Microsoft Builds Out Health IT Portfolio, Waits (and Waits) for Market to Materialize

2/26/10Follow @xconomy

Patience has got to be the watchword for the 800 or so people who work at Microsoft’s Health Solutions Group. There’s certainly been a lot of political rhetoric over the past year about dragging the inefficient world of pen and paper medical records into the 21st century—but this is still one big market opportunity waiting to be tapped.

More than four years have gone by since former drugstore.com CEO Peter Neupert re-joined Microsoft to spearhead its worldwide health strategy. This division isn’t going to pay the bills like Windows 7 does anytime soon, but Microsoft has shown it is willing to keep building a wide and deep portfolio of products, and to be patient for when its day will come. That was the sense I got during a wide-ranging conversation I had earlier this week with Nate McLemore, Microsoft’s general manager of business development and policy in the Health Solutions Group.

“We are taking this very seriously and investing a lot,” McLemore says. “It’s a top-of-mind issue for governments, for businesses, and for consumers. They are all our customers.”

Healthcare IT has been near the top of the U.S. political agenda since January 2009, when President Obama set a goal of making all of the nation’s health records computerized within five years. The administration poured in $19 billion (or $47 billion, depending on whose budget numbers you believe) from the federal stimulus to support electronic medical records adoption. There are a million reasons why this hasn’t caught on yet, not the least of which are consumers’ worries that insurers will get a hold of the data to discriminate against them, physicians’ adherence to tradition, and hospitals’ fears that they will lose data or somehow mess things up or damage patient care.

If the money spigot ever turns on to encourage massive adoption of electronic records, Microsoft is definitely positioned—along with competitor Google Health—to be ready to pounce. Microsoft has been methodically assembling a portfolio of software products that tackle all sorts of inefficiencies. One product seeks to help consumers and providers better share electronic records (HealthVault). Another aims to get all 65 or so proprietary health programs the average U.S. hospital has to talk to each other (Amalga). A third program (Amalga Life Sciences) seeks to get researchers who are drowning in genomic data to put it in a form that might be useful if the world ever shifts to personalized, genomic-based medicine.

Nate McLemore

Nate McLemore

So what kind of traction is Microsoft seeing here? The company isn’t saying how many consumers are using HealthVault. It’s measuring progress in other ways, like how there were 46 healthcare organizations who adopted HealthVault when the platform was introduced in October 2007, and now that number has climbed to 150. When the program launched, there were nine devices that could upload data to be compatible with HealthVault—think blood sugar monitors for diabetics, for example. Now there are 70.

But really, the various constituents—doctors, patients, hospitals—who all need to adopt these technologies are taking their sweet time. All that e-health money that was authorized for spending from the American Reinvestment and Recovery Act—something between $19 billion or $47 billion, depending on budget assumptions—is still waiting to be put to work, McLemore says.

The federal program is a classic carrot-and-stick approach. The feds are supposed to offer something between $2 million and $12 million to health providers who make electronic health data available to patients, as long as they can demonstrate “meaningful use” of the technology. Physicians will be eligible for as much as $44,000 in incentives, McLemore says. If they don’t switch, penalties will kick in at some point. But none of the incentive money has flowed yet, because … Next Page »

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