from healthcio.com
ASP's (Application Service Provider) Help or Hype
The congruence of two key emerging drivers will dramatically alter
healthcare. One, all vertical businesses are moving to ecommerce and the
use of the Web to touch customers. Two, the development of Web
applications requires an infrastructure of high bandwidth and staffing
with up-to-date Internet skills. Bandwidth will eventually become a
commodity just as phone service is today. However, the staffing problem
most likely will not be ameliorated except through outsourcing of
applications development. This represents opportunities for Web
sub-portals, IT outsourcing and professional services firms, Web hosting
companies, and ASP's.
Under repeated cost-containment and budget cutting, healthcare providers
and IT department are asked to do "more with less." Application service
providers represent a new trend in application delivery for healthcare.
Health care is an especially appealing market for ASPs because of the
systems fragmentation, shortage of IT staffing, and intense cost
containment pressure. Software and outsourced services including ASP's
and ecommerce related services and applications are expected to continue
to be greatest area of growth in information technology services. Some
critics have questioned whether ASPs are being oversold, what the value
proposition is, and whether they have a sustainable business model. Are
ASPs an outsourced service or a software product?
ASPs will allow you to outsource and host particular healthcare
applications at the vendor's site such as discharge planning, electronic
patient records, claims processing, care management, purchasing and
supply-chain, etc. Most of these applications are available on a
subscription basis and accessible via a Web browser. HealthCIO (HCIO)
conducted an online survey to determine if there was sufficient
understanding of the ASP business model and evaluated perceived "strengths
and weaknesses" to ASPs. HCIO conducted an online survey of 222 health
care provider and health information technology organizations (consisting
of 121 health care provider organizations and 101 IT supplier
organizations). With HIPAA compliance following on the heals of "Y2K"
information systems remediation, the need among health care organizations
to demonstrate a clear vision of value for spending on ASPs is paramount.
ASPs a Sustainable Business Model
Gartner Group defines ASPs as delivering functionality and associated
services across a network to multiple customers using a "pay as you go"
payment model. The ASP model had been around before using a dedicated
connection and services model but the rapid acceptance of the Internet and
ebusiness and funding from the capital markets fostered this explosion of
ASPs.
Basically, the economic value of the ASP lies in a concept fostered by
ebusiness service providers, mass customization. Basically, if
applications could be delivered to many customers with little variation in
specifications requiring customization, then the ASP could profit by the
volume delivery model. The advantages to the customer was that the ASP
could deliver the application without high upfront fees, maintain and
upgrade the application as needed, and by freeing up IS/IT staff allow the
organization to concentrate on their core competencies.
Size of the Health Care ASP Market
In other industries the ASP model has been especially appealing to
organization with high IT staff turnover and has been targeted to small to
medium sized businesses. In the 2000 HIMSS (Health Information
Management Systems Society) Leadership Survey sponsored by IBM, nearly
one-third to half of the responses indicated severe staff shortages in
Network support (48%), Systems Integration (47%), and Internet/intranet
(38%). The cost of skilled IT labor (the largest component of operating
budgets) will continue to increase as healthcare competes with
higher-paying industries. In the HIMSS survey, a third indicated that
they already outsourced the web site, so for these organizations that
already outsource a number of systems ASP may be more readily accepted.
HIMSS: himss.org
To estimate the size of the ASP market in health care, an analysis was
performed of the type of applications that could be outsourced to an ASP
and the size of the software application market. HCIO examined 1) the
size of the application market in health care, 2) annual growth and IT
spending trends, and 3) the health IT market share likely to be captured
by ASPs. Assuming that ASPs can capture from 10% to 20% of the
application market in health care, then the health care ASP market could
range from a low of $278 to as high as $556 million. Seen from another
angle, the most likely applications for ASPs are laboratory information
services, practice management systems, scheduling, materials management
and purchasing applications with total revenues of the top 100 vendors
around $106 million in 1999 ("Healthcare Informatics 100"). Therefore, we
believe the ASP market to be more in the neighborhood of $278 million or
less.
healthcare-informatics.com
HCIO ASP Health Care Provider Survey Key Findings*
· Top business priorities in order: #1. IT systems for quality of care,
#2. Systems for cost reduction, #3. HIPAA Compliance, #4. Portals to link
patients, providers, payers.
· Top IT priorities in order: #1. EMRs (electronic medical records), #2.
DSS (decision support systems), and #3. Legacy to Web integration.
· The use of ASPs is expected to double from currently 22% outsource
applications to an ASP increasing to 44.6% planning to use an ASP in the
future.
· Top three objectives in using an ASP were #1. Allow provider to
concentrate or core competencies, #2. Cost control, and #3. To connect
patients, providers, and payers.
· Top three concerns in using ASPs were #1. Reliability, #2. Ability to
integrate to legacy systems, and #3. Security of hosting data on the
Internet.
· ASP features that were rated as very important to customers were #1.
Ease of use, #2. Ease of deploying application, #3. ASPs ability to
troubleshoot problems.
· ASP service and financing issues were most important to health care
buyers. The most important attribute were a comprehensive SLA (service
level agreement), and secondly the ability to terminate contracts without
big upfront fees.
* (based on 121 health care provider organizations)
Important Questions to Ask An ASP
· Are my hosted applications on a dedicated or shared server? Always go
with dedicated server, unless the hosted data are not sensitive in nature
and then a shared server is okay.
· How is access to my application and data secured? You need at a minimum
password protection, encryption, and some form of authentication (e.g.,
hardware tokens, digital certificates, biometrics, secure ID passwords,
and single passwords). Note, hackers were able to spoof Microsoft by
entering through MS own telecommuters network.
· Will the ASP be HIPAA compliant? If the ASP does not have a plan to
comply with HIPAA, run don't walk from the vendor.
· What are my payment options? Are there upfront and termination fees,
fees by transaction, by month, etc. Do the numbers for the best
arrangement.
· What software and hardware will I need? Some ASPs require a particular
database and server or will lease the required hardware.
· What are my options for portability of data to another platform if I
terminate my agreement? If the ASP uses a proprietary format to store the
data will it be portable to another system.
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For more information or for a copy of the complete ASP survey results
including a thorough description of the major health care ASPs and an
analysis of the IT supplier survey, please contact Jon Bogen, HealthCIO
Inc. The survey results are for sale for $495 in electronic form or $695
for printed bound version. Contact Info@healthcio.com (781)585-6002.
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New Year Calendar
January 2001: HIPAA and IT Security Technologies.
February 2001: Health Care Wireless Technologies.
(Voluntary Disclosure: Position- Long; ST Rating- Strong Buy) |
