Shopping for health software, some doctors get buyer’s remorse

Introduction

Robert Cameron wasn’t much of a technology buff, but the orthopedic surgeon knew he wanted to get rid of all the paper in his nine-physician practice in Pensacola, Fla. So he bought an electronic medical records system from a California-based company called Acermed.

Cameron’s group spent more than $400,000 on the software, but the system still never fully worked and even confused patients’ scheduled visits, according to a lawsuit the doctors filed against the technology company in 2006. Acermed filed for bankruptcy in September 2007, complicating the doctors’ attempts to recover their expenses.

The effort to go digital “was a disaster,” Cameron says now.

Computerizing American medical records within five years is a key goal of federal health policymakers, who have committed to dispense billions of dollars in stimulus money to doctors and hospitals that make the transition in the coming years. Although the dispute between the Florida doctors and Acermed is an extreme example of what can go wrong during a move to digital systems, it highlights some of the challenges for individual medical practices making the conversion.

“This is a very volatile industry,” said Steven Lazarus, president of consulting company Boundary Information Group. “Any product doctors buy could be bought or changed within two years.”

Federal officials hope that electronic medical records will help lower costs and improve health care quality. And while they acknowledge that the effort will be difficult, they say that any hurdles along the way will pay off through savings to the health care system and improved quality of care.

But there’s also concern that the government may not be doing enough to ensure that taxpayer money isn’t wasted on faulty systems.

What’s more, doctors often have little expertise in buying electronic health records, commonly called EHRs, and do not always know what questions to ask or what protections they should push for in their contracts, several industry consultants said in interviews.

“I’ve seen physicians buy EHRs where they’ve spent less time buying them than their house and car,” said Margret Amatayakul, a prominent health care information technology consultant, who has studied the market for more than 10 years.

In a marketplace full of eager sellers of technology — and some with limited track records — “there’s a lot of risk,” she said.

Hundreds of companies — big and small, new and old — sell health information technology but industry analysts expect a wave of consolidation in the market, creating uncertainty that certain products will stay in the marketplace or even if some vendors will survive. Amatayakul said she found that up to 70 percent of vendors moved in and out of the market in some years, through mergers, acquisitions or on occasion, bankruptcy.

Congress did not address the possibility that federal incentives could be spent on products from companies with shaky finances when it wrote the stimulus law setting aside billions of dollars for electronic health records.

But as government officials write the rules for distributing the stimulus money, there have been renewed calls for oversight. During testimony before a congressionally mandated advisory committee last summer, Sheldon Razin, chairman of Quality Systems, a large electronic medical record vendor, urged officials to “consider a review of company financials to include long-term viability,” according to his presentation document.

“We just think it’s an important issue that the government needs to consider,” said Steven Plochocki, who works with Razin as chief executive of Quality Systems. “Government can’t guarantee people will stay in business, but we think it’s an important element.”

The federal committee did not suggest any consideration of financial viability in their recommendations to David Blumenthal, national coordinator for health information technology. Paul Egerman, who chaired the group that heard Razin’s comments, acknowledged that financial viability was a concern, but said that the group was swayed by the recent experience of the financial industry.

“We had a fear that there’s a greater risk to hospitals and doctors from organizations that are too big than ones that are too small,” Egerman said. “We wanted to make it possible for innovation.” He said the committee believed that the centers the government plans to set up around the country to aid doctors in their purchases would include help on how to better evaluate companies’ financials.

Officials from another advisory group, the National Committee on Vital and Health Statistics, disagreed in a May report to Blumenthal.

“We’re starting a very exciting process that could change the landscape of health care, but the thing that will stop it quickly is if the doctors feel that they don’t have some good direction,” said Harry Reynolds, chair of the committee and a vice president with Blue Shield Blue Cross of North Carolina. “You’ve got to make sure that there’s a clear definition of viability.”

Although Blumenthal’s unit has no plans to review company financials at this time, it “will continue to examine the issue”, said Nicholas Papas, a spokesman for the Department of Health and Human Services. “This is a complex matter,” he said.

Bankrupt Vendors

The Bush administration first set the goal of putting most Americans’ medical records online by 2015. By 2006, the industry had begun to receive some oversight through the Certification Commission for Healthcare Information Technology (CCHIT), a nonprofit organization contracted by the government to certify electronic health records.

The commission reviews whether companies’ products meet the operating standards they promise. It does not evaluate the firms’ financial viability, although since 2008 it has asked companies to voluntarily disclose their number of customers and how long they have been in business.

Mark Leavitt, chair of the certification commission, said evaluating the financial stability of a company poses many challenges. For example, he noted, even a big, financially successful company could decide to discontinue a software system that didn’t pan out. And merely certifying the firm’s financial strength could give doctors “a very misleading sense of security” about the future of the product they bought, he said.

Still, some doctors have complained that their practices have been hurt after purchasing certified software from a vendor that later went bankrupt.

Canada-based MedcomSoft, which received certification in 2006, declared bankruptcy two and a half years later. The year before, MedcomSoft began installing its software for some members of the 1,200-doctor Independent Physicians Network in Wisconsin. The company also agreed to build a database of the network’s patients and provide maintenance, but failed to do so, according to a 2008 lawsuit filed by the physicians’ group. That forced the doctors to pay outsiders to keep their system going, they alleged in court documents.

Four months after the doctors filed suit in November 2008, MedcomSoft’s attorney filed a motion to withdraw representation, stating that it appeared “neither Medcomsoft nor its parent corporation has any employees, officers, or directors.”

Not every client fared as the Wisconsin group did. Megan Peterson, a manager with medical billing company PBF Online, the Johnstown, Pa., company that bought Medcomsoft out of bankruptcy, said the successor firm had retained 85 percent of the original customers. “We’re a strong stable company and will continue to be that for our clients,” she said.

Nevertheless, the executive director of the Wisconsin physician network, Michael Repka, said: “It’s going to be considerable time and labor for [medical] practices that are going to switch to a new system.”

In another case, a Florida-based company, Dr. Notes, went bankrupt in 2007 after 57 liens were filed against the company, according to a tally by the South Florida Business Journal. Some doctors alleged they were locked out of their medical records or left saddled with hundreds of thousands of dollars in loan payments on hardware despite being promised by the company they would recoup the costs.

South Carolina-based First Choice Healthcare was one such company, which in 2005, won a $1.5-million judgment against Dr. Notes in state court. Since then, the health care provider has only collected $100,000, the company’s lawyer Andrew Schwartz.

“The doctors are left holding the bag,” Schwartz said.

A Fight Over Source Code

Cameron’s Florida doctors group, Gulf Coast Orthopaedic Specialists, looked at half a dozen companies before signing with Acermed in April 2005. After installing the first part of the system, they alleged in their lawsuit, the scheduling software “malfunctioned causing patient appointment[s] to disappear.” Also, the billing system was not feeding claims back to insurers, which over the next six months nearly ran the practice into bankruptcy itself, the complaint alleged.

Gulf Coast doctors continued to alert Acermed to the problems, but the company was unable to fix them, the lawsuit stated. They weren’t the only ones having trouble. Two other doctor groups—one in Florida, another in Tennessee—had also filed suit against Acermed, alleging similar problems. Gulf Coast filed its suit in October 2006. Acermed stated in court documents that the doctors had no basis for their claim.

As it turned out, Acermed had been dealing with problems of its own. In July 2006, a federal judge ordered Acermed to pay more than $750,000 for using some of the source code from another vendor it had once worked with to develop its own electronic medical record software in 2004.

Gulf Coast’s lawsuit was still pending when, in September 2007, Acermed filed for bankruptcy. Company officials at the time said that the reason for their bankruptcy was the financial impact of legal bills, not problems with their software.

In January 2008, Ophthalmic Imaging Systems of Sacramento, Calif., bought Acermed and renamed it Abraxas Medical Solutions with Acermed’s former chief executive Michael Bina as president.

In an email, Bina said he does not “represent AcerMed any more and would not like to comment on its behalf.” He said that one of his conditions for joining Abraxas had been that it continued to service Acermed customers, and that “many clients” of AcerMed have stayed with the new company. One of those clients, Tony Cattone, general manager of a 70-doctor medical practice in New Jersey, said in an interview, “they have lived up to their commitments and it’s working fine.”

Several other doctors said they were left with loan payments for a system they never received.

And today, the Gulf Coast group still hasn’t entirely gotten rid of paper. In December 2008, the doctors settled their lawsuit with Acermed for an undisclosed amount. They invested in a different electronic system, but the doctors aren’t entirely happy with the new one either, said Alan Trest, the group’s technology manager. With the current system, doctors have to type rather than dictate notes. Some aren’t willing to make that transition because they say it takes them more time. So the group still pays for transcriptions.

“They haven’t really completely bought into the idea,” Trest said.