ASPs: Healthcare Reaches Back to the Future.

New way to buy software is reminiscent of "shared service" computing days, and a huge step forward in accessibility and cost savings for healthcare providers.

By now you've awakened to the acronym ASP. You may even have ventured beyond the label to explore what Application Service Providers (ASPs)

have to offer. But, if you haven't looked yet, look now. This technology will serve a lot longer than other information technologies that emerged during the past couple of decades. And, as the ASP era progresses, dramatic changes are in store for IT departments in hospitals, managed care organizations, and even that common technology holdout among care providers, physician practices.

ASPs are vendors who offer software use through the Internet, with the application and the user's data stored at an offsite data center. So, why all the hype for a different way to "buy" software? We'll explore the buzz and the benefits, but first, a history note: ASP technology is being compared to the IT solutions of two and three decades ago.

"In some ways, ASPs are a return to the `shared service structure' of the past," says Violet Shaffer, vice president of APACHE Medical Systems, a leading clinical decision support system vendor in McLean, VA. From the late 1960s through the early 1980s, Shaffer reminds us, computer systems were large and expensive, so vendors set up data centers and offered computer time plus use of software applications through phone lines linked to dumb terminals in hospitals.

As technology improved, mainframes and minis allowed establishment of systems on site in the healthcare provider organizations. Hospitals could buy, own, and manage their own system, and not worry about phone links or sluggish communication. When Local Area Networks (LANs), Wide Area Networks (WANs), and client/ server network opportunities arrived, the landscape changed again, delivering more applications throughout hospital departments.

"Now, ASPs complete the full circle revolution back to offsite hosting, with a twist," Shaffer says.

A Way to Outsource IT

Time sharing with a difference, agrees Bill Trail, director of marketing for the ASP Group at Progress Software Corp., Bedford, MA, a specialist in helping traditional software vendors build Web-enabled databases and ASP operations.

"The difference is that now the driving force is scarcity of people," Trail says. "There are more than 700,000 open IT positions in North America alone, and shortages are expected to grow to more than 1 million people in just the next few years."

Progress Software expects ASPs to ease the people crunch by transferring much of the programming, maintenance, user training, and technical support from healthcare IT departments back to the technology firms. Even if traditional client/server applications comprise the bulk of their systems for years to come, CIOs and IS managers for healthcare delivery networks will not thumb their noses at the administrative time they can save by utilizing some ASP software. Upgrades alone can consume tremendous amounts of time when having to ensure smooth operation at every desktop and workstation throughout the enterprise.

The values magnify when comparing in-house software implementation to ASPs models. Because the expenditures can reach from tens to hundreds of thousands of dollars, organizations will often spend 30 to 60 days researching and evaluating before deciding to buy, then another 60 to 90 days for delivery, installation, and training.

By contrast, "ASPs offer the opportunity to cut the total process to `go live' from 120 days to less than a month," says Massoud Alibakhsh, president and chief executive officer of Nuesoft.com, Atlanta, GA, which recently launched an ASP version of its legacy practice management system.

"After a decision is made, installation is one click away--all the user needs is an Internet connection, and they can be processing claims real time by the end of the same day," Alibakhsh says. "It's affordable, immediately implementable on any variety PC already existing in the physician offices--old 386's, MACs, AS400s, you name it." That's without hefty up-front investments, and with fewer internal concerns about ensuring compliance with regulations or security, Alibakhsh adds. "It's a big shift of the risk and the dollars."

The reduction in the need for IT services may provide some relief for overburdened IT departments, but it may also have long-term implications. In fact, at least one leading consultant is forecasting a downsizing of IT departments in hospitals and healthcare facilities. (See the Industry Watch column on page 8 in this issue for details on the GartnerGroup's report).

Savings Through Subscription Pricing

Traditional software purchases involve large upfront payments to cover licensing, plus annual maintenance fees as high as 15 percent, to cover technical support and upgrades. With ASPs, the costs can drop from tens and hundreds of thousands up front, to small monthly fees on a "pay as you go" basis.

Emerging as a standard for ASPs is subscription-style pricing. Vendors charge a regular monthly fee; some add a one-time enrollment fee; some ask for contract commitments of six months to a few years. Sometimes, you can choose between base fee and per-transaction pricing, depending on the application, like claims processing or referral connects. You can determine the best value, if you know the types and volumes of transactions in your practice or operation.

The service level agreement, or SLA, will be the key document defining the relationship between you and your ASP. The SLA will spell out the software user's expectations, like response time, data storage issues, expectations for backup systems or restoration if failures occur, and penalties, Trail says. But, as with cable or phone and other utility subscription services, customers will also have more influence, including the ability to change service providers--without the fear of flushing a $100,000 investment--if the program is not working satisfactorily.

Customer Service

Improved treatment of customers is one of the most important likely outcomes of the ASP era, says John Holton, CEO of scheduling.com, a Los Gatos, CA, ASP. It offers an enterprise access management system focused on registration and scheduling for integrated delivery systems, acute care hospitals and large, network-owned clinics.

"IT delivery in healthcare has been generally poor over the years, with many vendors treating customers shabbily, particularly with regards to service under their software licensing arrangements," Holton says. "Even for some large scale investments of $2 million to $5 million, promises about functionality are frequently unfulfilled, and customer satisfaction is low. The combination of true connectivity and `pay as you go' service should help tip the balance in this environment to favor the buyers."

Broader Access to Technology

In the early going, the real beneficiaries of the ASP model will be small- and medium-size healthcare businesses that have avoided IT investments because of the high cost.

"One of the most attractive dimensions of ASPs for the business managers of medical practices," says Trail, is the chance to get fixed cost, all inclusive service, without the need to hire IT support--on staff or consultative. This is particularly attractive for practice management, where 75 percent of practices employ three or fewer physicians.

Other beneficiaries of ASP adoption will be clinicians who may not have been as techno-savvy, now with the ability to make more use of desired clinical systems.

Peter Gladkin, CEO of APACHE Medical Systems, says he expects ASPs to impact their business because they can deliver outcomes management solutions, with patient risk predictors, inexpensively to healthcare professionals, nurses, and physicians who haven't used computers that much.

"They want it now, because, in medical groups, physician collaboration on new drugs, specific disease experiences, is vital," Gladkin says. "What we're all trying to do is to use the browser technology to get very important information and ease of utility as physicians and nurses care for patients. MEDLINE is another example; if you can turn on a computer, you can search the medical literature."

Using Blink Speed

Many experts see ASPs as the best possible hope yet to deliver, for the first time, on the unkept promise of enterprise integration of the late 1970s and early 1980s.

"The current model still hasn't succeeded in linking all the users, all the data needed. Take the very common functions of patient ID, registration and scheduling that start most healthcare encounters," Holton says. "They're not automated across the enterprise be cause the processes have not been viewed as an integrated whole, and that's because it has been too expensive to try to span facilities through WANS and client/server networks. The Web provides a deliver-anywhere, affordable infrastructure."

He says $42 of the average $220 ambulatory care bill in acute care networks is lost, per outpatient, because of missed charges, ineligibility, and lack of referral or authorization approval. For physician practice, similar numbers: typical loss on each patient is $25.

Providing better access to physicians and facilities for patients, and better connectivity in scheduling outpatient surgery at a surgical center can help recapture a high percentage of the lost revenue, Holton claims. A system that can reduce the number of calls, missed appointments, proper codes and eligibility for referrals and other services can save $1 million annually for a large IDN.

Constant Access

Real gains could be just around the corner for healthcare providers, but the challenges increase for point-of-care solutions. "Point-of-care systems require security, response speed, and reasonable recovery after system crashes,' says Gladkin. The Internet can, provide equally robust, reliable products lower cost and risk than in-house applications, but the critical factors for point-of-care are constant access anywhere and speed. "For good clinical decision support, you need blink speed."

Clinical staff won't tolerate the kind of response time common in some Web-based programs, Alibakhsh agrees. "True interactive response for mission critical, point of patient care requires a guaranteed response time of less than five seconds, routinely, not 30 to 40 seconds, and not variable. The infrastructure behind some ASPs is here to deliver the instantaneous information demanded," Alibakhsh says. "If clinicians get concerned about response time, the system will fall into disuse, and stack up with other technology failures of the past."

Nuesoft's chief also explains how the solution does not come from the pipe--not the modems or computer chips or PC speeds--but the architecture of the applications themselves. The company chose not to re-engineer its legacy application for the Web and instead crafted next generation applications for the Internet from the ground up.

Its system relies on patented technology that can speed delivery of high-level encrypted coding for security, a feat typically unachievable with applications simply re-engineered for the Internet. This helps keep the infrastructure transparent to the user, yet the browser-imbedded software seamlessly collects and displays the data needed for everything from scheduling appointments, to eligibility checks, referrals processing, and submitting claims. "The trick is to build a system that doesn't require physicians, nurses and others to have to go to other programs and drag in or re-enter data."

Great Expectations

ASPs, like the Internet itself, will create profound, dramatic changes in some healthcare operations. The good news is that ASPs represent a change, for a change, that will live up to--and probably exceed--the positive billings that are coming, even from the vendors.

Log on to www.healthmgttech.com for additional comments from the interviews of these shapers of the ASP era. Then, in our June issue, look for profiles of some of the applications available from selected service providers.

For more information on companies interviewed: circle 209 for APACHE Medical Systems; circle 210 for Neusoft.com; circle 211 for Progress Software; circle 212 for scheduling.com.