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News and Trends

January 1, 1998
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Oxford’s IT Disaster

ON OCTOBER 28, 1997 THE FATEFUL WALLStreet "crash" of the year, one of the biggest losers was Oxford Health Plans. The largest health plan in the state of New York, and one of the fastest-growing HMOs in the country, Oxford saw its stock fall by two-thirds, from $68 to $25 per share: a loss of $3 billion on 49 million shares. That same day, Oxford announced losses of $78 million due to a host of billing problems.

Oxford, based in Norwolk, Conn., blamed its great fall on a flawed computer system that failed on both ends--receiving and collecting. The company has announced measures to get the company back on track. In the meantime, the fear for every healthcare manager is that problems like Oxford’s could surface in any health system that isn’t careful in managing its information technology.

"These organizations are absolutely, totally information intensive and information dependent companies," says Thomas Johnson, a managed care consultant with Sheldon I. Dorenfest Associates in Chicago. If the information is inaccurate, a managed care company loses its primary function: managing costs.

Johnson said his perception is that Oxford is run by a "brilliant, visionary" executive staff, but the marketing and sales force outstripped what the company’s technology systems could handle. "You had an information system director sitting there every day who had something new presented to him," Johnson said. But the system couldn’t keep up with Oxford managers’ demands. "I think they fully understand that at this stage, but it’s not an unusual problem in the industry," Johnson says.

The problem at the root of such disaster may be the frantic pace of competition in managed care. Managed care firms are being forced to merge and/or introduce innovations to attract and retain customers.

"The real question is whether or not information technology was fully to blame [at Oxford] or whether there are other factors illustrative with all the consolidation and growth in healthcare," says Ray Falci, healthcare technology analyst with Piper Jaffray in Minneapolis.

Oxford’s information technology problems began in 1992 when executives asked for more powerful and flexible technology that could respond to the company’s explosive growth. Oxford doubled in size to 1.9 million members in just 18 months.

The information systems division chose to build a new system internally, atop databases from Oracle Corp., and to move away from the older, patchwork-built system from Computer Sciences Corp.

Marc Hebert, a vice president from the Oracle Alliance Program, didn’t work on the Oxford project, but he called the Oxford situation "a classic systems management problem" of transferring a large legacy database to a new database system.

"There’s no magic to it," said Hebert, who previously was employed with Arthur Andersen on similar conversion projects. "It involves thinking through the detail of what does that data look like."

In Oxford’s case, the devil was in the details--big and small. The new system took far longer to build than anticipated. Contributing to the problem was an unusually high turnover among programmers. Over five years, Oxford employed 100 outside systems contractors. It was obvious, according to Hebert, that the new system was never properly tested to see if it worked.

The result was catastrophic. Providers were so late in receiving payments from Oxford, the New York attorney general’s office intervened. Oxford responded by advancing estimated payments to providers for unresolved claims. Oxford’s error was further compounded by underestimating rising medical expenses, especially for Medicare patients.

Worse still, customers weren’t billed on time--and sometimes not at all. When Oxford tried to bill belatedly for premiums, customers balked and some companies dropped Oxford altogether. Rather than try to collect, Oxford chose to write off its losses.

Oxford responded to inquiries for this story only by fax. A prepared statement claims that it has brought in auditors from KPMG/Peat Marwick to help straighten out the mess and it is installing new hardware to speed up claims processing. It is calling in a variety of experts, including ThinkMed Software, Milwaukee.

Maureen Willenbring Schriner is a healthcare writer in Minneapolis.

Contributions from Business Week (The McGraw-Hill Companies, Inc.) Nov. 17, 1997; Keith Hammond in New York and Susan Jackson in New Haven, Conn.


Network Helps L.A. Face Disasters

TO HELP PREPARE FOR THE "BIG ONE," OR ANY other natural or unnatural disaster, L.A. County last November simulated a 7.8 magnitude earthquake with thousands of casualties--testing area hospitals’ disaster preparedness. The county’s department of health services conducts a similar mock disaster annually, but the primary objective of this year’s scenario was to assess ReddiNet II, its new computerized emergency network.

Owned and operated by the Healthcare Association of Southern California (HASC), ReddiNet II is a mass triage system that allows hospital emergency and trauma departments to communicate during a disaster using 960 MHz microwave radio. "It is much less vulnerable than telephone lines that are often disabled or overloaded after a catastrophe," says Brian Greene, spokesman for HASC, a non-profit organization representing physicians, hospitals and health systems in Los Angeles, Orange, Riverside, San Bernardino, Ventura and Santa Barbara counties.

The concept for the network emerged in the late 1960s with a plane crash in Santa Monica Bay. After reports of the crashed spread, area hospitals went on full alert expecting a flood of crash victims. The crash turned out to be minor and victims never showed. As a result, members of HASC sought to develop an effective emergency communication system. They came up with the HEAR radio system that was put to use just prior to the 1971 Sylmar earthquake.

The original ReddiNet (Rapid Emergency Digital Data Information Network), launched in 1987, added the element of computers. It was controlled by a central 286 PC with custom terminals at each emergency site. Its successor, ReddiNet II, operates on Pentium PCs running Windows 95. Instrumentation Technology Systems (ITS), a small Northridge, Calif. firm designed the components, including software and a special controller interface card that allows communication between the radio and PC. The entire system--hardware, software and installation costs each hospital $30,000. "It is expensive," says Darlene Isbell of L.A.’s health services department. "But it’s a worthwhile investment in southern California."

All information is routed through the network by a "polling" process in which a central point or Medical Alert Center (MAC) retrieves emergency department updates and messages in the form of microwave "data packets" from each site and transmits the updated information out to the network. Mountaintop repeaters keep the data packets from getting held up in the Santa Monicas. The entire process takes about one minute, says ITS President Don Janess. "Worst case scenario would mean a three to four minute delay."

In the event of a disaster or multicasualty incident, the MAC sends a message that triggers an alarm at receiving hospitals and provides disaster assessment and hospital resource availability information. Under normal conditions, ReddiNet serves as a 24-hour message board for memos or bulletins. Local police will use the system to post alerts about fugitives or gunshot victims who may show up in the ER.

Other high risk metropolitan areas such San Francisco have installed similar emergency networks, but not as large. Since it debuted in August, 78 of the 82 paramedic receiving hospitals in L.A. County have installed ReddiNet II. HASC is relying on ReddiNet’s success in southern California to market the system nationwide. "Everyone’s waiting to see how it works in L.A. County. If it works here, it will work anywhere," Greene says.

--Jeffrey Elliott


Providers Overhauling Business Applications

SIXTY PERCENT OF INTEGRATED HEALTH NETWORKS (IHNs) are planning to replace one or more business applications by the year 2000, and 29 percent said they would replace all business applications, according to a survey conducted by healthcare IT consulting firm, The Kennedy Group, Redwood City, Calif. The survey also revealed that 53 percent of IHNs will take the best-of-breed approach to system replacement, while 46 percent are seeking a single-vendor solution.

Percentage of IHNs intending to replace primary business applications:

human resources 19%
materials management 67%
general financial 63%
financial reporting 46%

Source: The Kennedy Group

The survey, compiled from The Kennedy Group’s client base of 75 IHNs, aimed to measure satisfaction with current systems and trends in financial and administrative software purchases. "We had no idea so many IHNs wanted to replace their business applications," says Marie Turks, spokesperson for The Kennedy Group. However, providers are not replacing the applications because they are unhappy with them, but because they need additional functionality, she says. As providers are moving toward integrated delivery, so too are they seeking to implement healthcare information systems that cover the spectrum of care.

The survey results also cited comments on business application vendors. Respondents noted that vendors that have been successful outside of healthcare, such as Lawson, PeopleSoft and SAP, will benefit most from this trend. "We may see some significant shifts in IT healthcare market leadership," says Andrew Lederer, vice president, The Kennedy Group.

--Jeffrey Elliott


Fingerprints Used to "Book" Patients

TO MOST PEOPLE THE IDEA OF FINGERPRINT identification conjures up television shows where police officers book felony suspects with an ink pad. Yet the residents of LaPorte, Ind., lined up to have their right thumbprints recorded when LaPorte Hospital introduced fingerprint imaging technology during a pilot project in 1996.

"We gave away T-shirts and cups with fingerprints on them while we rolled fingerprint technology out little by little," says Carolyn Shebel, director of physician information systems at the 227-bed hospital. "The acceptance was excellent. But because of the stigma attached to fingerprints I think acceptance would be harder in, say, some New York neighborhoods."

Fingerprint technology falls under the rubric of the fast emerging field of biometrics, which includes identification methods such as voiceprint, retinal, iris and facial imaging. The technology records indelible characteristics unique to individuals--their voice, eyes and hands--for identification.

Interest in biometrics has grown as a result of the healthcare industry’s search for a single patient identifier system. Fingerprint imaging may be popular in part because it has a long track record of application in the military, law enforcement and government, according to Earl Adams, president of Professional Consulting and Computer Solutions, Inc., Mill Creek, Ind. Retinal and iris scans, for example, are not as accurate, and other biometric concepts are more expensive than fingerprint imaging.

Fingerprint technology can help reduce fraud by making it nearly impossible for someone to use a friend or relative’s medical card. "We need to know the patient is the person they say they are," Adams says. "With this technology, patients don’t even need a card. Everyone has their thumb with them."

Physicians and staff say they like the system because it screens patients who may have forgotten their medical card, and checks to make sure those with a card are the legitimate cardholder. As the system is expanded to associated clinics, says Shebel, both family physicians and specialists will eventually use it to access their patient’s electronic medical records rather than using outdated and piecemeal paper records. Fingerprint technology may also help in emergency situations when patients may be unconscious and without any identification.

LaPorte has fingerprint readers and workstations from NEC installed in the hospital’s inpatient and outpatient rehabilitation centers, emergency room, outpatient surgical center and outpatient registration area. The system went live in July 1996, operating on Windows NT and NEC ProServer, at approximately $7,000 per workstation. Since initiating the system, the hospital--a subsidiary of Lakeland Area Health Services--has captured the thumbprints of more than 5,500 patients.

A fingerprint goes into a database containing demographic information, date of birth and sex. According to Shebel, the system takes no more than 10 seconds after a fingerprint is entered to bring up patients’ medical charts. LaPorte and Lakeland Area-associated clinics are working toward the goal of someday making fingerprint imaging an integral part of an electronic medical records system.

Another hospital, Sarasota (Fla.) Memorial Hospital, uses a fingerprint identification system from Tampa-based National Registry, Inc. The system identifies hospital personnel authorized to see medical records; it is not being used at this time to identify patients.

As with all computer systems that house patient information and data, concerns over privacy have emerged with the introduction of fingerprint imaging. Margret Amatayakul, executive director of the Computer-based Patient Record Institute, Schaumberg, Ill., warns that the key to making the technology work without damaging a patient’s privacy is to "restrict access to the data to only those with appropriate authorization and legitimate business in the data."

--Frank Jossi


Feds Fund New Healthcare Technologies

THE FEDERAL GOVERNMENT SANCTIONED $11.6 million in grants for new healthcare technology projects identified as having potential economic benefit for the United States. Sponsored by the Commerce Department’s National Institute of Standards and Technology, the Advanced Technology Program (ATP) will partially fund projects to develop systems for preoperative decision support, vascular disease prediction and treatment, continuous speech recognition, population-based pharmaceutical decision support, component-based decision support and a national master patient index.

Criteria for the proposals were based on a marriage between scientific and commercialization merit. "Awards are given for high risk technologies that provide broad-based benefits for the American economy," says Bettijoyce Lide, program manager for ATP’s Information Infrastructure for Healthcare division. The healthcare award-winners were chosen from 94 proposals--all judged by 10 to 20 "high-ranking" government officials, according to Lide.

In all, the institute awarded $162 million in ATP grant money to 64 companies--48 of which were considered small businesses. The categories include healthcare infrastructure, motor vehicle manufacturing, digital data storage, tissue engineering and component-based software. To ensure that grant money is used appropriately, each project is monitored by visits from a two-person management team who give quarterly reviews. "If at any point a company fails to satisfy the criteria, it will be cut off from the money," says Lide.

--Jeffrey Elliott

ATP Information Infrastructure for Healthcare Awards

Waltham, Mass.
A component-based computing infrastructure that integrates clinical data for real-time decision support.
ATP contribution: $1.8 million
Company contribution: $1 million
Project duration: 30 months

Centric Engineering Systems, Inc.
Sunnyvale, Calif.
A vascular disease planning system that uses physiological images to simulate blood flow in the human body, enabling physicians to predict the effects of medical interventions.
ATP contribution: $2 million
Company contribution: $2.5 million
Project duration: 3 years

HT Medical Systems, Inc.
Rockville, Md.
A virtual reality, preoperative system that uses patient-specific, three-dimensional images for surgery planning, rehearsals and training.
ATP contribution: $2 million
Company contribution: $1.6 million
Project duration: 2 years

Sequoia Software Corp.
Columbia, Md.
A national master patient index that cross-references patient identifiers with electronic medical records from a central search and navigation server.
ATP contribution: $1.9 million
Company contribution: $400,000
Project duration: 2 years

Wallingford, Conn.
A data mining expert system enabling healthcare professionals to evaluate drug therapies using population-based medical data.
ATP contribution: $2 million
Company contribution: $1 million
Project duration: 3 years

Kurzweil Applied Intelligence, a division of Lernout & Hauspie Speech Products
Waltham, Mass.
A continuous speech recognition system using various language models that structures data for a computer-based patient record.
ATP contribution: $1.9 million
Company contribution: $619,000
Project duration: 2 years

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