Health care IT firms rushing to grab share of stimulus

Grab a partner and dance. Fast.

The stimulus bill passed last month essentially sets a five-year time line for doctors to start using electronic medical records
and for states to figure out how to exchange those records from doctor to doctor.

That has prompted Indiana businesses and not-for-profits that deal in medical records to look for partners to help them meet
the challenge and capitalize on the opportunity.

The potential market is substantial. Even before the stimulus bill, the U.S. health care information technology industry spent
$28 billion annually. The stimulus bill provides incentives that could pump $31 billion more into the market over the next
decade.

Over that time, computerizing the health care world will save $12 billion for the federal Medicare and Medicaid programs,
according to stimulus bill estimates. Also, doctors, hospitals and numerous policymakers hope digitized health records also
cut down on medical errors and actually help doctors give better care.

The stakes for Indiana are high. Obama’s new government-driven approach could anoint some of the industry pioneers from Indiana
as standards for the whole country, planting seeds for an industry based on medical informatics to blossom here. But it could
also anoint other players and thereby erase Indiana’s current advantages.

"We are positioned to be a winner in this in everything that matters," said David Johnson, CEO of BioCrossroads,
a life sciences
development group that is working to form teams to capitalize on multiple parts of the stimulus bill. "But as in anything,
you still have to compete to win."

Congress wants the stimulus bill, officially named the American Recovery and Reinvestment Act, to lead 90 percent of doctors
to be using electronic medical record systems, or EMRs, by 2015. In that year, the federal Medicare program will begin paying
doctors less if they are not using an EMR.

The bill also aims to spawn multistate computer networks so doctors and hospitals can swap those electronic records over the
Internet instead of over fax lines, as they do now. Such electronic swapping is called health information exchange.

Both goals are gigantic. Only 38 percent of doctors currently use an electronic medical record system, according to a survey
by the Centers for Disease Control and Prevention.

As for health information exchange, only five states had operating systems as of last year. Indiana is furthest along, largely
because of Indianapolis-based Regenstrief Institute Inc. and local hospitals. They launched an electronic medical record system
in 1972 and started health information exchange in 1994.

Wes Richel, an analyst for the Connecticut-based technology research firm Gartner, does not expect the stimulus bill to hit
the goals Obama and the bill lay out — at least not in five years. But he does expect a big impact.

"We will see an accelerating growth curve that starts now and doesn’t wait," Richel said.

Hoosier outfits are positioning themselves to work on both fronts to at least link up all of Indiana to electronic medical
records and exchange networks. If things go really well, they could also expand their reach beyond Indiana and become Midwest
and even national players in the industry.

"This could be a real growth thing for Indiana and it could really drive a lot of talent here," said Peter Norder,
executive
vice president of Medical Informatics Engineering in Fort Wayne, which operates a health information exchange and sells an
electronic medical record system.

Poised to benefit

Medical Informatics Engineering is one of several Indiana companies expecting its business to grow as a result of the stimulus.

The big reason is that in 2011 the Medicare program — a huge source of revenue for most doctors — will pay bonuses
of more than
$40,000 for using an EMR. Those bonuses will turn to penalties in 2015.

Medical Informatics, which has customers in 18 states, is looking to form new partnerships with much larger companies to help
implement its system around the country. It’s also looking to add to its 55-person staff.

The largest companies in the EMR market — Cerner, GE Healthcare, McKesson, Siemens — dwarf all of Indiana’s EMR
companies. Cerner,
for example, has 7,500 employees and $1.7 billion in annual sales.

But the larger companies’ products are based on older technology, said Gartner’s Richel. He expects those firms to hook up
with smaller companies making cheaper, Web-based products to take advantage of the stimulus money.

Another Indiana firm with a Web-based product is Indianapolis-based iSalus Healthcare. With just 15 employees, it is exploring
marketing partnerships with telecom companies that will receive stimulus money to extend broadband Internet access into rural
areas.

How much EMR sales will grow is unclear, since the stimulus bill is pulling against a sinking economy. Also, the kinds of
EMRs that will be eligible for incentives has yet to be clearly defined by the federal government.

"The stimulus, while it may [have a big impact] in 2010 and 2011, is still ambiguous and puts a fair amount of caution
into
decisions made this year," said iSalus CEO Mark Day.

In December, market research firm Kalorama Information predicted U.S. EMR sales would grow 14 percent a year.

Mike Bessignano, sales manager at Indianapolis-based Bradley-Scott Data Corp., thinks sales could expand even twice as fast
for his company. It resells the Intergy system, made by Florida-based The Sage Group, in five states, including Indiana.

Bessignano said the 93-person firm might need to hire another five training staff in the next two years to handle increased
demand. The company also is doing more co-marketing of its products to doctors with technology consultants and even a medical
malpractice insurer that offers discounted rates for doctors using an EMR.

"It hits right home for us," Bessignano said. "This [stimulus] is increasing [doctors’] awareness. It’s right
in the forefront
of their minds right now."

Multistate networks

In addition to computerizing doctors’ offices, BioCrossroads’ Johnson and others want to expand health information exchange
— throughout
Indiana and even beyond it.

Organizations likely to play big roles in these efforts include Medical Informatics Engineering in Fort Wayne, the Indiana
Health Information Exchange and the Regenstrief Institute in Indianapolis; and the Indiana Health Informatics Corp., a statewide
body created in 2007.

Representatives from those groups and many others have been working to form committees to investigate each area and form a
plan.

The first item of business is to link up the seven health information exchanges that already exist in the metro areas around
South Bend, Fort Wayne, Indianapolis, Bloomington and Evansville, as well as the Louisville and Cincinnati areas, which partially
extend into Indiana.

Those exchanges already were collaborating as part of national pilot programs under the Bush administration. But now the conversations
are becoming more frequent.

"It’s heated up," said Dr. Todd Rowland, executive director of HealthLINC, a health information exchange in the
Bloomington
area that includes 180 physicians and Bloomington Hospital.

The biggest prize, however, is to win some of $300 million in competitive grant money the stimulus bill will funnel to create
a multistate health information exchange. This portion of the bill gives Indiana the best chance to set the standards for
the rest of the country, Johnson said.

And it even could lead to partnerships with massive software companies, like Google or Microsoft, that might want to get into
the game.

Johnson already had out-of-state expansion in mind before the stimulus bill, when BioCrossroads funded an Indianapolis startup
called Mergetics, whose mission is to provide the expertise of the Regenstrief Institute to other cities. The idea is to build
up a massive database of patient records, with safeguards to ensure patient privacy. Then medical companies — whether
developing
drugs, devices or insurance products — could pay to access the database.

"The business plan for Mergetics could have taken 10 years to happen," Johnson said. With the stimulus bill, "Now
it’ll take
two or three."