Digital health push woos tech firms, pains doctors

LOS ANGELES — Two years ago, Dr. Gonzalo Venegas decided to bring his medical practice into the Information Age.

But the move turned out to be so costly that his business, which employs five physicians, ended up on financial life support.

An obstetrician-gynecologist, Venegas and his colleagues specialize in treating women in a low-income section of Dallas. They wanted to take advantage of government incentives that would pay them back for the investment they made in digitizing their medical records.

The group installed a system from a small vendor based in Georgia, at a cost of $80,000 per doctor, or $400,000 in all. As if the capital outlay wasn’t enough, the practice now is contending with a smaller income because the doctors are struggling to adapt to new ways of treating patients. And Venegas said it looks as though he’ll recover roughly only one-sixth of his investment through subsidies.

“If I had known what I was going to go through, I would have waited until the very last minute,” he said.


Under a government-led effort tied to the 2009 economic stimulus, doctors across the nation will spend on average $40,000 on software to build digital databases of patient records. But even after all that expense, few physicians will be able to send patient records to other doctors who could benefit from having rapid access to medical histories, according to interviews and government advisors.

Meantime, dozens of healthcare technology companies large and small are making their pitch to doctors, to provide patient-history systems where none currently exist at clinics, private practices and other medical offices.

Billions of dollars in software revenue are at stake in the plan, which is backed by $30 billion in federal money.

But before any of this will benefit patients, the program must get past some big hurdles springing up in what some compare to a Wild West frontier market.

Critics said the architects of the plan left out a means of ensuring that the systems in the emerging patchwork of proprietary software will be able to talk to each other. On top of that, the very act of digitizing millions of patient histories represents a technological leap for the legions of doctors who remain attached to paper record-keeping.

“It’s been slower than other industries to evolve,” said Judy Hanover, analyst with International Data Corp., which says $90 billion will be spent on the software alone that is needed for the effort.

Federal officials estimate that more than four-fifths of all doctors and hospitals had yet to adopt even the most rudimentary means for digitizing records when it started the stimulus program. The idea was to get caregivers to digitize patient records that could be exchanged to improve efficiency and care across the nation.

Two years later, the process is proving to be profoundly ambitious.

It’s as if the Information Age was beginning all over again, if on a smaller scale.

The U.S. medical community is widely known for sparing little expense when creating state-of-the-art tools for patient care. But most doctors’ offices and hospitals are in the digital equivalent of the Stone Age when it comes to patient records, and tech executives said bringing that entire industry up to date will be formidable.

“You’ve got all these disparate entities that have never been tied together in an efficient system,” said Rich Garnick, chief executive of Anthelio, a Dallas-based consultant in health information technology.

There’s no uniform code by which the medical community is operating, and no widely used software standard like Microsoft Corp.'s Windows being used.

“Capitalism and free markets are a little messy,” Garnick said.

Big companies such as McKesson Corp., a San Francisco-based drug distributor, and Germany’s Siemens AG are some of the names looking to sell their systems in this emerging market. Others like Cerner Corp. in Kansas City, Mo., are specializing exclusively in health IT along with upstarts like Athenahealth Inc. in Watertown, Mass.

Their market goes beyond software. Virtually all doctors and hospitals are acquiring new, customized hardware and are building their own data pipelines.

David Hamilton, senior vice president for enterprise services at Siemens, said you won’t find the usual tech suspects in the health IT space. There’s no Microsoft, Intel Corp. or IBM Corp. However, Oracle Corp. has made a foray.

“The health IT space is very specialized,” Hamilton said. “If you look at their business model, they look at the horizontal (market).”

Anthelio’s Garnick said many medical professionals feel they don’t have the time or the inclination to abandon their paper-based record-keeping, and they want the technology built around them. They’re also looking to preserve patient privacy, which makes sharing of information difficult.

Data are compiled through a variety of methods among doctors, hospital departments and countless payers such as insurance companies and the government, most with their own proprietary computer systems.

“These are vertically integrated systems that all grew up in silos,” Garnick said. “They never knitted these systems together.”

He added that many entities, particularly doctors, aren’t helping to keep costs down by insisting on extensively customizing their patient records. They’re also resisting changes to their work habits, regardless of the efficiency they could gain, and are forcing tech vendors to customize software to the way they do business.

“When you automate a bad process, you speed up a bad situation,” Garnick said.

Jonathan Bush, chairman of Athenahealth, argues that converting to electronic health records doesn’t have to mean a massive upfront investment.

He said his company offers cloud-based medical record-keeping that allows doctors to continue to operate the way they always have. His service will maintain their electronic records for roughly $800 a month, plus ensure compatibility with other systems. He hopes to get his fee down to $400 a month as he builds his clientele.

Bush finds, though, few doctors know he exists, and he’s confronted with concerns that putting patient records in the cloud will compromise security. Some analysts believe patient records actually would be more secure in the cloud.

“Our biggest obstacle is awareness,” Bush said. “I feel like I’m trying to explain freedom to people.”

Meanwhile, the learning curve has been steep for medical professionals, and sometimes they end up having to back out and start up again. Oakland-based Kaiser Permanente, a privately held managed care provider and strong advocate of electronic medical records, has spent more than two decades trying to update its system.

Kaiser said it started out using the wrong system. It had to start over from scratch, company officials said, with the HealthConnect system from privately held Epic Systems Corp. Kaiser won’t disclose the total cost of its effort but various reports put the figure at $4 billion.

“We had some pretty spectacular failures,” said Dr. John Mattison, Kaiser’s chief information officer. “The technology for us was really a huge challenge.”

Kaiser started converting to electronic records in 1986. Today it’s among a handful of healthcare providers that set the bar for the rest of the industry, and many of its tech staff have been hired away by companies that need to catch up.

Said Mattison: “We’ve been raided by everyone who’s implementing now.”

When Congress enacted the legislation behind the effort, the toughest questions were centered more on protecting patient privacy than on ensuring such a program would be viable.

But healthcare is rapidly becoming the biggest single industrial component of the U.S. economy, and it comprises more than one-sixth of federal spending. Healthcare and IT professionals said modernizing the lion’s share of such a sprawling industry won’t happen overnight when everyone is building customized systems from the ground up.

It’s all so daunting that many caregivers are staying on the sidelines. Some said they’re unlikely to receive government subsidies, a status that hinges on their practice proving they’ve made “meaningful use” of digitized records.

“Most of the incentives are really targeted toward primary-care practices and not so much specialty practices,” said Dr. James Kenealy, an ear, nose and throat specialist in the Boston suburb of Framingham, Mass. “It probably won’t be cost-effective for us to reach ‘meaningful use.’”

Dr. Susan Rudd Bailey is one of three allergy specialists at a small practice in Fort Worth, Texas. She said the horror stories she hears from other doctors who have tried to convert to what the industry calls EHRs (for electronic health records) is enough to keep her and her colleagues from forging ahead “until we absolutely have to.” Federal subsidies are out of the question.

“More than once, when I have been attending a session on EHRs from the supposed experts in the field, invariably I’ll hear them say, ‘Well, with my first EHR, I had this problem,”’ Bailey said, noting that many end up having to change software programs midstream. “I haven’t found a one that likes the first one they had, or has had an easy time with the conversion.”

Britt writes for