September 20, 1999
WHAT'S UP WITH ASPs?
Application service providers, or ASPs,
was one of the hottest topics under discussion last week at the
Microsoft Healthcare Users Group Conference in San Diego. In this
article, we will briefly describe ASPs, explain why they will be
important, and list some specific implications for care management
approaches. While ASPs will be attractive to all health care
organizations, we will focus on the unique advantages they can provide
for physician offices.
NOT A POISONOUS
SNAKE, BUT A GREAT CONCEPT
ASPs are a new type of company that
provides outsourced management of application software via the
Internet. In essence, the ASPs rent access to applications software
(for example, Peoplesoft for human resources applications, or Medical
Manager for physician practice management applications).
Zona Research have sponsored excellent white papers on ASPs (read
the first half of each of these for more background): Under the old
client/server model, physicians had to purchase, install, and maintain
both hardware and software at their local offices. Under the new thin
client ASP model, software is purchased, installed, and maintained
centrally at the ASP's site. Physicians need only minimal hardware and
software to access ASP services:
A PC (and in many cases even an older
PC dragged out of the closet will do just fine)
A web browser
An Internet connection
QUESTION: "WHAT'S IN IT FOR ME?"
What's significant about the ASP
The ASP model is an ideal approach for
doctor's offices. As we discussed in an a earlier article in our
e-newsletter, physicians direct over 70% of
health care expenditures. They are the hub of health delivery in a
local community. Physicians have been reluctant to capitalize computer
and software purchases. This is particularly true for primary care
providers, who have lower incomes than specialists. When the choice
comes down to "Should I spend $100,000 on a new computer system or
fund my kid's college education?" guess which wins?
Pay-as-you-go pricing structure offered
by ASPs will be viewed favorably by many physicians. Free or
subsidized ASP services will be provided to physicians by
organizations that want to link with doctors, e.g., payors,
pharmaceutical companies, Internet health companies, e-commerce
companies. Ironically, hospitals - which in the past have gone to
great lengths to partner with their local physicians - will be greatly
limited or prohibited from underwriting these services for their
physicians. Federal legislation (prohibitions against private
inurement) limits hospitals from providing physicians virtually
anything that might be interpreted as payment for patient referrals.
ASPs provide ongoing support. This means fewer staff or contractors
will be needed to maintain computers and upgrade software.
Most support will be provided centrally
by the ASP. ASPs allow for provision of multiple, best-of-breed
software programs. Do you think Medical Manager is the best practice
management system and Peoplesoft is the best human resources software
program? No problem. Soon you'll be able to get both from your local
health care ASP, and someone else will take on the headaches of making
them work together. Shorter sales cycles. The ASP approach
avoids the need for front-end capital investment in hardware and
software associated with client server systems.
Quick and easy adoption of ASPs is
likely to be very good for care management initiatives (but could
backfire). This will depend on how ASPs are adopted in local markets.
Allow us to explain.
OPTIMAL care management requires
sharing of data and communications among providers. There's no doubt
that ASPs promise to speed up the TECHNOLOGICAL solution to improve
data sharing and communications. Today's methods - primarily faxes and
phone calls - are not very efficient.
Internet connectivity promises to
reduce costs, broaden access, and provide a system of documentation
and follow up. However, initial efforts at providing Internet
connectivity to doctors offices are being focused on TRANSACTION
oriented applications, as opposed to clinical management applications.
Transaction oriented applications include patient scheduling,
referrals to other physicians, preauthorization approvals, insurance
eligibility verification, etc. Focusing on these applications is much
more straightforward and offers more immediate paybacks for physicians
and their overburdened office staff.
These initial efforts have been
undertaken by the some of the new e-health companies, and we expect
that ASPs will also initially focus on transaction oriented
applications. There is a danger here. The e-health companies are
developing two divergent strategies in attracting physicians to their
1) Gather market-share and critical
mass NATIONALLY (e.g., Healtheon), and 2) Gather market-share and
critical mass in LOCAL markets (e.g., CareInsite and Pointshare).
How will all this play out? It's too
early to tell, but there are two possible scenarios:
1) Local markets converge around one
common Internet technological infrastructure and work cooperatively on
care management initiatives.
2) Local markets fragment into 2 or
more technological Internet infrastructures. Clinical data are viewed
as competitive tools, and are not shared freely among health care
Clearly Scenario 1 is a much more
desirable scenario to promote widespread adoption of care management
approaches. In summary, ASPs offer many benefits. However, the
ease of implementing new ASP approaches might work against developing
a community-wide Internet infrastructure to promote care management.
Stay tuned to this key development.
COMMENTARY ON WebMD
Have you heard of
WebMD? It is a
company that is striving to become the premiere Internet health care
portal to both consumers AND physicians.
WebMD is in the process of completing
its merger with Healtheon. If you haven't heard of them, you
will soon. Unless you are cloistered in a monastery somewhere, you
will soon see WebMD rolling out a well-funded ad campaign.
I had the opportunity to see the CEO of
WebMD, Jeff Arnold, give a keynote presentation at the Microsoft
Healthcare Users Group (MS-HUG) conference. Anyone who is 29 years old
and is a billionaire can certainly capture my attention for a 45
minute speech! I'd like to present a few friendly challenges
which I believe are Achilles heels in the WebMD business and clinical
1) Does WebMD really grok (understand)
the local nature of health care delivery? While just about everyone,
including Mr. Arnold, TALKS about this, sometimes attitude speaks
louder than words. While many of the 2,000 attendees of the conference
came from home town America, Mr. Arnold presented to group as if it
were composed entirely of investment analysts. When a number of San
Diego area physicians flooded up from the audience to ask questions
probing how WebMD was relevant to their lives, he reverted to
The irony: WebMD seems to have a lot to
say to the home town crowd. It issued a press release announcing 35
agreements with major health care systems (see the URL above under
News & Events, 8/3/99). Suggestion: time to add speech #2 to the
2) Is Healthsouth the right partner? At
the conference Mr. Arnold announced a new $50 million partnership
between WebMD and
Healthsouth is a rehabilitation and
ambulatory service company that has established a presence in all 50
states. Healthsouth has developed joint ventures (JVs) with local
physicians in which doctors own a portion of locally structured
business deals. While I personally have seen well-structured joint
ventures accomplish miracles, I recognize that many physicians have
problems with JVs. Many doctors believe that physician investments in
joint ventures are unethical because they can compromise the
physician's responsibility to an individual patient.
Healthsouth's approach has been an
effective niche business strategy. Within a local community, this
approach will attract a segment of the medical community, including
the most entrepreneurial physicians. Healthsouth claims to have 50,000
physicians affiliated with its facilities and services.
However, these Healthsouth affiliated
physicians often are not mainstream members in the politics of a local
medical community. I am skeptical that they can be the opinion leaders
who can bring along other physicians and persuade them to sign up with
WebMD. WebMD's partnership with Healthsouth will raise eyebrows among
most mainstream doctors and could work against entrenching the company
into local health care delivery.
Finally, Healthsouth facilities are
usually competitive with major medical centers, another claimed
partnership target for WebMD. Will WebMD have shot themselves in the
foot with this deal?
3) Does WebMD really need to create
it's own health care content? Most Internet health portals are
choosing to AGGREGATE health care information. That is, they will
collect it from a variety of sources to package and present on their
web site. WebMD is choosing to develop its own content and has hired a
staff of 75 health care writers, 25 of whom are physicians!
I don't get it?! If you're a patient,
how eloquently can a staff of 75 writers say "Drink plenty of fluids,
and call your doctor in the morning." If you're a doctor, are you more
likely to believe a physician writing for WebMD or one writing for the
New England Journal of Medicine?? Bottom line: I don't see how WebMD
will be able to differentiate it's website by creating it's own
messages. Spend the money elsewhere.
My opinion, Vince Kuraitis,
MORE ON PHYSICIAN
A recent issue of
our e-newsletter discussed increasing levels of physician usage
and acceptance of the Internet. A recent commentary in
JAMA discusses further research about doctors' use of the
The highlights: "...physicians increase
their Internet and e-mail use following attendance at a 4-hour
Internet workshop. Nearly half continued to report that learning to
use the Internet was easy once they have been taught the skills."
ANALYSIS OF E-HEALTH
Capital has started a bi-monthly analysis of e-health companies
and events. Click on "Wit's Wisdom on eHealth".
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