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How to break into the healthcare IT services market

With $19 billion up for grabs thanks to the stimulus package, healthcare IT spending will be on the rise. Find out how you can break into this lucrative market of healthcare IT services as a networking solution provider offering healthcare IT networks and related services.

Solution provider takeaway: With $19 billion up for grabs thanks to the stimulus package, healthcare IT spending will be on the rise this year. In this article, you will learn how to break into this lucrative market of healthcare IT services as a networking solution provider offering healthcare IT networks and related services.

A new report from International Data Corp. finds corporate spending on IT is bouncing back "robustly," driven by pent-up demand for new hardware across the board, which can only be good for channel companies. IDC predicts IT spending in the U.S. will grow at 5% this year, compared with a drop of 4% during 2009. But the possibility of a double-dip recession could derail that recovery and lead to another decline in IT spending.

News like that -- optimism with the threat of disaster -- and more than two years of resistance among most customers to any noncritical spending has set many channel companies off on a search for markets where the recession may be less intense and IT budgets more resilient.

The most obvious is healthcare IT services, which got a commitment from Congress for $19 billion in grants to fund an industry-wide IT upgrade and was the subject of a national regulatory reform bill that will drive even more spending on technology between now and 2014, when the national electronic medical records requirements are scheduled to have been met.

"All the new IT requirements have existing IT staffs stressing, even at large academic hospitals that are rich in resources," according to Leo Carpio, vice president of Health Care IT & Services practice at financial analyst firm Caris and Co.

"It's creating a huge market for consultants to teach them about security and electronic medical records [EMR] and everything else, when most of the IT departments have been spending most of their time keeping up legacy systems and specialized medical systems," Carpio said.

There are several clear subdivisions in the market for healthcare IT, each with different requirements for the technology it buys, the amount of handholding it requires and the amount of ongoing support it is willing to buy from outside, according to Jack Santos, executive strategist for consultancy The Burton Group and a former hospital CIO and senior-level insurance-company IT executive.

Healthcare IT services opportunity: Are hospitals the way to go?

Large academic hospitals have the largest budgets. Third-party service companies such as imaging specialist services, outside testing services, insurance companies and other players have smaller but still significant budgets.

Both groups generally have their own IT staffs and may already have a set of preferred healthcare IT services providers as well, Carpio said.

Large academic hospitals also generally have large, relatively sophisticated centralized IT departments that are responsible for maintaining billing and other legacy applications. They also set standards and direct projects for everything from wireless networking in waiting rooms to the patient-information-systems that medical staff use to monitor patient conditions to creating data links for robotic-surgical-assist systems and other highly specialized gear.

"For most hospitals, network performance and data security are as high a priority as they would be for other companies," said Carl Labbadia, IT director for Grove Hill Medical Center. "There are a lot of special cases we have to deal with, but a lot of the backbone networks and IT are the same."

The bulk of network connections in hospitals -- as in most organizations -- need more bandwidth to deal with VoIP, digital video and other network-intensive applications, Carpio said, but not remotely the kind of bandwidth that diagnostic imagery requires.

A single CAT scan, for example, could generate a 2,000-image, 2 gibabyte DICOM digital image file, Labbadia said. Five years ago, Grove Hill's radiology department sent 10 to 12 DICOM images per day across the network to physician offices, diagnostic labs and other locations. Today, it sends 150 to 200, and the files continue to grow larger, he said.

Grove Hill killed two birds with one stone with its network backbone by skipping typical Cat 5 or high-performance Cat 6 network cabling and going to a Shielded FTP-capable Cat 7a cabling capable of delivering more than 10 GBit/sec of bandwidth across copper -- rather than more expensive fiber -- cabling. It also includes a trunking capability that allows more than one endpoint connection per cable, which reduces the number of cables that have to be pulled and connections that have to be made, saving IT staff time as well as optimizing network performance.

As digital imaging and reliance on networked applications and electronic health records continue to increase, so will demand for both higher bandwidth and greater flexibility of healthcare networks, Santos said.

Healthcare IT services opportunity: Doctors' offices are an untapped resource

The segment with the least IT development and greatest need for external healthcare IT services support is unquestionably the individual doctor's office or group practices, according to Bill Gillis, manager of clinical application services at Beth Israel Deaconess Medical Center in Boston.

Doctors' offices have traditionally been run independently of the hospitals and insurance companies with which they work and have typically put such a low priority on information technology that even complex data exchanges often are done using handwritten notes and fax machines, Santos said.

That's changing quickly, Gillis said, especially for the practices that are partially owned by large hospital systems such as BIDMC.

Faced with the need to connect more quickly and easily with its outlying practices, BIDMC was faced with the choice of upgrading each practice individually or creating a virtualized environment that all the external offices could use as if it were part of their own system. It chose the latter.

BIDMC "accidentally" built a cloud-based remote-access medical records and billing system that appears to each participating practice to be part of its own application set but actually lives in a VMware virtual infrastructure that Gillis oversees.

The system connects more than 300 partially owned offices and 350 independent practices, he said.

More on healthcare IT services for networking solution providers

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Healthcare IT infrastructure burdened by new technology

Wireless in hospitals: One organization's 802.11n wireless LAN

While the implementation is innovative, the need to network alarmingly low-tech physicians' offices is alarmingly common, Carpio said. Most physician offices use local networks and often DOS-based applications to keep their own records and have to use special sites like BIDMC's or separate workstations to connect to hospitals or insurance companies to exchange electronic medical records.

Most have staffs of between five and 25. Few have IT specialists, Santos said, and even fewer have either the resources or desire to build or maintain the network connections necessary to interact effectively with both diagnostic and clerical systems in hospitals and insurance companies.

Most would prefer to have someone else -- whether a hospital system like Gillis's, a channel company, or SaaS or cloud-based service provider -- handle the technical work so they can focus on medicine and increasingly complex billing requirements, Santos said.

A study published in the New England Journal of Medicine in 2008 estimated that only 4% of physician offices reported having fully functioning electronic medical records systems, and 13% had basic systems.

The $19 billion dedicated in the 2009 recovery act to funding IT projects and creating "any meaningful use or improvement" in electronic medical records is aimed squarely at the other 83% of physicians' offices that need healthcare IT services -- a number that is already shrinking as money becomes available and penalties for noncompliance come into view.

"Many of those offices focus on patient care, and IT is pretty dim on their radar," Gillis said. "A lot of them are changing pretty quickly, though; there's a real emphasis on it now."

Next Steps

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