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In a recent Associated Press report, a stock analyst described large technology companies that are venturing into health IT as the Goliaths that will lose to the smaller, better-entrenched Davids of the sector.
Microsoft? IBM? Forget it, said the analyst, James Kumpel of Friedman Billings Ramsey. He’s bullish instead on companies that are not household names, such as Cerner and Emageon.
Add now to the winners list Medicity, a privately held Salt Lake City company with about 85 employees. In March, the company was taking the first phase of the pioneering Delaware Health Information Network live while savoring its victory in a tough competition for the right to build a statewide health information exchange (HIE) in California.
To be sure, Medicity partnered with Perot Systems, a sizable Texas technology company, to win both the Delaware and California contracts. But the smaller company gets top billing as the prime contractor and the developer of the Web-based technology the two states will use.
The two states are approaching the development of their HIEs quite differently.
In the case of Delaware, the state’s health care commission got $6.7 million in seed money from the state and federal governments, along with more than $2 million from health care providers and insurers.
Asked how the network would be sustained in the future, Paula Roy, executive director of the commission, said strategies were being developed. For the near term, she’s counting on more state and private investments. One thing she’s not counting on in the coming year is user fees; there are none in Delaware.
In California, on the other hand, user fees are one key to a project in which the sponsoring organization, CalRHIO, is investing hardly a nickel. Here’s what CalRHIO’s press release said:
“Medicity and Perot Systems’ first step will be to assist in the procurement of private seed money to fund start-up costs for the CalRHIO HIE utility service, including building the statewide backbone infrastructure and integration, marketing and communication, and CalRHIO’s operating budget. Financing requirements for this phase are estimated at $300 million.†Despite the Golden State’s long history of prospering through reliance on venture capital, that’s a lot of money to sink into a service that has no track record and no established market.
The four large IT companies that built prototypes of the Nationwide Health Information Network last year are convinced there’s money to be made in health information exchanges. All are viewing this as a new line of business with great potential, and three -- Accenture, Computer Sciences Corp. and IBM – were among the unsuccessful bidders for the CalRHIO contract.
They may have recognized how closely HIE resembles, say, their defense business. For without the largess of the state and federal governments and various Blue Cross Blue Shield organizations, statewide health information exchanges would still be mostly a pipe dream. And no one expects the Department of Defense to be self-sustaining.
By Nancy Ferris
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