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News and Trends

February 1, 1998
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HIRED GUNS

IT Outsourcing on the Rise

THE HEALTHCARE INDUSTRY IS CONSISTENTLYspending more money on IT outsourcing. A recent study by information technology market research firm International Data Corporation of Framingham, Mass., indicates that the healthcare industry spent approximately $6.2 billion worldwide and $2.9 billion in the United States for outsourcing information systems operations, processing services and other IT-related business operations. The numbers are up significantly from 1996 spending of $5.6 billion worldwide and $2.3 billion in the United States.

The report also estimates that the composite annual growth rate of outsourcing spending will increase 10 percent in the United States and 10.9 percent worldwide through the year 2001. "The healthcare industry is undergoing a tremendous amount of flux as healthcare organizations around the world learn how to harness technology to better serve their patients," says IDC analyst Lisa Maio Ross. Healthcare ranked fourth worldwide in expected growth among 14 other industries, following only banking, communications and insurance industries.

Why outsource?
Reasons for outsourcing are many, but the idea that outsourcing saves money has fallen by the roadside. "The original motivation for us was cost savings," says Charles Emery, vice president/CIO at Blue Cross Blue Shield of New Jersey. "But it never materialized." Emery, who oversees BCBSNJ’s IT outsourcing contract, including approximately 300 IBM employees, says outsourcing gives him an easy way to track productivity and timeliness of delivery. "The downside is you spend a lot of money to do it." With over 2 million covered lives, BCBSNJ outsourced nearly all IT operations to IBM four years ago, and recently re-signed IBM for an additional 10 years.

Hiring and maintaining qualified employees is often the prime reason for outsourcing. Jon Burns, vice president/CIO of Forum Health/Western Reserve Healthcare in northeast Ohio, speaks highly of his own IT staffers--the few that he has. "Youngstown is not a garden spot," he says. "It became increasingly difficult to recruit people into our environment." The executive staff at Western Reserve made the decision to outsource all IT operations to SMS last year. Like many CIOs, Burns’ organization acted in self-defense. In the midst of a merger, downsizing and cost cutting last year, Western Reserve found outsourcing was the only way of implementing new technologies, Burns says.

However, the problem of recruiting isn’t limited to the provider or payor community. "We found that outsourcing vendors sometimes face the same challenges we do in getting qualified staff," says James Karolewicz, vice president/CIO at the H. Lee Moffitt Cancer Center & Research Institute in Tampa, Fla. After bad experiences with unqualified personnel supplied by their outsourcer, Karolewicz’s department began interviewing individuals and administering technical examinations, as if they were hiring for an internal position.

What’s outsourced?
A recent survey of 3,000 information systems directors, vice presidents, senior vice presidents and CIOs conducted by the College of Healthcare Information Management Executives (CHIME), a CIO educational resource organization in Ann Arbor, Mich., revealed that 56 percent of the 512 respondents outsource some portion of their IT services--spending an average of 17 percent of their IT budget.

The most popular areas in IT outsourced fully or partially are software development, implementation and support (21 percent); network design and support (20 percent); PC/desktop maintenance and support (19 percent); and data center operation (14 percent). The survey indicates how outsourcing has changed over time. "Outsourcing today has a broader definition," says Terry Wilk, vice president/CIO of Fairview Health System in Cleveland. "Ten years ago people thought outsourcing was either the data center or nothing."

--Jeffrey Elliott


Top IT Areas Outsourced in Healthcare % of Responses

Software development, implementation and support 21%

Network design and support 20%

PC/desktop maintenance and support 19%

Data center operation 14%
Consulting and contract programming 10%

Hardware maintenance and support 9%

Billing/financial system operation and support 8%

Telecommunications support 7%

Technical services 7%
PC/desktop acquisition and installation 6%

Help desk 6%

Management 5%

WAN design and support 4%

PC/desktop training 3%
Clinical system operation and support 2%

Base: 512 IT executives
Source: College of Healthcare Information Management Executives, 1997


Outsourcing Sessions at HIMSS

"IT and Telecommunications Outsourcing: Make It Work for You"
Tuesday, February 24,
1:00-1:50 p.m.

presented by Marjorie A. Stoltz, director, marketing communications, Convergent Communications, Inc., Englewood, Colo.

"Navy Medicine Outsourcing Initiatives"
Tuesday, February 24,
2:00-2:50 p.m.

presented by Captain Paul A. Tibbitts, MD, commanding officer, Naval Medical Information Management Center, Bethesda, M.D.


SURGICAL SIMULATION

The Virtual Patient

YOU ARE ABOUT TO UNDERGO HEART SURGERY, Aprocedure your surgeon has done before and rehearsed dozens of times with the help of a computer simulation system. But this time it’s not a generic prototype the doctor is practicing on, it’s you--a virtual you.

With help from the federal government, HT Medical Systems of Rockville, Md. is creating such a system. The virtual reality surgical simulation program called PreOp will create a 3-D simulation model based on a patient’s anatomical data, imported from MRI, CT and other medical images.

The user will "operate" on the computer-generated tissue through a set of virtual reality tools that closely mimic the surgeon’s real instruments, says Rick Cunningham, HT Medical director of engineering. The tissue model is designed to respond to each action, even to the amount of pressure the user exerts, much like human tissue would.

The rehearsal setting that PreOp creates is as real as it gets, says Monica Giffhorn, HT Medical marketing communications manager. "It’s not a generic female. It’s the person you’re going to operate on next week."

HT recently received a $2 million grant from the Department of Commerce National Institute of Standards and Technology’s Advanced Technology Program to develop PreOp by proving that this futuristic technology has potential economic value. The company is investing $1.6 million in the two-year project.

The system won’t be cheap for hospitals to implement. The mathematical models required for real-time simulation demand higher-end processing equipment than a traditional desktop PC. Much like an animated cartoon, in order for the simulation to appear life-like the computer will need to process 30 frames of graphics per second, Cunningham says. HT has yet to choose a platform or operating system for PreOp, but has used technology from Silicon Graphics in other applications and is evaluating Silicon’s new Windows NT-based platform. The system, which includes a display screen and computer, will be based on DICOM protocols and will interface to other hospital information systems. Greg Merril, HT president and CEO, says the system will cost approximately $50,000.

PreOp shows significant promise as a tool used in medical education. It will be designed to record, store and play back a user’s actions. HT says medical schools such as Massachusetts General and Penn State Hershey Medical are already interested in the technology’s training potential and contributed to its content development.

Thomas Krummel, MD, chair of the department of surgery at Penn State’s Hershey Medical Center, believes the system will greatly enhance preoperative rehearsal: Surgical interns can practice rare procedures without waiting for a real victim to enter the operating room, and seasoned doctors can learn the latest medical procedures without traveling to distant conferences.

Plug and play connectivity might be the best way to envision combining information from current patient monitoring systems with the simulation system, says Krummel. "We already have existing devices that are available commercially. It’s a matter of linking them together." Combined with telemedicine and/or the Internet, the technology also has the potential to redefine the concept of a second opinion. Once the data is in the system, the actions and results can be transmitted to a consultant who could then demonstrate his or her approach, Merril says.

HT also has plans for other patient-specific simulations, such as stent insertion and endoscopy, Cunningham says. "Minimally-invasive medical technology lends itself to computer simulation because the physician is already accustomed to using a monitor when operating."

--Pamela Tabar



FRAUD AND ABUSE

Detection Software is Big Business

HIGHMARK XACT MEDICARE SERVICES USED IBM’SFraud and Abuse Management System (FAMS) software to help Medicare build a case against a major national testing lab leading to a $182 million settlement and a $5 million fine. Another case led to an ambulance company paying $4.5 million to Medicare.

In 1994 Highmark, a subcontracting company that processes 300,000 claims per day from healthcare providers in Delaware, New Jersey, Pennsylvania and Washington, D.C., spent about $500,000 on software and hardware to uncover abuse, according to Margery Glover, manager of the company’s fraud investigations unit.

"Prior to the software it was a lot of manual effort on our part," says Glover. We didn’t do a lot of proactive data analysis because that’s hard to perform when you have 70 million claims going through the system every year. It gives us an advantage in identifying unusual billing patterns throughout all claims."

IBM’s FAMS is among the leading software programs in a growing field of players that have responded to a congressional mandate in the Health Insurance Portability and Accountability Act of 1996 which strengthens laws and penalties against fraud and abuse. Congress set aside $104 million last year to combat provider fraud--which the U.S. General Accounting Office estimates may cost the economy as much as $100 billion a year, or 10 percent of the $1 trillion healthcare market. The Coalition Against Insurance Fraud, a Washington, D.C.-based nonprofit organization supported by insurers and government agencies, says health insurance fraud costs the average American family $1,030 per year in higher premiums, taxes and costs of goods and services.

New software packages help identify healthcare insurance fraud. "There are a number of companies offering packages for data mining and data analysis that appear effective in rooting out fraud," says Michael E. Diegel, the coalition’s communication director. "They infinitely speed up an investigation and have the ability to do such things as show graphic representations of patterns of abuse."

Providers who violate a Medicare rule requiring diagnostic tests to be performed with three days of a patient’s admittance to a hospital can be detected by products from QuadraMed Corp. of Larkspur, Calif. and Tulsa-based CIS Technologies, Inc. (part of National Data Corp.).

Although not designed as fraud and abuse detectors, some software products handle claims auditing such as CodeReview from HPR Inc., Cambridge, Mass., and ClaimsCheck from the GMIS Product Group of Atlanta’s HBO & Company. And several other vendors have packages using medical records to identity fraud.

Glover believes software has become the preeminent tool in fraud investigations because of its number crunching ability to analyze vast amounts of data and see patterns an investigator sifting through paperwork might miss. "The software gives us another means of detecting fraud," she says. "It helped us identify fraud quicker."

--Frank Jossi


AUTOMATING THE ER

Need ER Technology Stat

COMPUTERIZED PATIENT TRACKING, ELECTRONICmedical devices automatically transferring data to decision support systems, physicians using touch screens instead of typewriters. Sound like a standard suburban emergency room? Think again.

"Essentially emergency departments have no automation," says Donald Bishop, president of software company Array Systems Corp., Arlington, Texas. "In 95 percent of the emergency departments in the country the only automation is a workstation or perhaps a terminal from their inhouse system that they use to place orders and discharges and do billing."

The HCFA guidelines implemented in October, 1997 have thrown most emergency departments a curveball by stepping up the evaluation and management documentation required for reimbursement, especially within the physical examination component.

"The old HCFA rules told you basically what you needed to do," says Donald Rucker, MD, an emergency physician in Boston and a senior consultant for Datamedic Clinical Systems, Hauppage, N.Y. "Now they not only tell you what you have to do, but also very specifically what you have to write."

The guidelines require physicians to give phrase or sentence responses to all questions, rather than answering only those that apply to the patient. Private insurance companies, which have tended to follow HCFA’s example in the past, soon may implement similar regulations.

The intent is to reduce errors and force physicians to use a standardized documentation format. If physicians skip some of the steps, they may miss out on some potential reimbursement. "These HCFA guidelines are going to cost hospitals mega-dollars if they’re not charting correctly," Bishop says.

The new HCFA guidelines are focused primarily on the documentation required for the highest trauma levels--CPT codes are dubbed level-4 and level-5. Rucker estimates these levels may account for 20 to 30 percent of emergency room patients.

Faced with manually writing additional documentation or paying for more transcription, many emergency department directors are scrambling to find an adequate documentation system.

The National Emergency Department Database Survey conducted by the Emergency Nurses Association, Park Ridge, Ill., in 1996 shows that most emergency rooms have a long way to go to reach an efficient level of computerization.

Eighty-eight percent of the 1,373 responding facilities indicated they used computers for patient registration, but only half the facilities used computerized order entry, charge capture and management reports. More than 70 percent were still using manual/paper entry for triage documentation, discharge instructions, medical records and patient tracking.

"The patients may come in waves and the biggest challenge is to keep track of what is going on," says Sue Lemke, RN, BSN and an alliance partner with Superior Consultant, Company, Inc. Southfield, Mich. "Clinicians need a system that will assist them in rapid triage, monitoring and treatment."


Applications computerized in the ER

Physician Assessments 14%

Physician Diagnoses 13%

Physician Interventions 12%

Physician Outcomes 12%

Base: 1,373 ERs
Source: Emergency Nurses Association, 1997

In the past, no one really studied the specific system needs of emergency rooms, says Denise Helfand, marketing director of Wellsoft Corp. in Somerset N.J. Instead, administrators focused only on the main hospital information system, which she says often cannot handle an ER’s frenzied pace and time-sensitive medical situations. "An ER system needs functions specific to emergency medicine. It better be quick and it better not have 25 application screens before you can perform a function," she says.

Part of the problem is platform history, Rucker says. Systems were built primarily in DOS, which at 80 characters per line, couldn’t handle all the data codes. "Now many systems are being built in Windows where you have better use of screen real estate," he says.

The grace period for enforcement of the HCFA guidelines was slated to end in January, but the American Medical Association requested a postponement until July 1998. Until then, emergency room personnel will be looking to trade in their ball points for a system that can solve writer’s cramp.

--Pamela Tabar


INFORMATION HUB

More Than Meets the Eye

TECHNOLOGY IS THE CATALYST FOR A SIGNIFICANTresponsibility shift for provider credentialing departments. No longer is credentialing database software used only for physician profiles: It is emerging as a hub that can provide information to several applications throughout a network.

"No one should be looking at their credentialing software only as a credentialing solution," says Wendy Crimp, director of operations consulting at BDO Seidman accounting and consulting firm in Costa Mesa, Calif. "When you populate a database with all that information, you may as well use it in other places too," Physician data in the credentialing database, including social security or tax identification numbers, can be easily transferred to other applications, particularly billing and claims.

Credentialing software really took off about three years ago, says Crimp, but providers are just now leveraging applications to their potential. "It became real obvious that we were entering a lot of the same data twice," says Jim Danner, the credentialing department’s network database administrator at the Harris Methodist Health Plan in suburban Dallas. Danner and his credentialing colleagues, who maintain files on 6,800 Texas providers, are now interfacing a Windows credentialing application from Morrisey Associates, Chicago, with its in-house claims system. "The main benefit is data integrity," says Danner. With only one set of data to enter, the information will be consistent throughout the network and even updated at least every two years as physicians are recredentialed.

Although Crimp says she has seen an increase in organizations using commercial credentialing software, she says only about 20 companies have off-the-shelf credentialing solutions and most are still missing key pieces, including the HL7 interface necessary to port data among applications. Right now, the market for Windows-based credentialing software is hot, she says. New Windows products released in the last six months include modules from Medic Computer Systems, Raleigh, N.C., and Sweetwater Health Enterprises, Dallas.

Uses of credentialing data aren’t limited to the confines of a healthcare facility. Integrated delivery systems are using credentialing data to profile physicians and other allied healthcare professionals among several hospitals. And consumer access to physician credentials with a Web browser represents the future of the referral process, says Jim Nutter, Morrisey’s vice president of sales and marketing.

The challenge for software developers: develop a database that allows us to package and distribute information in a complex environment without violating healthcare professionals’ rights, says Nutter.

--Jeffrey Elliott



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