| August 2006 |
| By Tim Gray |
The legislation designed to pave the way for health care IT implementation is expected to reach President Bush’s desk as early as September, and the passage of the bill likely means billions of dollars will be up for grabs in the tech sector.
After slowly wending its way through two separate committees over the past several months, the U.S. House of Representatives last month approved the Health Information Technology Promotion Act of 2006 (HIT).
And that is good news for IT executives, entrepreneurs and just about every level of tech worker hoping to push into this seemingly endless field.
“This is a huge undertaking and a great opportunity for technology information vendors,” said Robert Booz, research vice president of the information technology research firm Gartner Group. “I think it is safe to say it will be measured in the billions of dollars.”
While a few steps remain before the bill becomes law, President Bush is on target to meet his goal of providing most Americans with electronic health records by 2014.
IT interoperability
When the U.S. House late last month passed HIT, the mostly non-partisan supporters said the plan included creating a permanent sub-cabinet position of national health care IT czar, as well as interoperable electronic health records and e-prescribing systems.
The idea is to help reduce costly medical errors, inefficiencies, and costs, according to the legislation. The Institute of Medicine estimates as many as 98,000 people die every year from hospital medical errors. That ranks death from medical error the sixth largest cause of death in the U.S., according to the Centers for Disease Control.
The Department of Health and Human Services and the American Health Information Management Association says moving to a system of interoperable digital records could save as much as $300 billion in unnecessary expenses.
"It's time the health care industry moves to a digital future," said Rep. Lincoln Diaz-Balart (R-Fla.).
The legislation also requires any storage of electronic medical records to meet the same privacy standards as medical records used today.
The bill would also create an Office of the National Coordinator for Health IT and allow hospitals to provide doctors with IT systems in hopes of avoiding kickback laws that plague the current system.
What it means for the tech sector?
The legislation is a potential bonanza for any number of IT executives and entrepreneurs who either have already moved into the space, or are looking to enter what many expect to be a pretty large fray.
“Conversion will cost payers in the tens of billions of dollars, and of course, one organization’s expense is another organization’s revenue,” Booz said.
Although there is no way to put an exact figure on potential revenues created from the implementation of the nationwide program, a recent report from market research firm Input, of Reston, Va., said state and local governments are expected to increase spending on healthcare IT from $7.6 billion in 2006 to $12.2 billion by 2011.
“Both the amount of action and the type of action we are seeing are indicative of forward momentum for health IT,” said James Krouse, acting director, public sector market analysis at INPUT.
And now IT outfits large and small are lining up for the gargantuan opportunity that will spring from the legislation.
“It has the potential to create a lot of money and a lot of jobs,” Booz said.
Too late to join the fray?
Booz says large firms are already moving into the space and predicts compliance spending will encourage some startups to shift focus or move completely into the IT health care field.
“It [the legislation] puts a lot of the burden on creation and maintenance,” Booz said. “To be sure providers, hospitals and physicians will have large expenses and that also means health and uninsured costs may increase.”
Bluegate, a leading provider of outsourced health care IT solutions, recently enjoyed reported record earnings and expect the recent legislation to continue to increase their growth.
“Already, we have received calls from many health systems eager to create a sustainable model taking advantage of the emerging new regulatory environment,” said Manfred Sternberg, chief executive officer of Bluegate. “While these will take time to evaluate, we expect that they will bolster our ever-expanding sales pipeline.”
Of course entrepreneurs and businesses like Bluegate are now going to have to compete in this space with the big players looking to develop health record software. Microsoft recently bought software developed by two doctors and formed a new division to manage the product.
“Healthcare delivery is one of the top global challenges for governments, employers, caregivers and consumers,” said Peter Neupert, corporate vice president of Microsoft’s newly formed health solutions group. “Microsoft believes that information technology can positively impact the situation by removing barriers and empowering physicians with instant access to critical patient data.”
Allscripts Healthcare, Cerner Corp and GE Healthcare have also positioned themselves to reap benefits from the plan. Hardware titans IBM and Hewlett Packard are also gearing up to gain from the legislation.
Research firm INPUT predicts healthcare institutions will increasingly outsource functions such as eligibility verification, online customer relationship management and claims processing, thus creating even more potential verticals for enterprising firms to operate in.
The overall market for IT in the health care vertical is projected to be between $4.4 and $4.6 billion next year, according to INPUT.
Privacy Concerns
Although universally lauded as an important piece of legislation that will save Americans money, and hurry the updating of a system considered years behind European health care reporting, there are concerns about patient privacy.
"Without basic privacy protections built into the legislation up front, Congress will create an electronic superhighway system for others to misuse, data mine and steal the nation's medical records," said Deborah Peel, chairman of the Patient Privacy Rights Foundation.
“Patient Privacy Rights and the Coalition for Patient Privacy have repeatedly urged Congress to include specific patient privacy protections in health information technology (HIT) legislation,” she said.
The administration said it supports the current bill but was “still assessing the cost of the bill and looks forward to working with Congress to ensure that it does not cause a net increase in spending," according to a statement released by the White House's Office of Management and Budget (OMB).
“We are still a little ways away from the final look of the bill,” said Booz, VP of Gartner. “But everyone has already started lining up and they are going to be ready.”
Tim Gray is a freelance reporter in New York City covering the tech industry.
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