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Health Information Exchanges Are Hopping, but Doctors May Not Be Ready

While many doctors remain ambivalent about electronic health records (EHRs), there's a gold rush of sorts going on the related area of health information exchanges (HIEs). Funded by the Obama Administration to the tune of $783 million, statewide and regional HIEs are designed to help incompatible healthcare information systems communicate with one another and, ultimately, to improve the quality and reduce the cost of care.

Although these HIEs are public utilities, a vast array of private vendors are vying for a piece of that government investment. The question is whether this will be an ongoing business for these companies, or whether most of these exchanges will shrivel once their public funding runs out.

Today, with the bulk of medical records locked up in paper files, the ability to exchange information online is still fairly limited. That's starting to change, and the government's incentives for EHR adoption will make the online exchanges more viable. But for the information exchanges to survive and thrive, the majority of physicians and hospitals must buy and starting using EHRs so that most healthcare data becomes digitized.

One company that's betting on the HIE boom is Ingenix, a subsidiary of UnitedHealth Group (UNH) that has expanded from its consulting and research base to become a full-fledged technology vendor. In recent months, Ingenix has announced three acquisitions. Two of these appear to be aimed at securing a chunk of the federal stimulus funds earmarked for the promotion of information technology: Picis, which sells IT systems for the emergency, surgery, and intensive-care departments of hospitals, and Axolotl, a leader in the HIE space that was named after a Mexican salamander.

Axolotl creates HIEs for both healthcare systems and larger HIEs. Among the latter are the statewide networks of Nebraska, Utah, and Idaho; a New York State HIE that's connecting four regional health information organizations; and Cincinnati's Health Bridge. Altogether, 20 regional information networks use Axolotl's products.

Before the Axolotl deal, Ingenix already had an HIE division that was providing consulting, data warehousing, and an EHR to clients such as the Wisconsin Health Information Organization. Axolotl also has its own web-based EHR, and the combination of the two companies should make them a potent software competitor, as well as a firm to be reckoned with in the bidding for state HIE contracts.

Glenn Keet, president of Axolotl, told a trade publication that the distribution of HIE funds to the states has encouraged a flood of entrants to the field, ranging from small startups to major companies. (Some of these -- like Verizon, AT&T, and Microsoft -- are very large indeed.) As a result, he said, the market has become highly fragmented. But Lorraine Fernandes of Initiate Systems, which supplies identity management software to HIEs, believes the market will begin to consolidate in a year or so. If so, that will probably be because states will have settled on their contractors by then.

Meanwhile, hospital systems continue to push forward with their own HIEs, and there are plenty of vendors in that space, such as Medicity, Kryptiq and RelayHealth. In fact, if there's a single force that could make the online exchanges a sure-fire business proposition, it's probably healthcare systems that are intent on forging closer ties with their physicians so they can make more money from Medicare's new reimbursement methods. But it will take regional and statewide HIEs to connect the data silos of competing hospitals. And the business case of those organizations is still uncertain.

For now, however, HIEs are hopping. Perhaps, if the chicken does come before the egg, the proliferation of information exchanges will convince physicians that it's worthwhile to invest in EHRs.

Image supplied courtesy of Flickr.

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