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Making it Work

July 1, 2006
by David Raths
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Vendor-provider partnerships can yield tremendous results. But, just like any relationship, success depends on effort from both sides.

We've been married for over five years and the relationship has just increased in its benefits and its intensity." McKesson Information Solutions' Jim Nemecek isn't talking about his wife, but about his company's long-term software development deal with Vanderbilt University Medical Center.

McKesson has development relationships with Vanderbilt and Duke University Medical Center involving Horizon Expert Orders, its computer-based physician order entry (CPOE) system. As senior vice president, Nemecek's job is to support the implementation and enhancement of the product at those academic institutions and then integrate those improvements into the product it sells to the wider market.

In the healthcare industry, the term partnership is commonly used to describe relationships between vendors and their customers, but often that description is just marketing spin. Some companies and entrepreneurial nonprofit health systems, however, are starting to formalize long-term development deals that involve royalty payments, governance boards and liability clauses. Companies such as McKesson, GE Healthcare (Chalfont St. Giles, U.K.) and IBM (Armonk, N.Y.) are drawn to the spirit of innovation on hospital campuses today.

Many health systems are developing clinical information system expertise but lack the software tools or marketing clout to commercialize it. The offspring of these marriages may lead to the next generation of clinical applications, but these new partners are learning that there are cultural complexities to merging the efforts of their organizations.

"Embedded engineering"

Based in West Valley, Utah, with satellite offices in other cities, a development team made up of 240 employees from nonprofit health system Intermountain Health Care and for-profit GE Healthcare is working on a series of Centricity clinical information applications, including electronic health records, that the division of General Electric Co. plans to market to the industry. The two companies are collectively investing more than $200 million in the 10-year project announced in July 2005.Giri Iyer

"People talk about embedded reporters. Well, I call this concept 'embedded engineering,’” says Giri Iyer, general manager of strategic relations at GE Healthcare. "It's a new way of collaborating between suppliers and consumers."

A co-developed electronic medication administration record product is scheduled to be introduced in the fourth quarter of this year, to be followed by emergency department, critical care, and ambulatory care products that leverage the strength of Salt Lake City-based Intermountain's clinical IT infrastructure.

Because it was not a traditional sales relationship, the parameters of the deal required serious negotiations. "We are co-owners," Iyer stresses. "We had to sit down and decide who's going to hold whom accountable. We are both making an investment in people and resources."

Kevin Smith, Intermountain's general manager of the alliance, believes that equal investment by both parties is crucial. Otherwise the vendor might dictate to the provider and its commercial considerations might weigh more heavily in decisions.

"Intermountain's ideas may be clinically relevant, but if we weren't paying our own way, our viewpoint might not be listened to," he says. "I think that's why efforts like this have failed in the past."Kevin Smith

The IT executives at Intermountain, which has 21 hospitals and 92 clinics, had looked at the products on the market and decided to build their own enterprise clinical information system. But they also wanted a development partner to mitigate risks. "We sought a commercial provider with a broader view of the market and deeper development resources," Smith says.

Besides saving Intermountain money in development costs, the GE deal should help it collaborate with other providers using the same software. "We wanted to avoid becoming an island," Smith says. "We want something that's widely used so that if they're doing something at places like Mayo Clinic or Duke, we can collaborate and have interoperability."

Both Iyer and Smith say managing the partnership projects is tricky. One problem is that some employees had responsibilities outside the GE-Intermountain projects that their managers still expected them to do.

"We had to completely break those responsibilities," Smith says. Some employees have tried to manipulate decisions in ways that violate the guidelines established in the partnership governance structure, Smith adds. "Many of the people assigned to steering committees are getting reports once a month. They're used to getting reports once an hour and they are having separation anxiety," he says. If the joint effort fails, it will be because of a lack of trust, Smith says. "They are now part of a shared organization and they have to trust their managers and the managers of the other organization to do the right thing."

Leveraging partnerships

In 2001, McKesson bought the rights to a CPOE product called WizOrders that Vanderbilt had spent years developing and was looking to commercialize. McKesson renamed the product Horizon Expert Orders. "But we didn't just buy it and sign off on the deal," McKesson's Nemecek notes. "They helped us integrate it with our Horizon Clinicals and they have continued to develop functionality and content on an ongoing basis."


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