REAL-WORLD CASE

E-COMMERCE CURES HOSPITAL

Changes in U.S. government regulations and strong competition in the health care industry in the late 1990s and early 2000 caused headaches for many health care institutions. Even Kaiser Permanente, the largest U.S. health maintenance organization (HMO), could not escape the problem, losing $288 million in 1998 alone. Kaiser Permanente serves about 10 million members with 361 hospitals and clinics, 10,000 doctors, and tens of thousands of support employees.

The company realized that the old way of doing business, working with old-fashioned paper records and communicating with telephones, faxes, and letters, would aggravate its financial problems. So in a bold move, Kaiser Permanente decided to move toward EC by investing $2 billion in various Web-based systems. Here are some of the projects that were undertaken :
> An Internet-based communications system was implemented. The system includes customized Web pages for each organization with which Kaiser has a contract. Staff from those organizations can locate particular rates or coverage online, and do not have to call Kaiser's employees for the information.
> Kaiser's portal allows patients to schedule and check their appointments via the Internet and to e-mail routine queries to Kaiser employees.
> Kaiser's corporate intranet allows doctors and other employees to electronically order supplies, equipment, and services.
> The corporate intranet has an application that checks the drugs that a doctor suggests for each patient. The computer suggests cheaper or less dangerous alternatives, and the doctor can then decide if the substitution is acceptable.
> As an HMO, Kaiser has to compete with other HMOs for customers, both organizational (with all their employees) and individuals. The intranet allows for real-time quotes, enabling Kaiser's sales force over 4,000 brokers to provide customers with customized rates within minutes.
> Digital records of patients' test are kept on Kaiser's intranet and can be accessed by authorized personnel in seconds. This means that staff no longer need to repeat 10 to 15 percent of patient tests due to lost or misread paper records.
> An e-procurement system expedites shipments, reduced inventories, and cuts costs.
> All medical record are digitized. A doctor can instantly tap into a patient's records from a keyboard and a flat-panel computer screen attached to the wall. The doctor can also add notes to the electronic file.

Dozen of other EC applications are in the works. All of the EC applications will be part of huge network that will be completed in 2003.

EC implementation has not been easy. The HMO started phasing in EC in the northwestern states in 1999. During the phase-in, some employees resisted, mistakes were made, and vendors had to be managed. But the results are clear. The Internet is the most effective medicine for large health care organizations. In the first 2 years, processing costs in the Internet system were about 60 percent lower than costs in comparable non-Internet systems. Most importantly, the use of EC has also improved the quality of delivery, and that is what really matters.