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News and Trends

June 1, 1998
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Software Developers Come Out Ahead

HCFA’S NEW EVALUATION AND MANAGEMENT (E/M) documentation requirements have prompted considerable debate across the entire healthcare community.

Policymakers are targeting physicians in an attempt to retrieve some of the $23 billion lost to fraudulent and erroneous Medicare claims. The new policy, published by HCFA and the American Medical Assocation (AMA) last October requires physicians to provide extensive details on history, examination, medical decisions, counseling, coordination of care, nature of problem and time--all of which will be used to define the level of E/M services rendered and the amount they are reimbursed.

At the same time, practitioners are attempting to defend their livelihood as caregivers--not office workers--claiming time spent with administrative tasks will increase threefold. "The E/M guidelines force physicians to devote inordinate amounts of time to documentation rather than patient care," Neil Brooks, president of the American Academy of Family Physicians said in a speech in Washington, D.C., to the Practicing Physicians Advisory Council, a Health and Human Services advisory committee.

Meanwhile, information systems developers find themselves with an opportunity to finally prove they can make physicians’ jobs easier. "This is a great way to sell a system," says physician Richard Gibson, medical director for the information services division at Providence Health System in Portland, Ore. "Software vendors are realizing new documentation requirements will encourage doctors to use computers."

Gibson’s staff at Providence uses the Logician electronic medical records system from MedicaLogic, Beaverton, Ore., which, he says, does well for documenting encounters. But regardless of what’s automated, E/M requirements will still "take doctors more time," he says.

Some practitioners are less concerned about additional time spent documenting encounters than they are about the stiff penalties--up to $10,000 for documentation errors. The excessive punishment for a physician miscue is unacceptable, says Randolph Smoak, vice chairman of the AMA board of trustees. "The AMA wants to get this softened a bit." Ironically, it was the AMA’s CPT (Current Procedural Terminology) committee that helped HCFA draft the new regulations. However, Smoak explained, the CPT committee has its own agenda and is not controlled by other workings within the AMA.

Many electronic medical records systems are being designed with features such as alerts and flags that warn users when an encounter history or physical, for example, was recorded improperly.

Unfortunately, critics say, the new documentation requirements will invite game playing among physicians--reimbursement based on the number of things they document in the patient’s history. Electronic medical records systems may even contribute to short-cuts in documenting patient encounters, such as allowing a physician to "cut and paste" information from a past visit into the current record.

"My concern is that this could reinforce a bad process with a typical EMR," says family practitioner J. Peter Geerlofs, president and CEO of Medifor Inc., a physician and patient education software developer in Port Townsend, Wash. "The focus needs to remain on patient care." Geerlofs’ company provides formulary software that helps physicians use computers. The company is incorporating documentation and coding guides into its software.

The new E/M regulations could signal a boon for medical record software developers, when the issue is finally settled. After HCFA’s recent announcement that it is postponing documentation requirements indefinately, it appears as though the regulations will undergo major cosmetic surgery, possibly moving the compliance date into 1999. "HCFA has shown they are reasonable and willing to address the AMA’s concerns," Smoak says.

Many information systems, however, are based on regulations established last October. Software developers are watching the issue closely, poised to rewrite code that matches any changes made to the regulations, which will eventually become mandatory for all patient encounters reimbursed by HCFA. Private insurers, too, are expected to adopt identical regulations in the near future, making it virtually ubiquitous.

Don Rucker, a technology consultant for electronic medical records developer Datamedic, Waltham, Mass., and emergency medicine faculty member at Beth Israel Hospital in Boston, is confident that the regulations, regardless of their composition, will force physicians to consider automating more of their processes. "No matter what the specifics are, there will be a push toward IS."

In the past, he says, documenting encounters was simply a matter of complete dictation. Now, dictation alone will not suffice. "This is not necessarily the type of information that comes naturally," he says. "I think the only way people will be able to cope with new regulations is with computer support."

--Jeffrey Elliott

Congress Debates Internet Taxes

AS SURE EVIDENCE THAT THE INTERNET IS GROWING up, Congress is vigorously pushing legislation that will set the stage for the future of taxation on this new medium. While the Internet is still relatively government-free, a few states have begun to test the waters of taxation--proposing and collecting taxes on Internet access to electronic commerce. Industry is concerned that state and local governments will soon begin to flood the market with a confusing jumble of new taxes. Two bills under discussion now would place a moratorium on Internet taxes for a period of three to five years. A bill from Sen. Ron Wyden (D-Ore.) cleared the Senate Commerce, Science and Transportation committee this spring, while the House bill sponsored by Rep. Christopher Cox (R-Calif.) is making its way through committee votes now.

Lawmakers say the time-out on taxes is needed so Congress can study the viability and mechanics of introducing a tax system for the Internet. Since the Internet crosses state, national and international boundaries, allowing companies with no physical location to set up shop on the World Wide Web, the question of where goods and services are being provided is a tricky one. Some have suggested that one Internet transaction could be taxed by several state and local jurisdictions as it passes through different servers. There is also the thorny issue of "taxation without representation," wherein the Supreme Court has historically ruled that states cannot impose taxes on companies that do not have a physical presence in that state. A few state officials are pushing the envelope by arguing that Web servers located within their state constitute physical presence.

According to Francoise Gilbert, partner with Gray Cary Ware Freidenrich, a high tech law practice in Palo Alto, Calif., the issue is very similar to what physicians are encountering now with telemedicine. If a physician in New York provides a remote consultation to a patient in Ohio, does she pay income taxes to New York or to Ohio? "Since we don’t know where services are rendered, it’s difficult to know who should be paying taxes or when," Gilbert says.

Taxing Internet access is particularly dicey, since users may access the Internet from several different states when they travel. According to Gilbert, the industry and the legal community need time to sort out the complex jurisdictional tangle. "The danger without a moratorium is that it (a tax system) will not be well thought-out."

Fair or not, ’Net taxes will be a messy issue for the American public and Gilbert doubts that the moratorium will put the tax issue to bed. "I have trouble thinking that states and governments will give up on the idea of making money on taxes." Internet access charges from most of the major ISPs are steadily rising: taxation will bring even higher prices for users and may discourage the growth of the Internet. Says Bill Murphy, director of Internet marketing at Hewlett-Packard: "The ’Net has the probability of changing a lot of fundamental things. It’s wise not to put traditional burdens on it."

However, questions Gilbert, is it fair for companies with no physical stores, like, to sell books tax-free when all other book-sellers must charge taxes? Ultimately, the tax freeze will lead to a policy for equal treatment of all businesses--Internet-based or no, according to Lee Zoller, a state and local tax attorney with Philadelphia law firm Dechert Price & Rhoads. Yet from a global perspective, the picture gets very murky. How can individual governments regulate cyberspace at all if it transcends country borders, nationalities and political systems?

--Polly Schneider

Virtual Conferencing

NOT TOO LONG AGO, THE CONCEPT OF CONDUCTING a conference via satellite was a novel approach to reaching people in disparate locations. Newly emerging uses of the Internet could change everything.

Webcasting--simultaneously broadcasting a conference locally and over the Internet--could be the answer for busy physicians and administrators trying to absorb as much information as they can. "The computer wasn’t designed to be a broadcast medium," says. Frank Palazzolo, director of IS planning at the Henry Ford Health System (HFHS), Detroit. "I think the Web will allow you to have 500 stations that are all broadcasting to niche audiences. The Web could be more like interactive television."

On April 17, Palazzolo was executive producer for one of healthcare’s first-ever Webcasts. Forty-eight financial and IT executives from HFHS and the Healthcare Financial Management Association (HFMA) attended the live presentation of "Software: The Industry’s Largest Cost, Is It Its Best Value?" at the Ritz-Carlton Hotel in Dearborn, Mich. An additional 125 people logged on to the World Wide Web at some point during the half-day conference to view the live broadcast.

Palazzolo estimates that the health system saved at least $5,000 by broadcasting the conference over the Internet instead of broadcasting it live via satellite. But, he says, cost savings was not the driving force behind this project. "It was more a demonstration [of the technology] instead of trying to go out and save money."

There is more to this technology than simply saving a buck or two. If Palazzolo had broadcast the satellite version, he would have had to set up various locations around the country--each with a live audience. At the very least, this would have meant spending more time and energy at a number of separate sites planning, organizing and setting up attendee registration and any extras such as meals or copies of the speakers’ slides. "While that might have made it more of an event, it would have meant a lot more work," Palazzolo says. "This way, anyone with a Web browser could access [the conference]. We did it more like the Oprah Winfrey Show."

Tom McNulty, senior vice president and CFO at HFHS also compares the Webcasting process to a talk show. "It was much more orchestrated--like it would be for a television program," he says.

That’s not to say this type of conference format did not present its own set of challenges. For one, the bandwidth used by the originating organization (in this case, Henry Ford) dictates how close to real-time both the audio and video can be. If the bandwidth isn’t broad enough to carry the number of people trying to sign on to a site, the real-time qualities of the video and audio are compromised.

The HFHS conference used 100 meg/second of bandwidth, allowing the frame rate on the Webcast to range between 8 and 15 frames per second, depending on demand levels. Audio needs less bandwidth than video, according to Palazzolo, so during his conference the audio operated in real-time even when the video was momentarily slowed down by the lack of adequate bandwidth.

"Our opinion was that it was more important for the audio to be in real-time," Palazzolo says. In other words, viewers must be able to understand the speakers more than they need to see their lips moving.

After the conference ended, Palazzolo kept an archived version of the speeches on the Web server for several weeks. With the archived version, Net surfers could click on an individual speaker and access the presentation as well as the PowerPoint slides used during the live broadcast. The slides could be downloaded and printed from a PC.

Although the technology isn’t perfect--the server in Detroit crashed two days before the conference, forcing Palazzolo to use a server in Vancouver, Canada, which meant flying a specialist in from Vancouver as well--it could be one of the most effective ways for healthcare organizations to save money while educating physicians or putting on conferences for employees in different locations.

McNulty sees a bright future ahead for the use of Webcasting in healthcare. "When we figured it out, we delivered a production a lot cheaper than we could have in other mediums," he says. "We are putting a business plan together [for future Webcasting productions]."

--Lisa Paul

Rise of the Mini-Computers?

CREDIT THE SIZE OF THE POCKETS ON PHYSICIANS’ lab coats for shaping how they are using technology. Caregivers are beginning to embrace smaller computers that are designed to fit in the palm of your hand.

Larger electronic tablets have been pushed as tools physicians can use when they’re with patients, says Dave Rensin, manager of the mobile computing group at Falls Church, Va.-based consulting firm Noblestar Systems Corp. But, he says, they’re just too bulky compared with palmtops.

Filling the gap between personal organizers and laptops, palmtops are helping some physicians manage schedules and take notes. That role is expected to expand as they’re paired up with new, emerging software applications. Observers say palmtops will ultimately be used as point-of-care tools, allowing providers to review medical records, check test results or report medication decisions.

While few healthcare organizations have given their official blessing to these devices, look for that to change quickly. Rennin expects some prominent hospital systems to start using palmtops by the end of the year.

The spread of these devices for healthcare uses will be aided by their support in the business community, says Jim Bradley, CEO of Bloomington, Minn.-based medical application developer "There is a new cult and it is the PalmPilot cult," he says. "We’ve gone into settings where the CEO brings out his PalmPilot and says, ’I can’t live without it and anything you bring me has to work with it.’"

Produced by 3Com Corp. of Mountain View, Calif., PalmPilot is the dominant brand in the palmtop market, with more sales than all its competitors combined. PalmPilot has its own operating system while other offerings, such as Tokyo-based Casio Computer Co.’s Cassiopeia, run Windows CE.

Microsoft’s recent entrance to the palmtop market, which has already produced some legal grappling, will make the palmtops a very competitive market. After pressure from 3Com, Microsoft changed the name of its devices from Palm PCs to Palm-size PCs.

From Bradley’s perspective, the healthcare executive thinks, "I can see what [a palmtop device] can do for me, now I want to see what it can do for doctors who need clinical information."

With their small size, palmtops already meet the need of being unobtrusive. While larger tools such as tablets or PCs have more screen area to display information, Bradley says their size can have a psychological downside. "This may be what it takes to give physicians more information at the point-of-care."

Burned in the past on expensive technology, administrators will find the costs of acquiring and maintaining palmtop computers to be low enough to be "insignificant," Rensin says.

And the devices have a price point of an office expense rather than a capital acquisition, says Jeff Lohrmann, director of market development for San Francisco-based PDA, Inc. While palmtops cost around $300, an electronic tablet could run $3,000 or more, he says.

Wake Forest University Baptist Medical Center in North Carolina is one of the early adopters of palmtops. Starting this summer, the Wake Forest University school of medicine plans to give the devices to more than 300 students.

"It’s part of the overall plan to introduce medical information technology to our students," associate dean for medical education Cam Enarson says. "We didn’t think it was feasible for them to be lugging their ThinkPads around."

In an early experiment, one student downloaded a program on his palmtop that helps him choose antibiotics when he’s with patients, Enarson says. While most students will stick to the products’ scheduling capacities, he expects to see these grow as point-of-care tools as well. "I think in the next few years that is going to be a very active part of their whole clinical interaction--recording or accessing information in terms of helping them with clinical decision making," Enarson says.

Whether a palmtop’s users are nurse aides or physicians, you’re "putting it in the hands of people whose jobs are to interact with other people first," Lohrmann says. That means technology companies will have to carefully watch and meet the needs of healthcare providers in order to be successful, he says.

--John Manning

Intelligent Business for Managed Care

BLUE CROSS OF CALIFORNIA (BCC) HAS A NETWORK of more than 40,000 physicians that serves around 5.4 million members. The HMO needed a software tool that would both profile physicians and detect any unusual billing patterns in their practices.

BCC administrators already had fraud detection software at work on their database, but they wanted a system that could provide "early indications of physicians who may be practicing inappropriately," says David Redfearn, BCC’s director of physician network analysis in Woodland Hills. So the company recently began beta-testing a data mining application from SAS Institute, Cary, N.C. to pull data and calculate statistics on its network of physicians.

Redfearn devised a "scoring" system based on patient groups of 50,000 to 100,000 clients in search of physicians whose practices deviate from others in their field. The HMO will present data it has collected to the physicians and require them to make changes or be removed from the network. If just a few hundred mistakes are detected by the software, the savings could be as much as $1 million per year "and that gets the attention of management," Redfearn says, noting BCC pays $1 billion in claims annually.

Data mining has become big news in the computing world because algorithms have advanced to the point where they can reveal all kinds of patterns among customers and clients. The $2.6 billion data mining industry will jump to $4.7 billion by year 2000, with big guns such as SAS Institute, IBM, Digital Equipment, Acxiom and Silicon Graphics leading the way in a crowded field of more than 50 companies, according to Don MacTavish, research analyst with Stamford, Conn.-based Meta Group.

Data mining allows companies to uncover relationships in data, discover crucial patterns of behavior among customers and make predictions based on past decisions. Users build models with graphical user interfaces and then apply them to a segment of a database to determine patterns through statistical techniques. Data models take anywhere from less than a week to a month to build and often run in 15 minutes. BCC’s system, Enterprise Miner, operates on a 64 megabyte PC running Microsoft’s NT program.

Data mining tools often are sold in suites of business software for data warehousing, reporting and decision support. IBM and SAS are among the few who specifically mention healthcare data mining applications in their marketing materials. IBM’s application, Intelligent Miner, complements a suite of other data hardware and software tools, and SAS’s Enterprise Miner is marketed with the SAS System suite of business tools.

Early adopters of data mining were mainly marketing companies, although healthcare organizations have begun to take a strong interest in it--especially for fraud detection and analyzing the use of healthcare resources by providers and patients. "The healthcare and pharmaceutical sectors have used applied statistics at high levels," says MacTavish. "Currently data mining applications are being evaluated and their use is increasing." The most common applications are survival rate, side effects (hidden pattern), doctor-client prescription patterns and proactive treatment recommendations, he says.

But data mining has been as attractive a tool for marketing as for anything else. When BCC bid for and won a $69 million contract in April to administer two health plans for the California Public Employees’ Retirement System, representing as many as 200,000 new customers, BCC’s data mining and claims processing capability "helped sell that account," Redfearn says.

--Frank Jossi

Bill Surfaces but May Not Float

IN LIGHT OF THE HEALTHCARE INSURANCE PORTA bility and Accountability Act (HIPAA), a White House advisory committee pushing the "patient bill of rights" and a decree from the European Union, Congress has been called to task on implementing confidentiality legislation.

However, the recent political grappling has some worried that legislation will not easily be passed. "The fact that Senators Bennett and Jeffords couldn’t agree on the text of a common bill doesn’t bode well for the fate of health information privacy legislation during this congress," says Adele Waller, principal at the Chicago law firm of Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz.

Sen. James Jeffords (R-Vt.), chairman of the Senate Labor and Human Resources Committee introduced the Health Care Personal Information Nondisclosure Act of 1998 (S. 1921). The bill was sponsored by Chris Dodd (D-Conn.) after Jeffords failed to reach an agreement on the bill’s contents with Sen. Robert Bennett (R-Utah). Bennett, who has sponsored privacy legislation in the past, is currently drafting his own version of the bill.

Waller, who speaks frequently about HIPAA’s influence on the healthcare IT industry, believes some version needs to be passed in order to avoid "total disaster that will occur if we, under HIPAA, have to go the regulatory route." Meaning, if Congress does not pass a privacy bill by August, 1999, the Department of Health and Human Services is responsible for implementing a national policy, which would leave regulations open to chaos, she says.

Privacy advocates are concerned with S. 1921 because as it is written now, the federal law would not preempt state laws offering their own health information privacy. "We would like to see a uniform national standard established," says Kathleen Frawley, vice president for legislative and public policy services for the American Health Information Management Association (AHIMA). AHIMA believes that without a national standard, nothing will change in regards to a patient’s rights to privacy.

Jeffords believes states should have the authority to confidentiality legislation on their own because it would give them the freedom to impose stricter privacy legislation than the federal mandate calls for.


CIOs Take Tips on TQI

THE CONCEPT OF CHANGE IN HEALTHCARE IS especially evident during the various conferences that consume the industry. While a number of educational sessions presented during the National Managed Health Care Congress’ (NMHCC) information technology segment (NMH/IT) focused on case studies, standards, EDI and the Internet, many sessions also focused on the business of using IT to manage care.

During the CIO Summit that preceded the April NMHCC-NMH/IT conference in Atlanta, 48 high-level IT executives from both inpatient and managed care settings met for a day-long seminar, hoping to find solutions to their business problems. Many of their concerns echo those of executives from other industries.

In response to CIOs’ business solution needs, a non-healthcare business reengineering expert conducted part of the CIO Summit. Horst Schultze, president of Ritz-Carlton Hotels, Atlanta, offered his advice on total quality improvement efforts and why healthcare officials should borrow business models from other industries to improve care and cut costs.

Schultze’s message: The customer is always first. In healthcare, this idea translates into always listening to members and patients, and tailoring systems and health plans to give them--the customers--what they want. Strive to be the best, Schultze says. But, he cautions against making too much of benchmarking strategies. "You may end up being the best of a lousy lot."

Healthcare IT executives seem to be taking much of Schultze’s advice to heart. They are changing their focus from "I need the latest and the greatest technology" to "this is how I need to run my business and these are the technology tools I need to do so." Many of the 650 vendors on the exhibit floor echoed this desire, introducing new solutions instead of new products.


  • lack of capital
  • staff retention
  • getting applications to the users as quickly as possible
  • changing the medical mindset of physicians so CIOs can take advantage of new, leading-edge technologies
  • interoperability of disparate systems
  • high costs of technology


The Health IT Summits gather 250+ healthcare leaders in cities across the U.S. to present important new insights, collaborate on ideas, and to have a little fun - Find a Summit Near You!


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