Staggering out of the fog created by Y2K, leaders of healthcare organizations are trying to get their bearings and take their information systems strategy in a definite direction.
But instead of encountering clear skies and familiar terrain, senior executives are staring at a drastically different topography for technology. Everywhere they look, references to the Internet dominate their line of sight. Scads of vendors, some recognizable and others not, are stepping forward to volunteer as guides or talk executives into taking a particular path.
Meanwhile, clouds of regulatory inclemency hang low.
The climate for information services hasn't gotten any brighter in the new millennium, judging from MODERN HEALTHCARE's 10th annual survey of information system trends, which polled 224 healthcare providers, both single-hospital organizations and multiple-facility systems.
Budgets for capital projects and operations are projected to rise, but at the lowest rate of increase in seven years. On average, each company surveyed spent 2.6% of its total operating budget on information systems, the same as last year. Half of the survey respondents spent between 2% and 4%.
This was to be the year that providers returned to clinical and analytical software initiatives--the key to operating with efficiency and purpose--after replacing doomed financial and administrative systems unable to handle the year 2000 in dates and computations.
But the word from healthcare clients is that the hiatus in procurement of new-age software is "not magically disappearing. People are not running to the store to buy new stuff," says Everett Hines, a Parsippany, N.J.-based principal with the integrated healthcare consulting practice of PricewaterhouseCoopers.
Y2K may have faded away, but capital budgets and personnel are still under the same type of burden created by that monumental overhaul, says Hines. In seamless fashion, the Health Insurance Portability and Accountability Act of 1996 has moved in as the successor source of pain, complemented by its tag-team partner: the Balanced Budget Act of 1997.
Concerned about balancing their own budgets while coping with HIPAA, more than half the organizations polled this year are striding into the Internet sector looking for an assist, according to the survey co-sponsored by PricewaterhouseCoopers and Zinn Enterprises.
But many of the organizations don't have a clear idea of where they're going-just that they have plenty of work ahead to make their information systems contribute to solutions, and everyone seems to think the Internet can help.
Among the survey's findings:
* Strategists are working overtime to harness the World Wide Web and prepare their organizations for an Internet-based information era. But other than sensing they need to dish out medical facts, most executives aren't sure what they're getting ready for.
* The percentage of provider organizations willing to seek outside help in compiling and running a multitude of information systems has risen into double digits. But strong resistance remains, and the marketing stance taken by some vendors of healthcare Web portals hasn't helped any.
* Productive two-way relationships between hospital systems and physicians continue to be a fervent wish, and interest is keen in Web-browser approaches promoted as the key to achieving that goal.
* There's a discernible uptick in demand for information systems that try to make sense of the proliferating volume of data being collected in electronic form. Clinical data repositories, decision-support software and clinical information systems are gaining as priorities, but they are vying for scarce capital and operating dollars.
* Priorities of single-hospital organizations often vary significantly from those of multiple-facility systems. Solo institutions are more concerned with catching up on their information capability and large systems are investigating ways to capitalize on the raw capability they've amassed and turn it into strategic value.
Respondents. Single-hospital organizations accounted for more than half of the 224 organizations responding to the survey and averaged 338 beds each, which reflects a certain bulking up in an era of consolidation. Multiple-facility systems comprise 35% of the respondents and each system averaged six hospitals and more than 1,000 beds.
In all, the survey represented 635 hospitals with a total of 132,000 beds. Stand-alone hospitals averaged $195 million in approximate annual revenue; multiple-facility systems averaged $650 million.
Of the executives responding to the survey, 29% were chief executive officers or administrators and 27% were either chief operating or chief financial officers. Chief information officers and directors of information services made up 35% of the survey sample, and the remaining respondents held other managerial titles such as chief medical officer or chief nursing officer.
The survey results were separated into single- and multiple-facility respondents as well as aggregated for all respondents.
Cyber-construction zone. Though Y2K readiness captured most of the attention on software issues last year, healthcare organizations were accelerating construction of private communication networks that employ Internet technology, called intranets.
Nearly three in four respondents reported having an intranet installed throughout their organization, compared with fewer than half in last year's survey. About 80% of multiple-hospital systems had an intranet, compared with two-thirds of single-hospital respondents.
The rapid growth made intranets as common as general-accounting software, the business backbone of provider networks. The only information system in greater use throughout a healthcare organization was e-mail, another staple of the Internet age, reported by 85% of respondents (See chart, p. 72). E-mail topped the list of installed computer applications for the second straight year.
Of 14 possible priorities for information systems during the next two years, installing and using emerging technologies such as the Internet and intranets was respondents' most-frequently cited priority (See chart, p. 74).
Last year, when Y2K was the predominant information systems issue, less than a third of respondents identified emerging technologies as the third-highest priority. (Feb. 22, 1999, p. 52).
Internet-technology options that were virtually unknown to the healthcare industry a year ago showed surprising progress toward adoption. More than half of the polled organizations are planning a healthcare-oriented Web portal (See chart, p. 74).
Depending on the software category, a third to a fourth of respondents either signed a contract, intended to sign or were considering an agreement with an application service provider. An ASP delivers computer applications to a healthcare organization over the Internet or a private network (See chart, p. 76).
Embracing a stranger. When healthcare organizations were asked how they use Internet technology, the top three responses were all entry-level: e-mail, online research and communication within departments.
The power of Web technology to organize a delivery network is harnessed by fewer than half the organizations polled. Clinical uses of Web technology were sparse: 15% reported using intranets to share clinical guidelines and 13% used the technology to access multiple databases simultaneously (See chart, this page).
A third used intranets as a bridge to other information systems. About 40% are employing the technology for networkwide communication of any kind, excluding e-mail.
But it's not as if surveyed organizations just haven't had time to crank up the machinery. Visions for the rapidly forming Internet and intranet infrastructure remain conservative outside of basic data exchange.
Asked how the Internet could be used to restructure the hospital/
physician relationship, more than 60% of respondents mentioned it could facilitate physician ordering of tests and physician access to test results as well as data exchange among caregivers. (See chart, p. 81).
More than half mentioned online medical information services and 40% saw physician access to patient demographic information as a good use.
Lagging other goals on the list were such opportunities as comparing practice data with standard protocols, comparing practice patterns with those of other physicians and maintaining personal patient records.
The findings suggest that healthcare executives are focused on staying current with the tools that help their organizations manage information technology instead of how those tools are going to be used, says Frank Cavanaugh, national director of the Chicago-based integrated healthcare consulting practice of PricewaterhouseCoopers.
Though most have embraced the technology, "it's like they heard about the Internet" as a must-have instead of recognizing certain problems and assembling tools for the solutions, Cavanaugh says.
Many organizations are viewing the Internet as just another application, as in, "Let's implement the Web," says Tim Zinn, president of San Diego-based Zinn Enterprises. "They're not looking at it as a way to re-energize the delivery system."
When it comes to ordering Web-based solutions to specific problems, "there's nothing concrete purchased, in place or planned," PricewaterhouseCoopers' Hines says. "All the action is on the payer side."
Health plans and insurers have seized the Internet's potential to handle stores of information better and communicate with enrollees, he says. "On the provider side it's all thinking, planning, not much else," Hines says.
Portal identity conflict. One thing providers are thinking a lot about is Web portals, sites through which companies can conduct business and exchange information.
Given a range of choices, 22% of all respondents said they plan to contract with an Internet portal company to use an existing site, such as the one run by Healtheon/WebMD.
Another 20% of respondents planned to build their own, either by developing a portal internally or contracting with a company that customizes portals. Other variations were mentioned by 16% of the sample.
Separated results reveal that multiple-facility systems were much more likely to go their own way, with 19% planning an internally built portal, compared with 9% of all single hospitals.
That do-it-yourself-option has gained strength despite the fact that portal companies have spent billions of dollars compiling just this sort of Web-based application.
Some 46% of all respondents said they would use portals as a medical information repository for services such as patient education; 26% said they would use portals to process transactions such as insurance eligibility verification and appointment scheduling. (See chart, p. 80).
Multiple-facility organizations were more interested in portals than single hospitals. Some 55% of larger organizations wanted a capacity to deliver medical information, compared with 40% of single hospitals, and 36% of larger organizations sought transaction capabilities, double the percentage of single facilities.
Many hospitals aren't using portal companies' Web sites because "the issue that stands in the way is branding," Zinn says. Though the products are fulfilling the needs of the marketplace, hospitals want their own brands.
Nailing down a brand name has become a high priority for Web companies trying to distinguish themselves from the clutter and establish an innate value that can be offered to Web advertisers and sponsors.
"The only thing some of these business-to-consumer companies think they have is their brand," Zinn says. Consequently, they don't want to give up that hard-won identity. The problem is, neither do healthcare systems.
Educating consumers is the main reason healthcare organizations want their own portals, and developing a brand identity is the second.
More than half of respondents said a portal allows consumers to be better informed about their healthcare. That follows from the high interest in medical information repositories. And in view of how portal companies promote healthcare Web sites to consumers, "education is the easiest thing for CEOs to think about," Zinn says.
Nearly 40% of respondents said having their own portals would allow healthcare organizations to develop a brand identity with customers. And once again, hospital systems are the force behind it. "They want their own brands. They don't want others' brands," he says.
Nearly half of hospital systems selected branding potential as one of the top three advantages of a portal, compared with a third of single hospitals prizing their brand identity as much.
Portal companies might have to revise their standard business model to connect with the healthcare industry, literally and figuratively, Zinn says. Until that happens, providers will opt for the custom route because they don't like the terms laid out by commercial vendors, he says.
Different directions. Although the portal phenomenon can whip up quite a discussion about patient education and medical information, those priorities appear to carry less weight when lumped in with other issues facing healthcare executives. In a business as complex as healthcare delivery, even strong signals sent about one issue have to be tempered by everything else competing for attention.
This year's survey adapted to shifting issues in healthcare by removing Y2K preparation from the list of 14 information system priorities and adding one: response to consumer/
patient needs for medical information. Despite high visibility in some circles, especially the budding e-health industry, the consumer-information priority finished near the bottom.
By contrast, Internet-enabled connections with physicians easily get the attention of healthcare leaders, Cavanaugh says. Besides the broad support for easier physician access to test results and overall data exchange among caregivers, respondents selected clinical information systems and clinical links to physicians as their two top priorities for developing an integrated delivery system, the same as last year (See chart, this page).
Respondents kept clinical decision support among their top three information systems priorities for the seventh straight year. This year they might finally be able to act on it.
Though healthcare systems have been trying for years to establish such links to and from physicians, doctors either would not invest in the pricey and inflexible network solutions available or were not about to be herded in the same direction on an intricate series of decisions, he says.
Web technology reduces the expense of maintaining high-end PCs and takes much of the complexity out of providing links and gaining consensus, giving healthcare systems a simpler pitch, Cavanaugh says. "Now they can say, `Here's my secure site. Link up.' "
Hines calls links to physicians "a huge strategy. Every CEO I talk to mentions that." The discussion even gets into how far healthcare systems can go in covering the expenses. "They want to know, `What's legal? Can I give them stuff?' "
ASPs creep in. Other trends brimming with recent publicity barely showed up as a blip in this year's survey. That's the case for applications delivered through the Internet--but it's probably a reflection of newness more than anything else, Zinn says. "The message (about ASPs) has not gotten out there under the Y2K fog," he says.
Among priorities during the next two years, contracting with application service providers ranked dead last.
When asked directly about ASPs, however, 14% of respondents said they have signed or intend to sign a contract with an ASP for clinical data capturing and reporting, and 12% said the same about administrative or financial applications (See chart, p. 76).
Despite the interest in linking to physicians, healthcare systems appear less enthused about springing for remotely delivered applications to manage their practices. Though 9% of the systems have signed or intended to sign an ASP contract, three-fourths said they were not considering it at all.
Single hospitals were more likely to be focused on financial applications; 15% intended to ink a contract, compared with 7% of multiple-facility systems. Conversely, 17% of larger organizations drew a bead on ASPs with clinical systems, compared with 12% of single-hospital respondents.
Outside help. Another variation on calling in the cavalry--outsourcing of entire information systems functions--also began to gather acceptance. On the heels of blockbuster outsourcing agreements made by Detroit Medical Center and New York Presbyterian Hospital last year, 8% of respondents said they have signed or intend to sign a contract to outsource responsibility for all information systems and services. Another 7% had not made a decision but were considering it (See chart, p. 82).
Other executives warmed to the idea of outsourcing information services in specific areas. Computer operations drew the most support, followed closely by clinical information systems and communications and network management.
Consultants and companies advocating the option have pointed to the advantages of fixed, predictable long-term expense and the ability of provider organizations to free themselves of responsibility for functions having little to do with direct patient care. But those benefits ranked lowest among reasons for considering an outside company for information systems operations.
Instead, expediency and cold sweats drove interest in outsourcing. The biggest consideration was inability to retain and attract the necessary resources and personnel to do the job internally (See chart, p. 82).
That's a recognition of limitations, Zinn says, along with the hope that in hiring an outside contractor, a healthcare organization will reap the expertise it doesn't have and end up sharing in the savings engineered by leading-edge information systems and management.
It's also a hedge against the risk that information technology will change faster than organizations can buy it and organize the specific skills to support it, Cavanaugh says.
Hello HIPAA. Healthcare organizations will have to rally all the resources they can for the next hulking industry overhaul, this time brought on by the administrative simplification and security provisions of HIPAA. Final regulations are pending.
Recognition of the new marathon project is reflected neatly in respondents' priorities for developing their integrated delivery networks. After clinical information systems and clinical links with physicians, HIPAA requirements ranked third. Last year's results were virtually the same across the board except for Y2K issues--also ranked third.
Among the choices for information systems priorities posed each year, a perennial cellar-dweller had always been addressing changes in government and accreditation requirements. But this year the priority jumped to the fourth highest, selected by 37% in the poll, compared with 6% a year ago.
The difference was the looming HIPAA issue, Zinn says. "The last time we've seen it this high was the DRG era," he says, referring to the implementation of diagnosis-related groups of illnesses as a reimbursement foundation for Medicare in the mid-1980s.
That transition period also created uncertainty about making ends meet, the same situation in which healthcare organizations find themselves today with cutbacks in Medicare reimbursement associated with the 1997 balanced-budget law.
Budgeting for information systems is showing the strain, with tapering in anticipated spending on capital and operations as well as stagnation in the percentage of total operating budgets represented by information systems. Respondents selected from a set of spending ranges.
More than 40% of this year's respondents anticipate an increase of 5% or less in capital spending, compared with 35% in the 1999 survey (See chart, p. 84). The weighted average increase calculated from this year's survey results was 7%, compared with 8.5% in 1999 and 10.5% in 1998.
In direct spending on computer operations, 92% of respondents expect an increase in their budgets but nearly half said it would be in the range of 5% or less (See chart, p. 88). The weighted average increase in operating expense was 6.1%, down from 6.9% a year ago and 8.3% in 1998.
Weighted averages are calculated by multiplying the midpoint of each spending range by the percentage of respondents selecting each range.
Organizations expect to devote the same percentage of their operating budgets to information systems as last year, with half of them at between 2% and 4% (See chart, p. 86).
But in a budgetary climate of cutbacks industrywide, the modest rise in information systems spending shows that healthcare organizations are making room for information technology development despite a continuing financial drought, says Cavanaugh. "These days, with the Balanced Budget Act, that's a relatively significant increase," he says of this year's findings.
In the aftermath of the Y2K-related spending spree, "there are other people in other parts of the organization who are going to need to be spending some money," says Zinn. He predicts a big jump in information systems spending after that spate of attention to other areas runs its course.
Back on track. The status of key projects in the effort to coordinate healthcare systems hasn't changed much in a year; only computerized order entry and indexing of patient information were operational in half the organizations polled (See chart, this page).
But including projects in progress, data repositories and networkwide scheduling systems were working or in the works at half the organizations.
Projects to build analytical and decisionmaking strength were further along at multiple-facility organizations. For example, data repositories were operational or being implemented at 62% of larger systems, compared with 47% of single hospitals.
And although clinical decision-support workstations lagged near the bottom of the list overall, 45% of larger systems were using or implementing them, compared with a fourth of lone hospitals.
Another middling project priority-managed-care software for such functions as membership accounting, insurance eligibility and claims processing--is faring much better at larger systems. Already 36% of them have operational managed-care systems, compared with 22% of single hospitals.
The differences between the two groups of hospitals did not exist a few years ago, when all sizes and types of organizations were similarly deficient in their information systems development, Hines says.
But contrasting perceptions have emerged since then about the role of information technology, he says. Single hospitals view it as a way to make business more efficient, while larger organizations see it as a strategic initiative to help them survive, grow and expand, Hines says.
Some vendors, he adds, are recognizing that schism and reorganizing their sales efforts based on it, establishing a separate unit to accommodate the different viewpoint and needs of large accounts.
After years of concentrating on the nuts and bolts of computer network development, healthcare organizations are beginning to shift their focus to getting some value out of them.
Among pressing needs identified in the ongoing campaign to integrate delivery systems, data repositories rose the most in a year, to third-highest in need from sixth in 1999. The top two needs remained the same: user-friendly system interfaces, the computer screen presentations that enable people to easily manipulate and mine applications; and access to information from all locations (See chart, this page).
Another escalating need: Web browsers to facilitate data sharing, rising to sixth this year from 11th a year ago.
Nearly a third of multiple-facility organizations said they need to standardize on a limited number of application vendors, compared with 13% of single hospitals.
Meanwhile, a fourth of respondents with one hospital professed a need to implement interface engines, which interconnect many information systems to facilitate communication. But most larger organizations were on to other things; only 8% said interface engines were an unmet need.
Overall, the performance of the Internet has stimulated interest in facilitating better access to the information stored within healthcare organizations, Zinn says.
Demonstrated daily in the business and personal lives of healthcare executives, the ease of Web travel is making them ask why healthcare information systems can't provide the same level of benefit, he says. "The Web has given us standards by which we judge all other automation."
