Application service providers, or ASPs, was one of the hottest topics under discussion last week at the Microsoft Healthcare Users Group Conference in San Diego. In this article, we will briefly describe ASPs, explain why they will be important, and list some specific implications for care management approaches. While ASPs will be attractive to all health care organizations, we will focus on the unique advantages they can provide for physician offices.

Not a poisonous snake, but a great concept

ASPs are a new type of company that provides outsourced management of application software via the Internet. In essence, the ASPs rent access to applications software (for example, eoplesoft for human resources applications, or Medical Manager for physician practice management applications).

Corio and Zona Research have sponsored excellent white papers on ASPs (read the first half of each of these for more background)

Under the old client/server model, physicians had to purchase, install, and maintain both hardware and software at their local offices.

Under the new thin client ASP model, software is purchased, installed, and maintained centrally at the ASP’s site. Physicians need only minimal hardware and software to access ASP services:

• A PC (and in many cases even an older PC dragged out of the closet will do just fine)
• A web browser
• An Internet connection

The doctor’s question: "what’s in it for me?"

What’s significant about the ASP model?

• The ASP model is an ideal approach for doctor’s offices. As we discussed in an a earlier article in our e-newsletter , physicians direct over 70% of health care expenditures. They are the hub of health delivery in a local community
• Physicians have been reluctant to capitalize computer and software purchases. This is particularly true for primary care providers, who have lower incomes than specialists. When the choice comes down to "Should I spend $100,000 on a new computer system or fund my kid’s college education?" guess which wins?
• Pay-as-you-go pricing structure offered by ASPs will be viewed favorably by many physicians
• Free or subsidized ASP services will be provided to physicians by organizations that want to link with doctors, e.g., payers, pharmaceutical companies, Internet health companies, e-commerce companies. Ironically, hospitals – which in the past have gone to great lengths to partner with their local physicians – will be greatly limited or prohibited from underwriting these services for their physicians. Federal legislation (prohibitions against private inurnment) limits hospitals from providing physicians virtually anything that might be interpreted as payment for patient referrals
• ASPs provide ongoing support. This means fewer staff or contractors will be needed to maintain computers and upgrade software. Most support will be provided centrally by the ASP
• ASPs allow for provision of multiple, best-of-breed software programs. Do you think Medical Manager is the best practice management system and Peoplesoft is the best human resources software program? No problem. Soon you’ll be able to get both from your local health care ASP, and someone else will take on the headaches of making them work together
• Shorter sales cycles. The ASP approach avoids the need for front-end capital investment in hardware and software associated with client server systems

Implications for care management

Quick and easy adoption of ASPs is likely to be very good for care management initiatives, (but could backfire). This will depend how ASPs are adopted in local markets. Allow us to explain:

OPTIMAL care management requires sharing of data and communications among providers. There’s no doubt that ASPs promise to speed up the TECHNOLOGICAL solution to improve data sharing and communications. Today’s methods – primarily faxes and phone calls – are not very efficient. Internet connectivity promises to reduce costs, broaden access, and provide a system of documentation and follow up.

However, initial efforts at providing Internet connectivity to doctors offices are being focused on TRANSACTION oriented applications, as opposed to clinical management applications.

Transaction oriented applications include patient scheduling, referrals to other physicians, preauthorization approvals, insurance eligibility verification, etc. Focusing on these applications is much more straightforward and offers more immediate paybacks for physicians and their overburdened office staff.

These initial efforts have been undertaken by the some of the new e-health companies, and we expect that ASPs will also initially focus on transaction oriented applications.

There is a danger here. The e-health companies are developing two divergent strategies in attracting physicians to their networks:

1) Gather market-share and critical mass NATIONALLY (e.g., Healtheon), and 2) Gather market-share and critical mass in LOCAL markets (e.g., CareInsite and Pointshare).

How will all this play out? It’s too early to tell, but there are two possible scenarios:

1) Local markets converge around one common Internet technological infrastructure and work cooperatively on care management initiatives.

2) Local markets fragment into 2 or more technological Internet infrastructures. Clinical data are viewed as competitive tools, and are not shared freely among health care providers.

Clearly Scenario 1 is a much more desirable scenario to promote widespread adoption of care management approaches.

In summary, ASPs offer many benefits. However, the ease of implementing new ASP approaches might work against developing a community-wide Internet infrastructure to promote care management.

Stay tuned to this key development.

Copyright © 1999, Better Health Technologies, LLC. All rights reserved.

'PS, Care Management' is a complimentary e-newsletter that tracks a major change in health care and managed care -- the paradigm shift from "managing cost" to "managing care"