Jan. 15, 2008 | Expect large institutions to make significant IT investments; RHIOs will still struggle with architecture and governance models; EMRs creep closer to reality, and health plans will continue to implement consumer-directed vendor partnerships.

So says Forrester health care analyst Eric Brown as he examines the industry landscape for the coming year. Digital HealthCare & Productivity spent some time talking with Brown, who launched Forrester’s health care practice in 1999 and now serves as research vice president.

DHP: Let’s start at the top. What does the health-IT spending picture look like for the coming year?

Brown: If we look at large hospital and enterprises, we’re looking an average of 3.5 percent of their budget spent on IT, with some notable outliers in the 5-6 percent range. This includes investing in the usual suspects: electronic medical records, clinical information systems — PAC systems (Picture Archiving and Communications), CPOEs (Computerized Physician Order Entry), nursing station automation, pharmacy systems -- and in the middle there’s some sort of clinical data warehouse and analytics, the operational reporting that helps hospitals improve their administrative and clinical efforts.

This spending trend is not a huge uptake but a slow and steady growth over the past five to seven years as large institutions spend more aggressively on clinical systems. And compared with other industries at large, there’s a much higher ratio of investments in new initiatives, about 45 percent of the IT budget -- as compared with operations, maintenance or salaries, and other things that are ongoing. But in smaller hospitals, only 24 percent of the spending is dedicated to new initiatives, and 75 percent is spent on maintaining current operations.

DHP: Why is there a discrepancy in investment plans between large and small operations?

Brown: It’s similar to the demographic distribution of EMR adoption. EMRs are not evenly distributed across all practice sizes — they are significantly slanted toward the larger groups that tend to act like businesses as opposed to the smaller groups which tend to act like loose configurations of individual practitioners. Smaller practices are much less likely to have the business and technology tools to bring these EMRs in, manage them over time, back them up, and replace servers when they break. And that’s been a barrier.

DHP: Is this the year EMRs move closer to reality?

Brown: Is this the beginning of the hockey stick? You have roughly one-third of everyone doing it — does this mean the floodgates open and the stampede happens? We’re not on the precipice of madhouse adoption because there has to be one more turn of the technology screw for us to experience the everyday utilization of the EMR, and that’s the on-demand, server-in-the-cloud, software as a service.

There are a lot of buzzwords around how this will be delivered — but it requires some mechanism where a small practice doesn’t actually operate the server itself. This means you need an extremely reliable network connection and all sorts of trust in putting those medical records behind a remote service. The EMR is such a highly interactive and graphical -- not a heads-down transaction -- system that it needs to be something that a physician has to operate in clinical setting without a time lag or sacrificing functionality on the client side. Today’s EMRs are just marginally good enough for people to feel like they’re getting value out of them.

If you stretch the string between the physician and the server, which is on the other end of a very long telecommunications line at a data center some place, and all of a sudden it’s slower and clunkier, that’s not going to work. There are technologies that create this kind of rich connection between the two — bandwidth is getting better and more reliable all the time, but until software as a service, or hosting, thin client, or whatever you want to call it, becomes widely available, we’re going to have a hard time pushing through that first one-third of adopters into the remaining two-thirds. I think we have another two years before these kinds of on-demand technologies are embraced.

DHP: What needs to be in IT tool kits for those who are building consumer-directed health plans this year?

Brown: The tools associated with CDHP, Consumer Directed Health Plans, include Website design and access to content on the back end. This isn’t so much acquiring the proper tools and technologies as it is about making a usable Website, good old-fashioned customer experience and good site design. This devilishly hard and difficult to buy in a box or can. You need to understand who your members are and what they expect to do when they come to the site as consumer, and then model those experiences, as opposed having a litany of functional capabilities at the site.

I wouldn’t characterize the market as a wasteland of legacy systems that don’t speak CDPH; most plans of considerable size have remedied their systems and can make available the information and transaction they need, but making it meaningful at the Website is a bigger challenge.

The biggest technology associated with CDHP is connecting my backend with some financial institution — there’s a bunch of organizational middleware there. That’s tough work. But there’s an even more profound business opportunity available: the individual market. [That’s] building a system where consumers can shop for individual insurance and take the agent out of the way. This is a huge growth area, but [requires] a big transformation in the fundamental processes including how policies are determined, underwritten, issued, and managed. This is a both a huge business opportunity, more profound than CDHP and more work for IT.

DHP: Regional Health Information Organizations (RHIOs) have made only a modest start in the last few years. What do you see ahead?

Brown: It’s going to take a long time for RHIOs to actually materialize and there are three things in particular that predicate small adoption. First, who pays for it and who owns it? Those are governance and sustainability questions.

Second, what’s the functional design, i.e. the technical architecture? What does it actually do, how much information does it share, how does it distribute it? You have the big database in the middle, end servers, direct access to clinical repositories. You have people saying forget about trying to create an aggregate picture of a patient medical record, let’s just work on secure messaging and e-mail. Again there’s some evidence of some things that might work, but no clear answer.

Third, there is a lot of anxiety around the unintended consequences of sharing [data], many of them legal. [That’s] because there’s a lack of clear understand and legal precedence around the liability of handling of medical records.

With these three things holding us back, it doesn’t mean that RHIOs will never happen, because these are resolvable questions -- not this year, not next year, not in the next three years, but probably in the next 10 years. We’ll probably be half done with this RHIO game by 2015.

Well in advance of this, I think it is the payer-based picture of my aggregate health record that is much more likely to achieve many of the intended goals of RHIOs. It’s imperfect, it’s not as good as a medical record, and it’s often biased by coding intended to maximize revenue, but it’s available, and the payer-based electronic health record is 30-40 percent of the value for two percent of the cost.

DHP: What are some overall health care predictions that you’d make for 2008?

Brown: This is the year of clinical analytics. At the end of this year we’ll look back and marvel at what we’ve begun to learn by exploring and analyzing the data increasingly available to us through these clinical information systems. I think this year we’re going to recognize that because of EMRs, we’re all in clinical trials all the time. We have put into place the information technology tools to manage the improvement and practice of medicine in real-time.

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