Experts agree that electronic medical records can lower costs and improve care. Yet just 10 percent of U.S. hospitals keep any computerized records, according to a survey in the New England Journal of Medicine last year. The biggest reason is cost: depending on the size of the hospital, the price of a digitized record system can run from $20 million to $100 million.
Carlsbad, CA-based Medsphere Systems is marketing what it bills as a cost-effective solution. The company has taken the electronic medical record system developed by the Veterans Health Administration and adapted it for commercial use.
Developed over two decades with more than $8 billion from taxpayers, the source code for the VA system is in the public domain. This means software developers and startups like Medsphere are free to use and modify the code known as the Veterans Health Information Systems and Technology Architecture, or VISTA. (The acronym is sometimes confused with Microsft’s unrelated Vista operating system.)
Medsphere Chief Operating Office Rick Jung says the private, venture-backed company offers its version of the software, called OpenVista, on a subscription basis, which minimizes the upfront costs for hospitals and healthcare facilities. The system manages clinical and health information, laboratory tests, pharmacy, radiology, and nutrition and food service applications. In exchange, Medsphere provides OpenVista subscribers regular software updates, maintenance, and technical support. Customers also get tools that connect OpenVista to legacy systems that handle specific functions, like billing.
OpenVista also is available without a paid subscription for users to install and operate on their own enterprise networks, without support from Medsphere. Before downloading the software, however, users must agree to share whatever improvements they make so other OpenVista users may benefit, Jung says. “Everyone who takes the application agrees to make a contribution,” he says.
Medsphere’s competitors include Sequence Managers Software, which also adapts the VA software for customers, and McKesson and Cerner, which market proprietary systems. All of the systems are used to electronically store a patient’s medical history in one place. The electronic records contain information on allergies and prescription medications to make sure there are no unsafe interactions with a new drug. The records also contain information on treatment guidelines for such chronic illnesses as heart disease and diabetes.
The Obama administration plans to spend $20 billion in economic stimulus funds as an incentive for hospitals to start using these systems. To qualify for the funds, hospitals must demonstrate “meaningful use” of the technology over a five-year period. A report in The New England Journal of Medicine in March said meaningful use is defined as improving quality, safety and efficiency; improving patient access to care; improving care coordination; improving public health; and ensuring patient privacy and data security.
According to the report, only one of the nearly 3,000 acute care hospitals surveyed met the first four criteria. (The survey did not assess privacy and security.) Clearly hospitals have a lot of work to do. Besides the availability of stimulus funding, hospitals have another reason to get on board: hospitals that fail convert to electronic medical records will have their Medicare reimbursements cut as punishment, beginning in 2015.
Medsphere argues that besides improving patient care, electronic medical record systems can improve financial performance and in effect pay for itself. Having a complete record of patient care means “every single charge gets billed,” Jung says. In addition, he says, the electronic record systems contain treatment protocols that help ensure patients get proper care, reducing the likelihood of errors that can increase costs.
At one client, Midland Memorial Hospital in Texas, infection rates fell to 3 per 1,000 from 24 per 1,000 in the 18 months after the system was installed as staff followed infection-control procedures. Compliance with guidelines for patients on ventilators increased from 20 percent to 85 percent of cases during the same period. The guidelines are intended to prevent cases of pneumonia.
“We are able to decrease operating expenses in an important clinical way,” Jung says.
Medsphere was founded in 2002 by Scott and Steve Shreeve, two brothers who were also doctors. The brothers later left the company, and new management was brought in. The venture-backed company has raised about $46 million to date and investors include Azure Capital Partners and Thomas Weisel Venture Partners, both of San Francisco, and EPIC Ventures of Salt Lake City.
Medsphere is targeting hospitals with 50 to 500 beds that have little or no electronic record-keeping systems, Jung says. Subscription costs vary by hospital size and other factors. Besides Midland Memorial Hospital, customers include Lutheran Medical Center in Brooklyn, NY; Kern County Medical Center in Bakersfield, CA; Hoboken University Medical Center in Hoboken, NJ; and the federally run Indian Health Service.
Medsphere expects to triple its bookings this year as hospitals respond to federal incentives. The company has hired 30 people in the last two years, bringing the total workforce to 90, Jung said. “This piece of the stimulus has been magnificent,” he says.
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