September 20, 1999

WHAT'S UP WITH ASPs?

Application service providers, or ASPs, was one of the hottest topics under discussion last week at the Microsoft Healthcare Users Group Conference in San Diego. In this article, we will briefly describe ASPs, explain why they will be important, and list some specific implications for care management approaches. While ASPs will be attractive to all health care organizations, we will focus on the unique advantages they can provide for physician offices. 

NOT A POISONOUS SNAKE, BUT A GREAT CONCEPT

ASPs are a new type of company that provides outsourced management of application software via the Internet. In essence, the ASPs rent access to applications software (for example, Peoplesoft for human resources applications, or Medical Manager for physician practice management applications). 

Corio and Zona Research have sponsored excellent white papers on ASPs (read the first half of each of these for more background): Under the old client/server model, physicians had to purchase, install, and maintain both hardware and software at their local offices. Under the new thin client ASP model, software is purchased, installed, and maintained centrally at the ASP's site. Physicians need only minimal hardware and software to access ASP services:

A PC (and in many cases even an older PC dragged out of the closet will do just fine) 

A web browser 

An Internet connection

THE DOCTOR'S QUESTION: "WHAT'S IN IT FOR ME?"

What's significant about the ASP model? 

The ASP model is an ideal approach for doctor's offices. As we discussed in an a earlier article in our e-newsletter, physicians direct over 70% of health care expenditures. They are the hub of health delivery in a local community. Physicians have been reluctant to capitalize computer and software purchases. This is particularly true for primary care providers, who have lower incomes than specialists. When the choice comes down to "Should I spend $100,000 on a new computer system or fund my kid's college education?" guess which wins? 

Pay-as-you-go pricing structure offered by ASPs will be viewed favorably by many physicians. Free or subsidized ASP services will be provided to physicians by organizations that want to link with doctors, e.g., payors, pharmaceutical companies, Internet health companies, e-commerce companies. Ironically, hospitals - which in the past have gone to great lengths to partner with their local physicians - will be greatly limited or prohibited from underwriting these services for their physicians. Federal legislation (prohibitions against private inurement) limits hospitals from providing physicians virtually anything that might be interpreted as payment for patient referrals.  ASPs provide ongoing support. This means fewer staff or contractors will be needed to maintain computers and upgrade software.

Most support will be provided centrally by the ASP.  ASPs allow for provision of multiple, best-of-breed software programs. Do you think Medical Manager is the best practice management system and Peoplesoft is the best human resources software program? No problem. Soon you'll be able to get both from your local health care ASP, and someone else will take on the headaches of making them work together.  Shorter sales cycles. The ASP approach avoids the need for front-end capital investment in hardware and software associated with client server systems. 

IMPLICATIONS FOR CARE MANAGEMENT

Quick and easy adoption of ASPs is likely to be very good for care management initiatives (but could backfire). This will depend on how ASPs are adopted in local markets. Allow us to explain.  

OPTIMAL care management requires sharing of data and communications among providers. There's no doubt that ASPs promise to speed up the TECHNOLOGICAL solution to improve data sharing and communications. Today's methods - primarily faxes and phone calls - are not very efficient.

Internet connectivity promises to reduce costs, broaden access, and provide a system of documentation and follow up.  However, initial efforts at providing Internet connectivity to doctors offices are being focused on TRANSACTION oriented applications, as opposed to clinical management applications. Transaction oriented applications include patient scheduling, referrals to other physicians, preauthorization approvals, insurance eligibility verification, etc. Focusing on these applications is much more straightforward and offers more immediate paybacks for physicians and their overburdened office staff.  

These initial efforts have been undertaken by the some of the new e-health companies, and we expect that ASPs will also initially focus on transaction oriented applications.  There is a danger here. The e-health companies are developing two divergent strategies in attracting physicians to their networks: 

1) Gather market-share and critical mass NATIONALLY (e.g., Healtheon), and 2) Gather market-share and critical mass in LOCAL markets (e.g., CareInsite and Pointshare).  

How will all this play out? It's too early to tell, but there are two possible scenarios:  

1) Local markets converge around one common Internet technological infrastructure and work cooperatively on care management initiatives. 

 2) Local markets fragment into 2 or more technological Internet infrastructures. Clinical data are viewed as competitive tools, and are not shared freely among health care providers. 

Clearly Scenario 1 is a much more desirable scenario to promote widespread adoption of care management approaches.  In summary, ASPs offer many benefits. However, the ease of implementing new ASP approaches might work against developing a community-wide Internet infrastructure to promote care management. Stay tuned to this key development. 

COMMENTARY ON WebMD

Have you heard of WebMD? It is a company that is striving to become the premiere Internet health care portal to both consumers AND physicians.

WebMD is in the process of completing its merger with Healtheon.  If you haven't heard of them, you will soon. Unless you are cloistered in a monastery somewhere, you will soon see WebMD rolling out a well-funded ad campaign.  

I had the opportunity to see the CEO of WebMD, Jeff Arnold, give a keynote presentation at the Microsoft Healthcare Users Group (MS-HUG) conference. Anyone who is 29 years old and is a billionaire can certainly capture my attention for a 45 minute speech!  I'd like to present a few friendly challenges which I believe are Achilles heels in the WebMD business and clinical model:  

1) Does WebMD really grok (understand) the local nature of health care delivery? While just about everyone, including Mr. Arnold, TALKS about this, sometimes attitude speaks louder than words. While many of the 2,000 attendees of the conference came from home town America, Mr. Arnold presented to group as if it were composed entirely of investment analysts. When a number of San Diego area physicians flooded up from the audience to ask questions probing how WebMD was relevant to their lives, he reverted to strategic rhetoric.  

The irony: WebMD seems to have a lot to say to the home town crowd. It issued a press release announcing 35 agreements with major health care systems (see the URL above under News & Events, 8/3/99). Suggestion: time to add speech #2 to the repertoire.  

2) Is Healthsouth the right partner? At the conference Mr. Arnold announced a new $50 million partnership between WebMD and Healthsouth. 

Healthsouth is a rehabilitation and ambulatory service company that has established a presence in all 50 states. Healthsouth has developed joint ventures (JVs) with local physicians in which doctors own a portion of locally structured business deals. While I personally have seen well-structured joint ventures accomplish miracles, I recognize that many physicians have problems with JVs. Many doctors believe that physician investments in joint ventures are unethical because they can compromise the physician's responsibility to an individual patient.  

Healthsouth's approach has been an effective niche business strategy. Within a local community, this approach will attract a segment of the medical community, including the most entrepreneurial physicians. Healthsouth claims to have 50,000 physicians affiliated with its facilities and services.  

However, these Healthsouth affiliated physicians often are not mainstream members in the politics of a local medical community. I am skeptical that they can be the opinion leaders who can bring along other physicians and persuade them to sign up with WebMD. WebMD's partnership with Healthsouth will raise eyebrows among most mainstream doctors and could work against entrenching the company into local health care delivery.

Finally, Healthsouth facilities are usually competitive with major medical centers, another claimed partnership target for WebMD. Will WebMD have shot themselves in the foot with this deal?  

3) Does WebMD really need to create it's own health care content? Most Internet health portals are choosing to AGGREGATE health care information. That is, they will collect it from a variety of sources to package and present on their web site. WebMD is choosing to develop its own content and has hired a staff of 75 health care writers, 25 of whom are physicians!  

I don't get it?! If you're a patient, how eloquently can a staff of 75 writers say "Drink plenty of fluids, and call your doctor in the morning." If you're a doctor, are you more likely to believe a physician writing for WebMD or one writing for the New England Journal of Medicine?? Bottom line: I don't see how WebMD will be able to differentiate it's website by creating it's own messages. Spend the money elsewhere.  

My opinion, Vince Kuraitis, vincek@bhtinfo.com

MORE ON PHYSICIAN INTERNET USAGE

A recent issue of our e-newsletter discussed increasing levels of physician usage and acceptance of the Internet. A recent commentary in JAMA discusses further research about doctors' use of the Internet.  

The highlights: "...physicians increase their Internet and e-mail use following attendance at a 4-hour Internet workshop. Nearly half continued to report that learning to use the Internet was easy once they have been taught the skills." 

ANALYSIS OF E-HEALTH COMPANIES 

Witt Capital has started a bi-monthly analysis of e-health companies and events. Click on "Wit's Wisdom on eHealth".

E-CareManagement News  is an e-newsletter that tracks a major change in health care and managed care—the paradigm shift from “managing cost” to “managing care”. This e-newsletter is brought to you by Better Health Technologies, LLC (http://www.bhtinfo.com). BHT provides consulting and business development services relating to disease management, demand management, and patient health information technologies.

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