MedStar selling its data system

Microsoft to market patient files collator


Columbia-based MedStar Health, a seven-hospital system, announced yesterday that Microsoft is buying its system to organize patient data from a variety of sources and make it available to doctors and nurses in a fraction of a second.

For MedStar, it means a chance to see a system created by two of its emergency room doctors at Washington Hospital Center, then expanded over the past decade, get developed more fully by the world's biggest software company, with its vast capabilities and marketing prowess.

"It's grown to the point that it needs the strength and focus and resources of a major developer - and that's not MedStar," said Kenneth A. Samet, president of MedStar. Although financial details were not disclosed, Samet said the deal allows MedStar to recover its development costs, reduce future information technology costs as it becomes a test site for Microsoft Corp., and share in profits if the system sells well.

For Microsoft, the deal marks an entry into a crowded and rapidly shifting, but potentially lucrative, field. Health care administrators, government policymakers and academics have been promoting the potential of health information technology for years. The goal is for doctors to have instant access to the full medical record of each patient, reducing medical errors, eliminating duplicative tests, speeding treatment, saving money, and facilitating rapid and accurate payment of claims.

"The needs are there," said Peter Neupert, vice president in charge of Microsoft's new health solutions group. "There are a lot of people talking about it, but not a lot of people solving the problem." The MedStar system, called Azyxxi (it rhymes with "a pixie"), is Microsoft's first designed specifically for a health care application.

Neupert was coy on Microsoft's strategy.

"It's too early for us to say specifically how we're going to market the product," Neupert said. As for what other products Microsoft might buy or invent, he said only, "I don't think there's any one product, or any suite of products, that can deal with all the opportunities."

Analysts have been expecting a move to acquire or develop a health information product by Microsoft since fall, when Neupert was named to head a division that, until yesterday, had nothing to sell.

"It's not surprising Microsoft would move in this direction, because it's clearly an area that needs automation," said Phil Leigh, a senior analyst at Inside Digital Media Inc., a market research firm in Tampa, Fla. "As big as they are, they have to consider new ways to grow. "

In recent years, he said, Microsoft has branched out in different ways, ranging from the $1.1 billion purchase of Great Plains software, which produced business and accounting applications, to the launch of the game machine Xbox.

The health care information field already has a large number of specialized players, said Dr. Victor M. Plavner, a physician practicing in Arnold who chairs the Maryland/D.C. Collaborative for Healthcare Information Technology, an alliance of doctors, hospitals, insurers and businesses seeking regional cooperation for sharing medical records.

In addition to the specialized vendors, he said, health information systems are marketed by large companies such as General Electric Co., which makes medical equipment; Northrop Grumman Corp., which maintains a record system for the Defense Department; and McKesson Corp., a pharmaceutical distributor with a varied portfolio of health businesses.

"I'm fascinated by all the different players who are getting into the business," said Joy M. Grossman, associate director of the Center for Studying Health System Change. She is the author of a report on health technology adoption published last month. The industry, she said, is characterized by "a lot of maneuvering, a lot of shakeout, and companies buying each other."

Despite the buzz over the promise of health technology, she said, "While there is some evidence these systems can improve quality and reduce costs, there aren't comprehensive studies on commercial products, so the jury is still out."

Adoption of systems, particularly in physician offices, has been slowed by questions over how well they work and by costs - which are not necessarily paid by those who have the most to gain financially. While doctors, hospitals, labs and other health providers would have to bear most of the cost of buying systems, she said, savings would accrue mostly to insurers, employers and governments.

Still, hospitals are buying information systems of various types in a big way. A survey last year by the American Hospital Association found 92 percent of hospitals using or considering a clinical information system. On average, hospitals were spending $700,000 a year to buy systems, and $1.7 million a year to run them.

A major problem, Plavner said, is that a large hospital can have a variety of administrative and clinical systems, some limited to particular departments, that "don't talk to each other."

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