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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In a regulatory filing this week, Carlsbad, CA-based Medsphere Systems says it has raised about $1.9 million of a $15 million secondary venture round. Medsphere CEO Michael Doyle told me recently that existing investors have committed $6 million for the round so far. Since it was founded in 2002, Medsphere has raised $50 million from investors that include Azure Capital Partners, Epic Ventures, and Thomas Weisel Partners. The company is commercializing an open source software version of VistA, the electronic health record system developed for the U.S. Department of Veterans Affairs.

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Most doctors in the U.S. have never heard of Athenahealth, the Watertown, MA-based firm offering Web-based software for managing billing, electronic medical records (EMRs), and other functions in physician practices. But the federal government plans to invest $19 billion to make funds available for doctors to switch from the usual paper-based systems to electronic medical records, giving them a new reason to learn more about Athenahealth (NASDAQ:ATHN) and its offerings. I caught up last week with Jonathan Bush, the outspoken CEO of Athenahealth, to get the lowdown on how the company is seizing this multibillion-dollar opportunity.

Bush, the first cousin of former President George W. Bush, has his doubts about the program. For one thing, the $19 billion isn’t a lot of money for its ambitious purpose, and for another he says that he wants to know what specific standards doctors will be held to in their use of federally subsidized electronic medical records. The $19 billion is part of the broader, $787 billion stimulus package passed in Congress last month. Some of the details such as a murky requirement that doctors will have to show “meaningful use” of electronic records to get the federal dollars have yet to be fully explained. Athenahealth is hoping that the requirement means doctors will have to actually use the electronic records and integrate them into their practices, playing into the company’s strengths in providing software and online services that touch multiple aspects of medical practices.

In any case, doctors are going to get a bigger dose of Athenahealth and its chief executive. The firm revealed during its earnings call last month that it plans to increase its investment in sales and marketing this year. And here’s a link to Bush’s colorful TV appearance two weeks ago on CNBC.

The interview below captures Bush’s thoughts about the $19 billion that the government plans to inject into his industry and its likely impact on Athenahealth. (And if you can’t tell from the interview, Bush hints that he has some obvious philosophical differences with the stimulus package.)

Xconomy: Do you think the government’s spending on EMRs will be effective?

Bush: Obviously, the standards are still up in air …Next Page »

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Burlington, MA-based ChartOne, which makes software used by hospitals to manage the distribution of confidential paper and electronic medical records, was acquired by Alpharetta, GA-based HealthPort in a deal that closed on Monday, HealthPort said in an announcement. ChartOne was HealthPort’s closest competitor, according to the statement, which did not reveal the terms of the acquisition.

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For the better part of a decade, advocates of computing in healthcare have fixated on the dream of paperless medicine—a new era in which every patient’s medical records would be stored digitally and every hospital, physician’s practice, pharmacy, and insurer would have access to these records, reducing paperwork costs and medical errors. But for all of the time stakeholders have spent squabbling over standards for electronic medical records, and all of the money providers have spent rolling out costly and controversial proprietary medical-database systems, these dreams haven’t gotten very far. More than 80 percent of medical practices still keep paper records, according to a study published last week in the New England Journal of Medicine.

Meanhile, the Internet has given birth to a totally new way of doing business and interacting with consumers: Web 2.0. And in a rush of Web-based health initiatives that has picked up significant steam just in the last few weeks, entrepreneurs and programmers are leapfrogging over the problem of electronic medical records to tackle much broader (and ultimately more important) issues such as how to use the Internet to track people’s health, how to use the power of social networking to improve standards of treatment, and how to deliver medical advice over the Web.

And it’s not surprising—given the Boston area’s dense concentration of high-tech hospitals, leading universities and medical schools, computing hardware and software companies, and Web startups—that much of this “Health 2.0″ revolution is happening right here in the Bay State. Last week’s launch of Boston-based American Well is only the most recent local example, and it’s sure to be followed by more.

The area’s Health 2.0 cluster may not be quite as big as the New England clean energy cluster, but it’s larger and more varied than some other clusters we’ve covered, such as the music and technology cluster and the Internet video cluster. It’s also growing fast, with new companies being launched every month. And it has all the hallmarks of success, including buy-in from big outside players like Microsoft (which is partnering with American Well to roll out its HealthVault service) and Google (which recently signed up Boston’s Beth Israel Deaconess Medical Center and Blue Cross Blue Shield of Massachusetts as its first partners for its Google Health project in the hospital and insurance industries, respectively).

What qualifies a company as a Health 2.0 venture? In this list, we’re including any New England-based company that uses the Web or other digital media to deliver software or services intended to help people manage their own health or to help providers manage healthcare delivery. That means we’ve left out a number of local firms, such as Health Dialog, D2Hawkeye, MedAptus, MedVentive, and mTuitive, that could be classified as “e-health” companies, since they are in the business of collecting or analyzing data that’s used to improve patient health or healthcare administration. But if a company doesn’t tap into Web 2.0 technologies and/or use digital media to communicate with consumers, we didn’t include them here.

As always, we invite you to send comments and additions to editors@xconomy.com.

American Well
Boston, MA

A 24/7 online network that matches consumers seeking medical care with doctors for live consultations via Webcam, instant message, or telephone (profiled in Xconomy last week).

Athenahealth
Watertown, MA

Subscription, Web-based software aimed at helping individual clinics and provider networks manage billing and electronic medical records. (Athena shelved plans for a secondary public offering in February 2008.)

Body1
Cambridge, MA

Creates online, interactive multimedia training courses for healthcare executives and clinicians as well as consumer-oriented, advertising-supported health information portals such as Heart1.com.

…Next Page »

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The face of online health care is changing in Massachusetts—and probably for the better. Today one of the state’s leading health insurance companies, Blue Cross Blue Shield of Massachusetts (BCBSMA), announced that it has signed an agreement to integrate with the Google Health platform. It is the first health insurance company to do so.

Google Health, a free service that patients can use to organize their health information online, launched in the U.S. last month with a list of provider partners that includes the Beth Israel Deaconess Medical Center (as we reported here), Cleveland Clinic, Walgreens, and CVS/CareMark.

The integration is supposed to be finished sometime this fall, at which time Google Health will be offered to BCBSMA members. The service will allow members to store and manage their medical records and health info (including insurance claims) in one secure location, download their prescription history from other connected providers such as pharmacies and doctors’ offices, and search for a doctor or hospital online.

You wouldn’t necessarily expect a huge insurance company to be quick on its feet when it comes to adopting technology, but BCBSMA has previously funded the Massachusetts eHealth Collaborative and is a founding member of the Massachusetts eRx Collaborative. The Google partnership should give members “easier and more portable access to their health care information,” said Steven Fox, BCBSMA’s vice president of provider network management, in a statement.

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Boston isn’t just home to a bevy of top-rated hospitals—it’s also the birthplace of medical informatics, or the storage and retrieval of health data. (The MUMPS programming language—for Massachusetts General Hospital Utility Multi-Programming System—was written in 1966 and is still one of the most widely used languages for creating database-driven clinical applications.) So it isn’t surprising that a Boston hospital, Beth Israel Deaconess Medical Center, is one of the first two healthcare facilities to partner with Google Health, the free consumer-oriented health information management portal launched by Google yesterday.

Effective immediately, approximately 5,000 patients at BIDMC who use the hospital’s PatientSite portal and have existing Google Gmail accounts can export BIDMC records on their diagnoses, medications, and allergies to Google Health’s database, which is designed to help consumers manage their own medical records in a secure online environment. Over time, all 40,000 monthly users of PatientSite will be offered the ability to export their data to Google Health, according to John Halamka, the CIO at BIDMC, who is also a member of the Google Health Advisory Council, an unpaid group of medical professionals who advise Google on health-related product ideas and development.

“We believe that patients should be the stewards of their own data,” Halamka said in a BIDMC announcement timed to coincide with the launch of Google Health. “PatientSite is wonderful if all care is delivered at BIDMC. However, many patients have primary care doctors, specialists, labs, pharmacies, and non-traditional providers at multiple institutions. Our vision is that BIDMC patients will be able to electronically upload their diagnosis lists, medication lists and allergy lists into a Google Health account and share that information with health care providers who currently don’t have access to PatientSite.”

Halamka, who was at Google’s headquarters in Mountain View, CA, for a media “factory tour” that served as the occassion for the health portal’s official launch, also blogged about the effort, stressing that security and privacy are “foundational” to the effort. “The privacy policy, with oversight from the Google Health Advisory Council, stipulates that data will never be transferred, sold, mined or released without specific consent of the patient,” he wrote. “Patients completely control the content and may remove it any time.”

The other hospital joining Google Health as a founding partner and allowing the importation of its electronic medical records is the Cleveland Clinic. Meanwhile, anyone with a Google account is free to manually enter health-related information such as their age, sex, height, and weight, diagnosed health conditions, medications, allergies, procedures, test results, and immunization records. They can then grant doctors and other service providers access to these records. From the Google Health site, users can also receive alerts about adverse interactions between the medicines they take, and connect to a range of online health assistance services such as a heart attack risk calculator from the American Heart Association and a diabetes monitoring tool from MyCareTeam.com.

Google Health, which has been in the works at Google for more than two years and was the subject of premature launch rumors back in February, isn’t the only health data aggregation site BIDMC is working with. The hospital also has a partnerships with Microsoft’s Health Vault portal and with Dossia, a consortium of large employers such as Wal-Mart and BP that’s assembling a system where employees, dependents, and retirees can keep lifelong electronic health records.

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