There is a growing group of institutions that have adopted electronic medical record (EMR) systems to help optimize work flow and clinical activity. In addition, today’s health care market faces fierce competition that fosters the development of strong, consolidated delivery networks. This consolidation has led complex, geographically distributed enterprises to try to cope with demands for rapid access to patient information.

The changes in medical practice and in health care economics created by managed care (and capitated payment plans) have introduced a higher degree of EMR complexity and have shifted the relative emphasis placed on the various benefits of the EMR. While the EMR was historically envisioned as a convenient means of managing patient data, it is now being pursued as a way of providing better, more cost-effective patient care by supplying the medical community with data more quickly and efficiently.

Because there are so many variables involved in a hospital-wide information system, there is no template that can be applied to financial justification for information technology. Initial capital investment is often the most difficult component to address in a global information-technology budget. In the most traditional model, spreading the information-technology investment over time delays the point at which savings begin, thus decreasing the overall value of the project. In most instances, cost-savings analysis also fails to address the cost of money over time. Recently, numerous vendors have proposed new and creative financing strategies, such as leasing programs, the application service provider (ASP) model, and various risk-sharing arrangements. These alternatives are particularly attractive in the management of large volumes of data (such as medical images and multimedia patient records) and provide a cost-effective alternative to traditional hospital information system (HIS), radiology information system (RIS), and picture archiving and communications system (PACS) implementations.

The ASP model is the newest financing strategy; it will appeal particularly to small and mid-sized hospitals. In this model, all hospital information services, including PACS, are outsourced to an independent service provider. ASPs have been promoted as ways to acquire the electronic infrastructure for EMR and PACS with little risk and little capital investment. Additional cost benefits of ASP solutions are the reduction of costs associated with software and hardware upgrades, service, system integration, and implementation. ASPs typically include service-contract costs in their per-unit fees.

Are ASPs really cheaper and safer? In the case of archives, one can certainly prevent technology obsolescence by allowing the provider to store data on the most cost-effective medium possible and to move the data to newer media when appropriate. While different ASP vendors offer different strategies for payment, most cost models are linear, charging according to the volume of data, number of studies, or number of documents filed. Unlike the costs of traditional purchases, ASP costs increase linearly with volume. This may turn out to be less cost effective than outright purchase for very large volumes of data (such as large-scale PACS or comprehensive multimedia medical records). For example, a traditional PACS with adequate storage scalability and rapid reduction of the cost of storage has an overall cost that tends to be relatively independent of data volume. Recent studies comparing film-based and filmless costs of operation showed that, in a filmless environment, the cost per examination decreases when the number of examinations increases. Other studies showed that examination volumes increase upon transition to filmless operation. As a result, one would expect a synergic effect to decrease costs per examination as more examinations were performed during the transition to filmless operation. If this is true, then the ASP customer essentially gives away a significant profit (as potential volume-based savings) by paying a fixed fee per examination. These observations are forcing vendors to offer more competitive ASP models that incorporate sliding-scale arrangements under which cost per examination decreases as total volume increases.

Despite considerable corporate activity, ASPs are still in the early stages of deployment and adoption, especially where full-scale data distribution (including images and multimedia documents) is concerned. In many instances, health care facilities are initially considering ASPs not for data management or distribution, but for off-site long-term storage of historical clinical data. While there has been some experience with the ASP model in the HIS/RIS implementations of some companies, the model has not been widely adopted due to issues of ownership, security, and reliability. It is likely, however, that medical applications will benefit from recent, dramatic changes in data-communication technologies and from the shift toward secure, reliable professional use of Web-based applications on wide-area networks (WANs).

The rapid deployment of Web technology has significantly modified the technical implementation and infrastructure of the HIS and has greatly facilitated the distribution of patient data to a much larger set of users. With Web technology, it is much easier to distribute information to a variety of users, regardless of their individual computer types. While some Web access may suffer from low transmission speed, users certainly benefit from the convenience of ease of use.

One of the greatest effects of Web technology is likely to be the seamless integration of information from diverse sources through the hyperlink paradigm (Figure 2); Web-browsing capability makes it hard for the user to discern the physical location of information. As Web technology is being adopted for most information systems (including HIS, RIS and PACS), it becomes more natural to link these sources of information directly through their Web interfaces. This allows the achievement of what was often envisioned as an impossible mission: combining multiple vendors’ systems handling different sources of information into a single, integrated EMR.

Logistics, technical challenges

The concept of outsourcing the EMR to an off-site ASP may be appealing from a cost-effectiveness point of view, but it does require significant logistical adaptations that often imply serious re-engineering of clinical work flow. Careful analysis of the existing work-flow pattern is essential to the identification of the data pathway and work flow that will provide the best performance and user satisfaction. Dealing with the EMR is too often perceived as an additional burden by health care professionals. Unless the electronic system provides fast, convenient access to data in a way that is clearly superior to (and more flexible than) the access provided via conventional paper-based and film-based operation, the electronic system will not achieve any improvements in productivity or in the quality of patient care. If EMR services are to be outsourced, special attention must be given to the performance and flexibility of the system. Adequate security and reliability must also be maintained. While ASPs could transform everything from data warehousing to information management to medical education, their biggest impact, once they mature, will be widespread adoption of Internet-based data management and distribution in the medical community. Patient records that include ancillary data, images, reports, notes, and charts will be recorded and archived by ASP vendors and made available, via Web-based applications, at physicians’ desktops and nurses’ workstations. This will facilitate communication between different groups of health care professionals. Many leading institutions have already identified the advanced service enhancements, (such as online access to patient data and images, augmented by additional educational content for referring physicians) that will become a competitive reality.

Another rapidly emerging drive for the online hosting of medical data may come from patients themselves. Internet-savvy patients with the time and motivation to review the latest research on their own medical conditions are increasingly demanding greater subspecialty expertise. This is reversing the trend, imposed by the marketplace just a few years ago, that emphasized the importance of primary care physicians. Several online health care information services are also providing personalized services, storing encrypted patient records and prescription information online. Those sites will also forward copies of those records via mail, email, or fax to members or to their physicians, wherever the records may be needed. This kind of service empowers patients who are eager to take more active responsibility for their own health and provides them with convenient access to their medical records so that they can seek specialized consultations and second opinions. This may lead to new ASP business models in which the cost of the service can be shared by the patient and various health care providers (or even payors). Such a trend, however, can only be driven by patients themselves, who must come from a general population that is more technically oriented and that is increasingly aware of the advantages and convenience of online services in facilitating access to medical expertise and better quality of care.

In recent years, the University of California Los Angeles (UCLA) health care enterprise has made strategic decisions favoring the use of Web-based information technology infrastructure for the enterprise-wide distribution of an integrated patient record. Adopting a Web paradigm allowed rapid evolution toward seamless integration of legacy systems for laboratory results, pharmacy data, medical images, electrocardiograms, and all other medical documents (including formal reports and follow-up notes). The Web interface also serves as a bidirectional interface that allows users to enter orders for ancillary services, treatments, and medications. Through a strong commitment to support standard interfaces and standard data storage and communication formats such as Digital Imaging and Communications in Medicine and Health Level 7, integration of commercial components can be greatly facilitated. The adoption of Web-based viewing components for the medical data and the support of emerging industry standards such as Extensible Markup Language for data encoding also facilitate the outsourcing of data management and data warehousing functions to off-site service providers. UCLA is seeking strategic alliances with leading vendors implementing wide-area ASP services to host and distribute components of its EMR.


There is no doubt that, in the next 10 years, high-speed data communication and online application services will become more significant commodities. The remaining challenge is to use these communication capabilities as well as possible in order to provide more cost-effective management of medical data and, ultimately, to provide care of a better quality. The fact that institutions no longer depend on sheets of paper or film allows complete changes in work flow and better utilization of resources. Ironically, the economic constraints that are imposed on health care will accelerate the movement toward broader utilization of distributed EMRs. The ASP model is regaining the attention of vendors and customers with more attractive financial plans for the storage and management of large volumes of data. While ASP models are not new to the medical field, having been used for financial, patient-record, and other text-based transactions by some vendors, they have reached a new dimension through recent technical innovations, easier access to fast WANs, and the convenience of Web-based distribution of multimedia documents. The services available through ASP vendors today focus on the storage and communication of images and multimedia patient records. Such services are becoming attractive to small and medium-sized institutions that cannot afford the initial capital investment needed for a fully digital patient records that handle images, text, graphs, and charts. With the rapid evolution of computer technology and the rapid obsolescence of software and hardware, an ASP provides an attractive alternative to the purchase of information-technology infrastructure that might require constant upgrades and expensive maintenance contracts.

The major limiting factor for wider adoption of ASPs by large institutions is the linear-cost model adopted by most vendors, in which fees depend on the volume of data being handled. These simple models, because they do not factor in a reduction in cost based on increasing data volumes, are less competitive with the traditional purchase of on-site equipment where very large volumes of data are concerned. It is expected that the market will mature and provide more attractive solutions based on combinations of volume-based fees and transaction-based fees, as well as sliding-scale payment systems that will allow adaptation of the cost model for each institution’s needs. One of the major added values of Web-based ASPs is flexibility, allowing wider distribution of medical data to the health care community. There may be rapid evolution toward a new paradigm that puts patients in control of their own medical records.

Osman Ratib, MD, PhD, is professor and vice chairman of information systems, Department of Radiological Sciences, University of California, Los Angeles, School of Medicine.

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