About 10 years ago, Dr. Fleur Sack quit her practice as a family physician to become a hospital department head. Spurring her decision was the need to switch from paper records to electronic ones to keep her private practice profitable. “At that time, it would have cost about $50,000,” Dr. Sack recalled. “It was too expensive and it was too overwhelming.”
But times and technologies changed, and last year, Dr. Sack left her hospital job to restart her medical practice with an affordable system for managing electronic patient records. She agreed to a $5,000 setup fee and a subscription fee of $500 per month for the system. Her investment also qualified her for subsidy money, which the federal government pays in installments, and to date, her subsidy income has paid for the setup fee and about two years of monthly fees. “So far, I’ve got my check for $18,000,” she said. “There’s a total of $44,000 that I can get.”
That kind of cash flow is one reason why so-called EHR software systems for electronic health records have been among the hottest-selling commercial products in the world of information technology. EHR system development is a growth industry in South Florida, too. Life sciences and biotechnology are among the high growth-potential sectors identified by the Beacon Council-led One Community One Goal economic development initiative unveiled in 2012; already, the University of Miami has opened a Health Science Technology Park while Florida International University has launched a healthcare informatics and management systems program in its graduate school of business.
For many young businesses in the area’s IT industry, government incentives are paving the way. The federal government is pushing doctors and hospitals to use electronic health records to cut wasteful spending and improve patient care while protecting patient privacy — sending digital information via encrypted systems, for example, rather than regular email.
Under a 2009 federal law known as the HITECH Act, maximum incentive payments for buying such systems range up to $44,000 for doctors with Medicare patients and up to $63,750 for doctors with Medicaid patients. Hospitals are eligible for larger incentive payments for becoming more paperless. The subsidy program isn’t permanent; eligible professionals must begin receiving payments by 2016. But by then, the federal government will be penalizing doctors and hospitals that take Medicare or Medicaid money without making meaningful use of electronic health records.
“What the government did is, they incentivized, and now they’re going to penalize,” said Andrew Carricarte, president and CEO of IOS Health Systems in Miami, one of the largest South Florida-based vendors of online software service for physician practices. He said insurance companies also may start penalizing physicians for failing to adopt electronic health records because “the commercial payers always follow Medicare and Medicaid.”
It’s all part of the growth story at IOS Health Systems, which has more than 2,000 physicians across the nation using its online EHR system. Carricarte said many of the company’s customers buy their second EHR system from IOS after their first one flopped. “Almost 40 percent of our sales come from customers who had systems and are now switching over to something else,” he said.
His company is on track to have more than 60 employees by year-end, up from 50 now and about 40 a year ago. Part of the growth is expected to come from sales of EHR systems to cruise lines to help them handle health records of passengers and crew. “We’re in talks with the top five cruise lines,” he said.
Business conditions are likely to improve further for companies like IOS as more doctors and patients get comfortable with online access to electronic health records. “We’re still at that psychological threshold. We’re not quite there yet. But I think it’s just a natural progression of the industry,” Carricarte said. “It’s the same fear we felt when banking went online. Everybody was worried that their money would be stolen, and look what happened: Everybody is doing online banking.”
Leading the way
Many hospitals have been leaders in adopting electronic records and cutting the healthcare industry’s dependence on costly paperwork. Physician practices have taken a more mixed approach. While many doctors have graduated to modern EHR software systems, many others still use outdated computers and paper archives to store patient information, making records difficult if not impossible to search and send. But the trend toward an increasingly paperless healthcare industry appears inexorable, not only because the federal government is demanding it but also because patients are benefiting. Indeed, higher-quality patient care is one of the main selling points in the EHR software business.
Dr. Sack said the EHR system she bought from Kansas City, Mo.-based Cerner Corp., one of the industry’s biggest vendors, empowers her to deliver timely care even when she’s away from her office near Baptist Hospital of Miami. Among other features of Dr. Sack’s new EHR system, results of patients’ lab tests at remote locations automatically appear in her own records. “I can access my records anywhere. I could be in Timbuktu and know what’s going on with my patients,” she said. On a recent weekend, Dr. Sack said she saw “something critical” in fresh lab-test results on her home computer and immediately arranged for treatment of a female patient that “saved her from winding up in an emergency room.”
Miami-based CareCloud is probably the biggest player among EHR vendors with roots in South Florida. CareCloud and other EHR system vendors sell software as an online service, alleviating physicians’ need to install, maintain and update software on computers in their offices. Many doctors pay a monthly subscription fee of several hundred dollars to keep their electronic health records in a so-called “cloud,” or a remote data center, where they are retrievable online.
Privately held CareCloud, started in 2009, doesn’t disclose its revenues. But the company’s president and CEO Albert Santalo hinted that the top line is approaching $100 million a year. “We’ve been on a triple-digit growth path since inception,” he said, “and we’re getting close to crossing over eight digits in revenue.”
CareCloud has about 170 employees and expects to grow to 300 employees by year-end; it will make most of the new hires in Miami, where the company has 150 employees now.
“We’re trying to build a Silicon Valley-like, enduring company in Miami. It’s not the kind of company that we’re going to build and sell in a couple of years,” Santalo said.
But CareCloud faces plenty of competition from such industry leaders as Kansas City-based Cerner, Epic Systems in Verona, Wis., and Greenway Medical Technologies in Carrollton, Ga. The EHR industry also is populated with less successful companies that have stayed in business largely because of the buyer subsidies authorized by the HITECH Act. The Health Information Technology for Economic and Clinical Health Act is part of the American Recovery and Reinvestment Act of 2009, the far-reaching economic stimulus legislation that President Obama signed into law shortly after his first term in office began.
“Companies that should have gone out of business, or been impaired through natural competitive forces, were basically given a heart transplant by the HITECH Act and the way it was implemented,” Santalo said. The CareCloud CEO also said many EHR vendors sold outdated software to unwitting doctors who had to buy a second system. “Now there’s this kind of rip-and-replace market,” he said, “where companies like us are coming in and helping to replace those old systems with something that’s a lot better.”
Some companies are digging into defendable niches in the EHR field, which extends beyond the realm of digital text. One of the niche players is Miami-based itMD, which markets cloud-based storage and retrieval of such medical images as X-rays and CT scans. “You have the EMR [electronic medical records] technology to transport documents, and now you have the ability to transport images,” said Barbara Perez Deppman, president of itMD, which she and her partners started in July 2010. Among other initiatives, itMD is developing software features “to enable patients to sign up for an account online, so they’ll be able to aggregate all their images online,” Deppman said. The images then “can be downloaded on their 3G iPhone or their iPad.”
Voice communication is at the heart of Consult A Doctor, a Miami Beach-based company that facilitates paperless telemedicine services. Users can call anytime to consult a physician by phone rather than wait days or weeks to visit a physician’s office. The company makes digital copies of the conversations available to the physicians and patients. The company’s CEO, Wolf Shlagman, said 17 states now require insurers to treat telemedicine and face-to-face exams equally for reimbursement purposes, and similar laws have been proposed in seven other states, including Florida. For non-emergency care, “it takes days and days to see a doctor,” he said. “If you can get care quicker [by telephone], and the provider gets paid, everybody wins ... There is a tremendous amount of primary care that could be handled through virtual care.”
Miami-based Kipu Systems is an EHR vendor with specialized systems for behavioral and substance abuse treatment facilities flooded with paperwork. One patient who spends one week in a treatment facility can generate “up to 300 pieces of paper. All that disappears,” said Natasha Duwin, president of Kipu Systems. The company is planning to expand its staff of six employees to 18 by the end of the year.
One reason Kipu is attracting treatment facilities is mobility: Most facilities equipped with Kipu software issue Apple iPads to employees to tap into the program. For nurses, in particular, “it makes their life so much easier,” said Tobias Franoszek, chief technology officer of Kipu. “Even most patients have one at home, so people feel very much at home with that type of technology.”
Still, concern over patient-privacy violations can stunt the growth of an EHR vendor. The Health Insurance Portability and Accountability Act of 1996, also known as HIPPA, established standards for securing patient privacy and set penalties for breaches of security. HIPPA rules also bar the transmission of electronic health records through commonly used email services, so software systems for medical records typically have log-in access to secure email communications.
Under a revised set of HIPPA rules, a vendor of such products as software for billing or clinical purposes could be legally liable for a breakdown in patient privacy. Previously, “they were not held liable, but now they are,” said Lisa Rawlins, director of healthcare at Fort Lauderdale-based SRG Technology, a software development company. “That was one of the new provisions in the HIPPA rules.”
Even relatively small security breaches can mean sizable fines for patient-privacy violations. The U.S. Department of Health and Human Services in January imposed a $50,000 fine on a hospice in Idaho, the department’s first financial penalty for a security breach affecting fewer than 500 individual records. “This has caught the attention of many of the smaller providers in the healthcare industry, and rightly so,” said Gail Blount, marketing and communications manager of JDL Technologies, a software company in Fort Lauderdale.
Wellington-based IT entrepreneur Matthew Ehrlich believes the key to avoiding privacy issues is putting the patient in charge of his or her medical records. He has started a business called Healthost.com that aggregates the personal medical records of users with their permission. “The HIPPA restrictions go away the second you agree to put the data with a third party,” Ehrlich said. So, with permission from its registered users, Healthost.com can search for their health records and securely store them on its website. “The data is scattered all over the place,” he said. “That really is the issue, scattered data.” Healthost.com expects to announce new deals with two hospitals soon and to expand its staff of 16 employees.
Despite the risk of privacy breaches, the healthcare industry continues to march away from paper records. Hospitals are leading the way. They not only invest millions of dollars in paper-saving EHR systems but also charge steep prices for printed copies of patient records. “It’s not cheap,” said Robert Seitz, chief technology officer of Support Services Group, a South Dade company that advises physicians on purchases of EHR systems. He said many large South Florida hospitals charge $1 per page or more when patients request hard copies of their records.
To encourage digitalization, Miami Children’s Hospital is targeting the venerable printer. “We’re not going to eliminate [printers] altogether,” said Ed Martinez, senior vice president and chief information officer of the hospital. “But we’re going to minimize the number of printers and force people into a more electronic practice.”
Miami Children’s has invested $60 million in EHR technology in the last 2 1/2 years, Martinez said. Remote access to patient files at Miami Children’s is one of the returns on investment. “Physicians can get into our servers from anywhere,” he said. Though many physicians continue to resist adoption of EHR technology, “the new kids coming out of medical schools and opening up practices are definitely embracing this.”
Although Miami Children’s and many other hospitals use EHR software systems to exchange patient records with physicians, the same type of electronic exchange between hospitals is much rarer. But that may be changing. Florida and the other 49 states have awarded federally funded contracts to create what eventually would be a national health information exchange.
Melbourne-based Harris Corp. has a federally funded, four-year contract with Florida to create a statewide network linking 20 local health information exchanges, many of them created by large hospital systems.
The company is working with EHR vendor Cerner to develop software interfaces that will allow users in different nodes to exchange patient information, said Janet Hofmeister, a project manager with Harris Corp. Doctors in one local health exchange, or node, will be able to search for patient records in another, but patient records filed in one node won’t automatically appear in other nodes.
“There’s nothing automatic about it,” she said. “That is something the physicians were very much against. They really wanted to keep control over their data. It’s all kept at the original edges of the system.”
Memorial Healthcare System, a Hollywood-based hospital operator, is one of the first “nodes” that will join the statewide network. “We anticipate our state connection to go live by the end of this month,” said Forest Blanton, chief information officer of Memorial. The hospital operator selected Epic Systems to provide its EHR software for accounts receivable and clinical functions. Memorial also has helped more than 100 of its affiliated physicians start using the Epic system in their offices. “It’s almost no cost to the physicians,” Blanton said.
Despite promising technological advances in the exchange of electronic health records, casualties are likely among companies currently active in the business. Some of the weakest companies in the business are likely to disappear by the time Harris finishes its work on the statewide health information exchange in 2014.
The principals at Nexus Clinical, a Miami Beach-based developer of physician-practice systems for electronic health records, are determined to stand out in the EHR crowd, not get trampled. “We have about 15 employees right now,” said Dr. Ahbinav Gautam, chief medical officer and vice president of Nexus Clinical, “but we’re trying to expand” despite competitive pressure. “There are many companies in this space.”
He started Nexus Clinical together with serial entrepreneur Pradeep Tripathi, the majority shareholder of the company. Dr. Gautam completed his residency in anesthesiology at the University of Miami and is now an assistant professor there. “I’m working on this endeavor [Nexus Clinical] full-time while practicing on a part-time basis at the University of Miami and Jackson Memorial Hospital,” he said.
The 2009 enactment of the HITECH Act was one of the reasons why the founders of Nexus Clinical launched the company the same year. Dr. Gautam recalled “thinking that this was the right time to get into the marketplace.” He said his optimism hasn’t waned since then, despite the competitive perils his company faces. “There will be some companies that don’t survive,” he said. “But I feel that this industry is a very nascent one.”