulation requirements. While Chandler says he's a little worried about what HIPAA might cost him, he insists that any changes the law requires will be changes for the better.
"Unless it's followed to a ridiculous extreme, HIPAA looks like it will do nothing but mandate commonsense management nationwide," says Chandler, whose organization includes more than 30 facilities in Northeast Florida. "So long as health-care CIOs run a tight ship now, compliance shouldn't be that tough at all."
Still, other CIOs aren't convinced. "Organizations using software they're not keeping current could wind up with a fairly significant challenge," says Rick Skinner, CIO at Providence Health System in Portland, Ore. "There are going to be institutions devastated by this law."
The HCFA is scheduled to complete its HIPAA regulations by the middle of 2001, and the law could go into effect as soon as 2002. Failure to comply could cost health-care executives anywhere from $100 to $25,000 per offense. Furthermore, individuals who knowingly violate the law's patient-confidentiality provisions could face 10 years in prison and a $250,000 fine.