“I still want to be able to go into the basement and kick the server!”: The State of Technology in Healthcare (Part I)

I am sitting in the airport in Kansas City, having spent the last 24 hours at the National Rural Health Association’s Critical Access Hospital Conference. In attendance were vendors and executives from critical access hospitals across the country. Critical access hospitals are designated as such as they have less than 25 beds and are the only inpatient care center within a radius of 35 miles. They represent almost a quarter of all hospitals in the US. I came to Kansas City to talk with the people running these facilities to understand their pain points and get a sense of how they view technology. Following numerous discussions, I decided to dig a bit deeper into the state of software and technology across the healthcare space through the eyes of a venture capital investor.

As I continue to speak with a number of expansion stage healthcare IT businesses, I have become increasingly intrigued by the state of technology adoption throughout the healthcare industry. Representing $2.5 trillion in spending per year in the US, the healthcare industry is also one of the fastest growing segments of the market. In 2005, healthcare spending was 16% of GDP and is projected to be nearly 20% by 2019. With this growth and large outlays, one might think that providers, hospitals and payers (insurance companies) would be yearning for technologies that would make the system more efficient and allow them to save money.

Adoption of technology throughout the healthcare ecosystem, however, has been shallow at best. Most doctors’ offices are still packed with multi-colored, manila folders. Many hospitals rely on interfaces from the 1980s, using MUMPS. Insurers still send millions of paper claims and rely on uncertain data.

We seem to be at an inflection point now though. The government has come out swinging with the HITECH Act, healthcare reform and compliance initiatives relating to HIPAA. The once staid healthcare industry is being forced to rapidly change. How will it react? What companies will be successful at creating competitive advantage and becoming market leaders? Stay tuned next week for provider technologies that are changing the playing field!