November 22, 2009
As the debate over health insurance reform rages on Capitol Hill, a less contentious federal health initiative is quietly being implemented in hospitals throughout the country — and generating a growing stream of business for high-tech firms in San Diego and elsewhere.
Over the next five years, the federal government is projected to spend as much as $45 billion on health care technology systems, largely through a stimulus program known as the Health Information Technology for Economic and Clinical Health Act, or HITECH.
The goal is to create systems that will computerize the data gathered in the nation’s emergency rooms, operating rooms and intensive care units and link them together in statewide or nationwide networks, so that information on patients can flow freely among health care providers.
Once the networks are up and running, it should make hospitals, clinics and private practitioners’ offices run more efficiently — and cheaply. A 2005 report by the think tank Rand Corp. estimated that a properly designed network could save the health care system as much as $77 billion per year by providing doctors with the necessary tools to make decisions.
Those kinds of savings are far in the future and will come only after health care providers, which now rely on paper for their record-keeping, are interlinked and work out the inevitable kinks and bugs of connecting competing software systems, as well as addressing the challenge of keeping personal records secure.
In the meantime, the government’s infusion of cash is creating a miniboom in the medical information technology field. Software vendors are particularly attracted by a $19 billion HITECH program that — starting in 2011 — will pay $45,000 to $60,000 to individual caregivers and millions of dollars to hospitals to implement interoperable computer networks.
Locally, health care IT firms have been in hiring mode, adding workers even at a time when other industries constrict. Medsphere, a company in Carlsbad that specializes in providing software to hospital and clinic chains, has hired 10 workers in the past month and plans to hire 10 to 20 more before the year is out.
CliniComp, which specializes in such things as an electronic patient chart, has hired 20 people in the past three weeks. The company, based in the Golden Triangle, has openings for a software engineer and a systems analyst.
“We’re interviewing people every single day,” said Alan Portela, CliniComp’s president. “There’s been a 220 percent increase in our bookings, with a combination of private-sector and federal business, and we foresee that we should be able to grow at 40 percent per year for the next two years. And all of this is happening at a time of recession.”
Those kinds of growth figures are drawing other entrepreneurs into the field. Last week, more than 200 people gathered at the Salk Institute in La Jolla to attend a panel discussion on the “entrepreneurial opportunities” in the stimulus funding.
“Yes, this is a lot of money. And it certainly will incent a lot of activity,” Mike Murphy, chief executive of San Diego’s Sharp HealthCare, told the crowd.
Vik Kheterpal, principal of CoreEvolution, a Michigan firm that focuses on making health systems interoperable, told the audience — mostly made up of software providers and investors — that “hospitals are essentially getting a $45 billion bribe from the nation, saying, ‘You ought to adopt this technology.’ ”
There are some critics of the stimulus funding.
Tevi Troy, who was a deputy secretary of health and human services in the Bush administration, said that even though he believes that electronic health records are “inherently good” and that government should take steps to encourage their growth, he questions why the program will require so much taxpayer money.
“Should taxpayers purchase a good that some doctors and hospitals have already had the ability to purchase with their own money?” Troy asked in a paper published by the conservative Heritage Foundation this year.
Proponents argue that most computer systems are too expensive for health care systems to pay for on their own. They stress that the modernization is necessary not only because of the money it might save, but because of its impact on patient care, because it can cut down on clinical errors.
“Without the stimulus program, we couldn’t have afforded to do this,” said Tracy Ream, chief executive of Neighborhood Healthcare in Escondido, which spent $1.2 million in stimulus-related grants on an electronic health care system from eClinicalWorks of Boston.
Ream said her chief goal was to make Neighborhood Healthcare more efficient by connecting the operations of its 11 facilities in northern and eastern San Diego County and Temecula.
“I thought this was all about saving money by being more efficient,” she said. “But then I realized this addresses some huge health and safety issues.”
Haydee Rose-Garcia, nurse manager at Paradise Valley Hospital in National City, said the computer system makes it much easier for nurses to determine when patients need care, instead of consulting paper charts that aren’t always legible.
The prenatal department has a computer in every patient’s room, as well as six in the nurses’ station, using CliniComp software.
Currently, the United States lags behind most industrialized countries in information technologies for health care.
In Australia, the United Kingdom, New Zealand, Denmark, the Netherlands, Finland and Sweden, between 79 percent and 100 percent of primary-care physicians use electronic health record systems, compared with 23 percent in the United States, according to a recent report by the Information Technology and Innovation Foundation.
Although the United States is not at the bottom of the list — doctors in Japan and Canada are less wired in — the lack of computerized records could partly explain why the United States pays far more money on overhead costs than other countries.
“The biggest reason for the gap (in computerization) is that until recently, we’ve had a lack of national-level leadership on this issue,” said Daniel Castro, senior technologist at the Information Technology and Innovation Foundation in Washington, D.C. “On an issue like this, when you don’t have national leadership, you don’t have the coordination you need to see it through.”
Castro said that one reason other countries have been so successful is because their governments, which typically spearhead the computerization efforts, are more focused on the long term than private companies or their investors.
“Investors sometimes run from the field when they don’t see a quick return on their investments,” Kheterpal said.
That could explain why — with the exception of a handful of major health care systems like Kaiser Permanente — some of the most successful software systems are in government-run health care systems, notably the Veterans Affairs hospitals.
Until recently, most of the leading health care software providers also found their steadiest customers within government. Anakam and CliniComp have concentrated heavily on military and state-government contracts.
Medsphere based its technology on a source code from the Veterans Affairs Department, which the company acquired through a Freedom of Information Act request.
Although Medsphere has sold its software to individual hospitals and relatively small chains throughout the country, its biggest clients include such government entities as the West Virginia Department of Health and Human Resources as well as the Indian Health Service, which runs 48 hospitals and several hundred clinics throughout the country.
The promise of government funding has brought some venture capital money back into the market. Last month, for instance, such investment firms as Azure Capital Partners, Epic Ventures, Thomas Weisel Venture Partners and Western Technology Investment pumped $12 million into Medsphere.
Mike Doyle, Medtech’s president, predicts that the health technology field will continue to grow even after the stimulus goes away.
“A whole new market is going to revolve around this space, whether it’s manufacturers who build devices that can plug into the (electronic health records) systems or software companies that can build more applications for the systems,” Doyle said.
“There’s a whole new opportunity to figure out how to bridge the gap between paper and information technology.”