The role of information technology in healthcare reform is such a huge, sprawling topic that it’s hard to make any real progress in just an hour or two of discussions. Yet that’s just what transpired at a stellar event last night called “Healthcare-IT—Innovations That Will Transform Healthcare Now and in the Future.” It all took place at the Herban Feast in Sodo Park, South Seattle, and it was organized by the Washington Technology Industry Association.

Over some fancy appetizers, a distinguished panel of technologists, executives, and entrepreneurs debated everything from the technical and cultural issues of privacy and security in electronic medical records to who’s going to get a piece of the $19 billion in federal stimulus funding for digital healthcare; everything from whether consumers really want e-health enough to drive regulatory changes to—and this was particularly interesting to Xconomy—what the real opportunities are for startups in the space. The panel showcased some of the first-rate expertise we have here in the Seattle and Portland regions.

Moderator Joel French, the founder and managing director of Nephalios Group, a management consultancy, kicked things off by saying the whole healthcare debate boils down to four things: a cost problem, quality variability, access and coverage, and wellness. In each of these issues, IT plays an important role. “You can’t really share information if it’s not digital,” French said.

With that, it was open season on the panelists:

—Henry Albrecht, CEO of Bellevue, WA-based Limeade, an online health and productivity startup making software-as-a-service for employers (we reported Limeade raised money in July).

—Carla Corkern, CEO and chairman of Bellevue, WA-based Talyst, a company that makes software and systems to help pharmacies manage medications in hospitals and long-term care facilities (we reported on Talyst’s broader strategy and funding in June).

—Luis Machuca, CEO of Hillsboro, OR-based Kryptiq, a maker of collaborative software that lets healthcare providers share information with patients, labs, and physicians (we’ve reported on some of Kryptiq’s deals and customers, including NASA).

—Mohan Nair, executive vice president and chief marketing executive of Oregon-based Regence, the largest health insurer in the Northwest (he has a background in tech entrepreneurship).

—Michael Raymer, global market strategist and general manager for Microsoft’s Health Solutions Group (we’re reported on HealthVault, the company’s Web platform for medical records).

For the next hour, some tough questions flew out from the audience, and among the panelists. Here are my takeaways from the discussion:

1. “The magic pill is data liquidity.” That was from Luis Machuca, who argued that patients need to be able to own and access their own digital health information and use it to get better healthcare. “Universal health will fail, everything will fail, if we don’t have data liquidity and digitization,” Machuca said.

2. An open market, human behavior, and connectivity are important too. Nair argued that the present closed marketplace for healthcare services encourages entitlement instead of earned rewards. Albrecht noted that we should pay more attention to behavior, and less to technology. Raymer added, “Data liquidity needs to be coupled with tools to empower people to make changes, and connect people together.”

3. If you want better healthcare, go to jail. “We see the best compliance for …Next Page »

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A major focus of the American Recovery and Reinvestment Act (Stimulus Act) that President Obama signed in February is to improve the quality and expand the scope of health information technology in the United States. One of the central goals is to develop a nationwide health IT infrastructure and transfer all Americans’ health records to electronic format by the year 2014.

Under the Stimulus Act, the Office of the National Coordinator for Health Information Technology (ONCHIT) received a $2 billion appropriation to achieve these goals. The funds will remain available until expended; however, the law requires that certain portions of the funds must be allocated to specified groups. ONCHIT will be advised by two policy committees comprised of members from the various sectors of the health-care industry. ONCHIT is charged with a number of oversight activities, including the development of uniform health IT standards to allow interoperability among diverse health IT systems. “Making the electronic health records dream a reality will depend upon the successful development of uniform HIT standards,” said Andrew Gantt, a partner in the Health Care and Life Sciences Group at the Washington D.C. office of Latham & Watkins. “This is critical to ensuring that multiple electronic health records technologies are able to communicate effectively with each other.”

One of the named recipients under the Stimulus Act is the National Institute of Standards and Technology (NIST). NIST will receive $20 million of the budget allocation to continue advancing the use of health IT. The law also earmarks $300 million to support sub-national and regional efforts in their advancement toward health information exchange.

The Stimulus Act also contains various financial incentives to specified groups who adopt and increase their use of electronic health records and health IT. Medicare providers, for example, are entitled to receive up to $44,000 ($48,400 for providers in a professional shortage area) of funding if they adopt and engage in a “meaningful use” of certified electronic health records technology. The standards that providers must meet to satisfy the “meaningful use” requirement in order to receive incentive payments include, among other things, the ability to connect in a way that provides for the electronic exchange of health information and a willingness to report information on clinical quality measures to the Department of Health and Human Services.

The law also incentivizes Medicare providers by penalizing them if they do not become electronic health users by 2015 through a one to five percent reduction in payment the providers would otherwise receive. Similar financial incentives, which can total $63,750, are available for Medicaid providers who implement electronic health records technology. Providers eligible for both Medicare and Medicaid incentives may only receive incentives from one or the other.

Hospitals are also entitled to receive funding under the Stimulus Act if they can demonstrate that they are “meaningful users” of electronic health records technology. A formula determines the amount that hospitals can receive, with the amount starting at $2 million. Grants will also be available to universities that develop centers designed to generate innovative approaches to the use of health IT.

State or state-designated entities are also eligible to receive grants if they submit a plan describing activities to be carried out to facilitate the exchange of health IT. In addition, regional centers that assist in the promotion and advancement of health IT may receive grants for the continued development of technological approaches. To secure their grants, however, these groups must contribute matching funds up to a certain percentage of the federal funds they intend to receive.

Universities and clinical health education programs that expand educational programs focusing on medical information are eligible to receive grants, if they contribute matching funds of at least 50 percent of the cost of the program. In addition, the Stimulus Act authorizes the establishment of loan programs, administered by states and Indian tribes, to health care providers who facilitate the adoption of certified electronic health records technology. Like many other incentives, however, the entity receiving the grant must match the federal funds received with a percentage of the amount received.

Advancing and expanding the use of electronic health records across the United States is a top priority under the Stimulus Act. With financial incentives being provided to various groups to facilitate the shift to electronic records, and a renewed drive to develop uniform health IT standards, the goal of having all Americans’ health records in electronic format is more likely to be attained.

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Yesterday morning in Redmond, WA, Governor Deval Patrick of Massachusetts sat down with Ray Ozzie, the chief software architect of Microsoft. They talked about high-tech innovation in the Boston area, how Microsoft views its own global future, and how the company could work together with Massachusetts to help drive the local economy.

“I was talking with Ray about what we have to offer in Massachusetts,” Gov. Patrick said afterward, “and how he is thinking about a distributed organization—not entirely focused on Redmond, but centers of gravity around the world.”

Patrick clearly would like to pull more of Microsoft into orbit around Boston’s technology cluster. His agenda on this West Coast trip—which also includes visits to Portland, OR, and to Silicon Valley companies like Google, Facebook, and Electronic Arts—is to promote Massachusetts as a cutting-edge leader in technology, and to build relationships that could lead to new high-tech jobs and economic growth in his home state. The governor briefed a group of reporters by phone while rushing off to the airport to catch a flight to Portland.

In their meeting with Ozzie, Gov. Patrick’s team spoke of Boston’s innovation strengths in e-health (including electronic medical records), Internet video, gaming, and mobile communications. Ozzie pointed out the strong high-tech talent pool in the Boston area, as well as the high quality of education in Massachusetts, from K-12 public schools to elite universities. They discussed Microsoft Research New England in Cambridge, MA, which officially opened last September, as being part of the company’s efforts to tap the best local talent in computer science and mathematics.

That point came to the fore during a Q&A session Patrick took part in with Microsoft employees. “There were an awful lot of people from Massachusetts working at Microsoft,” said the governor. “They’re here in some cases because in order to move up in Microsoft, it was perceived that you had to be in Redmond. Ray and others are trying to move to another model. Their lab in East Cambridge is a step in that direction.”

It was interesting to hear how Patrick portrayed Microsoft as an innovation leader—a view not everyone in the tech industry would share. “Microsoft is unique, or uncommon, among American companies in terms of their consistent focus on what’s next, looking out five, 10 years,” he said. “It’s not just about jobs today, but how to prepare ourselves for future growth…It’s about branding our tech sector in a fresh way, both as a platform for all the other innovation industries we’re trying to drive, and also as a source of innovation on its own.”

As for what progress had been made on any partnerships with Microsoft, Patrick wasn’t specific. “These are first meetings, or second conversations. We’re not expecting commitments so early in the relationship,” he said. “We want to build a strong foundation, we want to be in play. We want the relationship to deepen. It’s a step in that direction.”

And then it was off to a different tech sector for Patrick. In Portland, the Massachusetts Democrat was slated to meet with Vestas, the world’s largest maker of wind turbines. “We’ll talk about a testing facility and the opportunity to partner with them on that,” he said. “I’m interested in alternative energy and the creation of jobs around manufacturing turbines.”

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It was almost exactly a year ago that Microsoft launched its HealthVault service, a secure online database for users to store and manage their medical records. And in recent months, we’ve reported on the software giant’s increasing efforts in health care, including its new partnerships with prescription drug provider CVS Caremark and Boston, MA-based health startup American Well. Now, Microsoft is teaming up with San Diego-based Scripps Health to study the long-term effects of personal genome testing on health and lifestyle.

The study, which is co-sponsored by the Bay Area firms Affymetrix and Navigenics, seeks to do genetic scans on as many as 10,000 people affiliated with the non-profit Scripps Health system. The scans and analysis will tell participants about their genetic risk for health conditions like diabetes, obesity, heart attack, and certain types of cancer. But the point of the study is to follow what happens after that: will participants change their lifestyle to combat their newfound health risks, and if so, how? The plan is to track their behaviors over 20 years using detailed questionnaires and periodic health surveys. To protect the privacy of users, the identifying information on their saliva samples and questionnaires will be “encrypted and kept in a secure database,” according to Scripps.

What’s in it for Microsoft? Participants will be able to store their clinical and lifestyle information in a Microsoft HealthVault account, and access it or share it with health care providers. “This collaboration is a significant step forward in empowering people to proactively address their specific individual health needs, as well as give clinical researchers access to a broader pool of genetic data to develop new disease treatments,” said Peter Neupert, corporate vice president of Microsoft’s health solutions group, in a statement.

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Boston startup American Well lifted the veil on its ambitious and long-awaited online health care marketplace today. With its 24/7 online network—where people with medical concerns can log on and be matched within minutes with a physician who will provide a live medical consultation—the company hopes to disrupt business-as-usual in the healthcare industry, and potentially lower costs for both consumers and health insurers.

American Well co-founder and co-CEO Roy Schoenberg, who started the company with his brother Ido Schoenberg, jokingly calls the marketplace “almost like a Web 2.0 dating service for consumers and health-care providers.” Indeed, interactive, Web 2.0-style technologies have been seeping gradually into the healthcare industry over the last couple of years. Companies such as Atlanta-based RelayHealth and San Francisco-based Medem, for instance, have introduced “e-visit” services that allow consumers to exchange secure text-based messages about non-urgent health problems with doctors.

But American Well says its system will go far beyond this text-based model, supporting sessions where doctors and patients can connect in real time via webcam, instant message, or telephone. Physicians will have patients’ medical records at their fingertips during the consultation, and will be able to recommend treatments and write prescriptions online if appropriate. American Well will handle all billing and insurance matters related to each consultation behind the scenes.

The company thinks consumers will like the model because it offers immediate access to medical care, at any time of the day or night, without the hassle of scheduling an appointment and going to a doctor’s office. And it thinks doctors will be interested, too, since it will allow them to log into the system, offer their services, and earn reimbursements whenever they have time.

American Well designed the marketplace mainly to be offered to consumers by health plans as an add-on to their existing care options. But it will also be available on an a la carte basis to uninsured patients, according to Schoenberg. The system isn’t intended to keep patients from seeing doctors in person when they need to—but it could cut down on overall health costs by helping patients solve simple health problems without an expensive hospital or clinic visit. “What we are doing is drastically expanding the scope of care that can be rendered to patients in the least expensive possible setting, which is their homes,” says Schoenberg.

“We’re not claiming that this is going to replace traditional healthcare,” he adds. “There are numerous areas of care that require an in-person experience, where a physical examination is important. And certain diagnoses cannot be done over the Web. But the fact that you have a complementary tier of access that is much more immediate to you wherever you are will have a significant impact on your ability to utilize medical services.”

American Well timed the launch of its online marketplace to coincide with the AHIP Institute 2008, the annual meeting of America’s Health Insurance Plans, the leading trade association and lobbying group for the health insurance industry. American Well is a sponsor and exhibitor at the meeting, which is being held in San Francisco, and produced a free recorded webinar on Web 2.0 technologies in the healthcare industry that’s accessible via the meeting website.

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