The Digital Hospital

Peter A Gross has been a doctor for 40 years, rising up the ranks to become
the chairman of internal medicine at Hackensack University Medical Center in
Hackensack, N J. But one day this winter, a homeless man checked in to the
hospital with HIV, and Gross made a decision that could have seriously harmed
his patient. He chose to give the patient an HIV drug, tapping a request into a
hospital computer and zapping it off to the two-year-old digital drug-order
entry system. Moments later he got back a message he never would have received
before the system was in place: a warning that the drug could mix dangerously
with an antidepressant the patient was already taking. Gross got on the phone to
figure out the problem, eventually asking the man's psychiatrist to reduce the
dosage of his antidepressant. "There's no way I would have picked that
up," Gross says. "It was totally unexpected."

Scenes like this are unfolding across the country, providing a glimpse into
the potential of information technology to transform the health-care industry.
Hackensack is one of the nation's most aggressive tech adopters. Millions of
dollars in investments have paid for projects well beyond the online drug system
that tipped off Gross. Doctors can tap an internal website to examine X-rays
from a PC anywhere. Patients can use 37-inch plasma TVs in their rooms to surf
the Net for information about their medical conditions. There's even a
life-size robot, Mr Rounder, that doctors can control from their laptops at
home. They direct the digital doc, complete with white lab coat and stethoscope,
into hospital rooms and use two-way video to discuss patients' conditions.

Whimsical? Maybe, but Hacken—sack's results are perfectly serious.
Patient mortality rates are down. Quality of care is up. At the same time,
productivity is rising. While these are early days and plenty of hurdles remain,
the hospital has no doubts that its technology investments are making the
difference. "We could never become a top hospital unless we were tops in
tech," says John P Ferguson, the hospital's chief executive.

Is
this the health-care industry's future? It would be a startling reversal. For
years health care has missed out on the huge benefits that information
technology has bestowed upon the rest of the economy. Hospitals were not only
cheapskates when it came to investing in computers and Web technologies but also
had a knack for wasting the money they did spend. During the 1990s, productivity
in health-care services declined, according to estimates from Economy.com. That's
a huge underachievement in a decade of strong gains for the overall economy.

All of that may be beginning to change. Hospitals such as Hackensack, along
with insurers and the government, are stepping up their investments in
technology. For hospitals, there's more motivation than ever: The government
and private insurers are beginning to pay hospitals more for higher-quality care-and
the only way to measure quality, and then improve it, is with more information
technology. Hospital spending on such gear is expected to climb to $30.5 bn next
year, from $25.8 bn in 2004, according to researcher Dorenfest Group.

Dollars are dandy. Even more important, though, hospitals finally seem to be
figuring out how to make their tech investments pay off. Clumsy, sluggish
first-generation systems have been tossed out. Hospitals are listening to
doctors and nurses and installing laptops, software, and Net technologies
fine-tuned to the rhythms of their work. The results are beginning to show up in
national statistics: Economy.com figures that health-care services productivity
has risen about 2% annually since 2001, albeit at a slower pace than the overall
economy.

Such measurements in health care are more art than science. In other sectors,
productivity is measured as output divided by hours worked. But health-care
output is tough to measure. You can calculate how many worker hours it takes to
deliver a one-day hospital stay. But there's no consensus on how to measure
whether the quality of that care is better or worse than in the past. That's
why the federal government punts, declining to put out a productivity stat for
health care. Economy.com measures production and worker hours without adjusting
for quality of care. Other economists take issue with that calculation. But even
if it's just directionally correct, it means that after many sluggish years,
Hackensack and other institutions are delivering hospital stays, X-rays, and the
like more efficiently.

Refining the Software

Is this the beginning of a sea change or a false start? That question is
being hotly debated. Skeptics abound. Most recently, a high-profile study
published in the Journal of the American Medical Association in early March
showed that a tech system used by the University of Pennsylvania's hospital to
prescribe drugs created new ways to make errors. Why? In one example, it
scattered patient data and drug-ordering forms over so many different computer
windows that it increased the likelihood of doctors ordering the wrong
medications. "Hospitals need to make the systems work with the way medicine
is practiced," says Ross Koppel, the study's lead author and a professor
at the University of Pennsylvania.

The Technologies Behind the Care In its quest to go digital, Hackensack University Medical Center is rolling out a host of new systems. Here's a sampling: Lifebook  Hackensack is testing this pocket-size PC that hooks wirelessly into the hospital's network, giving doctors the freedom to place pharmacy orders and pull up medical records from anyplace in the hospital. Instant X-rays The hospital has set up an internal website that stores all of its medical images. This way doctors can view crystal-clear digital versions of their patients' X-rays, MRIs, and CT scans from any computer, in or out of the hospital. E-charts  Nurses use these wireless mobile laptops to record patients' vital signs, symptoms, and medications. Doctors can sign in to the same central system from the laptops, too, or from any desktop PC to order prescriptions and lab tests and read their patients' progress. About half of the hospital's units have electronic prescribing so far. Robotic Pharmacy  A giant robot named Robbie, equipped with arms, reads prescriptions entered into the hospital's computer system and then grabs medications stored on pegs on the wall. The pills are then dropped into containers that are marked for each patient. Smart TV  Hackensack is rolling out 37-inch flat TVs in patient rooms. Patients will get more than just pay-perview movies-they'll also be able to log on to the Web, take interactive classes about their condition, and find out how to take care of themselves after discharge.

But the experiences of Hackensack and other hospitals nationwide suggest that
health care really is making its way into the Digital Age. Hackensack has
successfully put in place an electronic prescription drug system. The New Jersey
hospital, however, has spent long hours refining its software to eliminate many
of the potential pitfalls cited in the University of Pennsylvania study. Such
tech work has helped boost Hackensack's operating margins, to 3.1% last year
from 1.2% in 2000.

The stakes couldn't be higher. Health care accounts for 15% of the US
economy, or $1.7 tn. It's so gargantuan that any efficiency gains make an
impact on the overall economy. Dr David J Brailer, President George W Bush's
point man on health-information technology initiatives, predicts that tech
investments could lead to $140 bn a year in cost savings by 2014, or an
estimated 6% of health-care spending in that year. "I actually think that's
conservative," says Brailer. "There's a body of literature that
shows case studies with much larger savings."

More important than saving money, of course, is saving lives. Poor
information kills some 7,000 Americans each year just by missing
drug-interaction problems, according to the National Academy of Sciences
Institute of Medicine. All together, hospital errors result in up to 98,000
deaths annually. Early evidence indicates that proper technology can reduce the
toll. Hospitals that have begun using electronic prescription systems have seen
up to 80% fewer prescription errors. And at Hackensack, patient mortality has
dropped by 16% over the past four years, in part because of its digital
initiatives.

While hospitals have always been devoted to saving lives, they're turning
to tech now because of a fundamental change in US health care. Pay for
performance, that central tenet of Corporate America, is making its way into the
world of health care. Medicare is leading the way. It set up a trial with 277
hospitals in which it's paying juicier fees for high-quality results in five
treatment areas.

It's quite a start. Medicare's trial suggests better information can lead
to better care. The evidence? Since the 277 hospitals began gathering
performance data and entering the spotlight of being publicly measured against
their peers, the average quality-of care-scores have increased 6%.

Over the past two years, WellPoint UnitedHealth Group, and many other
insurance companies have begun rating hospital treatments and rewarding
high-quality care. Here's how it typically works: A hospital gets a fixed
up-front fee for, say, a heart bypass. If the hospital scores high on quality
for bypasses, it will get a bonus on top of that fee, usually 1% to 4%.

So why not jump in with both feet? Hospitals have financial constraints on
their ability to purchase technology. There are competing demands. And while
most hospitals can issue debt, they typically only do so for big-ticket items,
such as a new building. For tech investments, hospitals pay for what they can
out of cash flow. And cash isn't easy to come by these days. The nation's
5,760 hospitals have seen average profit margins fall for eight years, according
to the American Hospital Assn.

Hackensack is a case study for the US health-care system as it navigates
these issues in the years ahead. It isn't a deep-pocketed academic hospital
with the budget to do things few others can. It's a community hospital, nine
miles from New York City, that symbolizes the challenges confronting local
hospitals around the country. To get a firsthand look at this future, two
BusinessWeek reporters went on rounds with doctors and nurses at Hackensack, sat
in on staff meetings, and talked with patients about their experiences.

The most important piece of Hackensack's digital initiatives is the
networked software that acts as the hospital's central nervous system. Nurses
use wireless laptops on wheels to log in to this system to record patients'
symptoms and get all the information they need to shuttle patients through their
stay. Doctors tap into the network via wireless laptops or PCs to order
prescriptions and lab tests. Everything else is linked into the system, from the
automated pharmacy to the X-ray room, eliminating the need for most faxes, phone
calls, and other administrative hassles.

Even Mr Rounder is hooked in. As doctors use the robot to "visit"
patients, they can zip off requests to refill drug orders or run lab tests from
a separate window on their computer screens. The robot has proven its worth.
When a blizzard stranded Dr Garth Ballantyne at home, 82 miles from the
hospital, he fired up Mr Rounder. "I wouldn't have been able to drive
here to see my patients that day," the surgeon says.

Still, the picture that emerged of Hackensack's experience is complex. The
institution has poured $72 mn into IT projects since 1998, and the technology
clearly is helping both productivity and quality of care. It's one of two
hospitals in the Medicare pay-for-performance test group that has scored in the
top 10% for four of the five categories Medicare is tracking-in heart failure,
cardiac bypass, heart attack, and pneumonia. Yet Hackensack has a long way to go
before it realizes the full potential of its digital initiatives.

Hackensack offers clear lessons for other hospitals. Making technology pay
takes time. It can be several years before the results of initiatives begin to
surface. Just as important, making the technology work well takes a huge amount
of effort. Hackensack's central software system is constantly being tweaked to
ensure that it's woven into the routine of the medical staff.

Most important, doctors remain the key to hospitals' success. Wooing them
is an extremely delicate task. Only 7% of doctors actually work for hospitals.
The others are essentially independent operators who are not required to do what
hospital administrators want. Many are wary of gadgets that take extra time or
interfere with their work. But they aren't Luddites. Most are willing to
experiment with new technology.

The key to winning them over? Hackensack and others must make sure the
technology saves time, is easy to use right from the start, and doesn't get in
the way of patient relationships. Over the past two years, Hackensack began the
task of getting doctors to embrace the technology. It has made large strides.

By Timothy J. Mullaney and Arlene Weintraub in BusinessWeek. Copyright 2005 by The McGraw-Hill Companies, Inc