The Mad Dash to Digitize Medical Records

GE, Google, and others, in a stimulus-fueled frenzy, are piling into the business. But electronic health records have a dubious history
By Chad Terhune, Keith Epstein and Catherine Arnst

Neal Patterson likens the current scramble in health information technology to the 19th century land rush that opened his native Oklahoma to homesteaders. Cerner (CERN), the large medical vendor Patterson heads, is jockeying for new business spurred by a $19.6 billion federal initiative to computerize a health system buried in paper. "It's a beautiful opportunity for us," the CEO says.

The billions in taxpayer funds—part of the $787 billion economic stimulus—also have energized tech titans General Electric (GE), Intel (INTC), and IBM (IBM), all of which are challenging Cerner and other traditional medical suppliers. Microsoft (MSFT) and Google (GOOG) aim to put medical records in the hands of patients via the Web. Wal-Mart (WMT) is teaming with computer maker Dell (DELL) and digital vendor eClinicalWorks to sell information technology to doctors through Sam's Club stores.

Under the federal stimulus program enacted in February, hospitals can seek several million dollars apiece for tech purchases over the next five years. Individual physicians can receive up to $44,000. These carrots should encourage the proliferation of technology that will computerize physician orders, automate dispensing of drugs, and digitally store patient records. If providers participate broadly, those files are supposed to be accessible no matter where a consumer goes for treatment. President Barack Obama says the changes will improve care, eliminate errors, and eventually save billions of dollars a year. There's also a stick: The federal government will cut Medicare reimbursement for hospitals and medical practices that don't go electronic by 2015.

The incentives are working. R. Andrew Eckert, CEO of tech provider Eclipsys, says one client, a 250-bed hospital that shelved a software order in the fall after losing $50 million in the stock market, has reinstated the order. The move is "100% due to the stimulus," says Eckert (who won't name the hospital). Brandon Savage, chief medical officer at GE's health unit, says his company's technology will leapfrog the competition by not just replacing paper but also guiding doctors to the best, least-costly treatments.

In Washington, where partisan bickering over how to revive the economy flares on several fronts, sweet consensus reigns on health-tech spending. Congressional Republicans sound just as enthusiastic as the White House. Encouraged by former House Speaker Newt Gingrich, now an influential industry consultant, lawmakers cheer electronic records as a business-based remedy for much that ails medical care.

HIGH COST, QUESTIONABLE QUALITY

That rare agreement, however, is obscuring the checkered history of computerized medical files and drowning out legitimate questions about their effectiveness. Cerner, based in Kansas City, Mo., and other industry leaders are pushing expensive systems with serious shortcomings, some doctors say. The high cost and questionable quality of products currently on the market are important reasons why barely 1 in 50 hospitals has a comprehensive electronic records system, according to a study published in March in the New England Journal of Medicine. Only 17% of physicians use any type of electronic records.

Hospitals and medical practices that plugged in early have experienced pricey setbacks and serious computer errors.

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