Utility Model

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ASPs versus a Utility Computing Model for EHRs

Susan Millea, Ph.D.

In 2005, then Office of the National Coordinator for Health Information Technology (ONCHIT) Director, David Brailer (1), stated: My concern is not low EHR adoption, but variable EHR adoption. . . [there is] an adoption gap based on the size of practice. This could prevent market forces and competition from improving healthcare. . . [We] have an obligation to level the playing field so that all practices and hospitals can adopt these life-saving tools.

The Application Service Provider (ASP) Model

The advent of an ASP delivery model for EHRs is shifting practice costs from a capital investment to an operational cost (2), however it is utility computing that may be the way to truly level the playing field. Tom Leonard, of McKesson Group, argues that the second wave of EHRs must address the needs of practices that lack the technical infrastructure and personnel to support clinical IT; and must address the need to coordinate care across settings (3). Emerging products that are web-mediated offer a significant opportunity to simplify the practitioners’ office support requirements, streamline processes and shift the cost structure. It is such changes in the product landscape that may tip the adoption curve (4,5,6,7).

Miller et al (8), the AAFP (9), and First Consulting Group (2) have studied the costs and benefits of EHR adoption in small practices, including both the traditional software purchase and ASP approaches. ASPs were well received by practitioners and cost less initially. Though ASPs may cost more over time, data storage, security, product updates and system maintenance are all shifted to the third party, reducing complexity for the practice while maintaining system function over time. Where the ASP model has been found vulnerable is not with the technology, but in the sustainability of the business model. Since the ASP delivery model is an add-on and not a core part of the business for most EHR vendors that offer it, the experience from other business vectors necessarily raises concern for practitioners dependent on the sustainability of their EHR vendor product (10, 11, 12).

Utility Computing, the Software as a Service Model

Utility computing is an emerging model similar to the ASP approach, but broader in scope (13), more sustainable, and with potentially paradigm shifting impact. An alternative name is Software as a Service (SaaS). High scalability and backend integration of differing applications are crucial benefits of the model. These can be delivered to the user because there is intense focus on standardization. Utility computing treats information technology like utilities, much like water or electricity. Users are charged only for the services they use. The true metric in utility computing is customer satisfaction, and the focus is on service provision. The only currently identified market entrant for small medical practices is Semper Vivo. Though still novel in health care, given the scalability of utility computing, users can start small with low risk and then grow by adding services.

A utility computing model brings to the small practice data security comparable to that used in financial institutions. As technology changes or problems arise, the utility provider is in a much better position to adapt and integrate the changes, or negotiate with vendors, than are smaller hospitals or practices. Upgrades can be implemented seamlessly, in the background. If prudently architected, the utility provider can run different versions of an application in parallel, allowing practitioners to transition from one version to an upgrade when they feel comfortable doing so.

Perhaps most interesting to think about, given the recent changes in Stark regulations, anti-kickback law and the IRS interpretation allowing non-profit hospitals to provide EHR support to physicians without threatening their non-profit status (15), is the potential for utility computing as a mechanism for creating local/regional health information exchanges (HIE). Such a model would efficiently relieve a hospital from costly requirements to expand an IT department to service community physicians. There is an added value from this approach as well. By using a third party host, the number of connections between partners, and thus the cost to each partner, is reduced. A community hospital that had 11 physicians (12 partners) would require 66 connections to connect them all to one another. By using a third party, the number of connections to the host is only 12 (13).


1 Brailer D. Remarks by david brailer, md phd national coordinator for health information technology. HIMSS. 2005 February 17. http://www.providersedge.com/ehdocs/ehr_articles/DavidBrailerRemarksHIMSS2005.pdf

2 Forin J, MacDonald K. Physician practices: are application service providers right for you?. California HealthCare Foundation. 2006 October.

3 Leonard T, Paving the way for the second wave of ehr adoption: universal physician adoption of ehrs will require hospitals to play a role. Health Management Technology. 2007 February.

4 Ford EW, Menachemi N, Phillips T. Predicting the adoption of electronic health records by physicians: when will health care be paperless? Journal of the American Medical Informatics Association. 13(1):106-112, 2006 Jan/Feb.

5 Blumenthall D, DesRoches C, Donelan K, Ferris T, Jha A, Kaushal R, Rao S, Rosenbaum S, Shield A. Health information technology in the united states: the information base for practice. Robert Wood Johnson Foundation. 2006 October.

6 AHIC Electronic Health Records (EHR) Workgroup Testimony Summary and Recommendation Discussion Items. 2007 February. www.hhs.gov/healthit/ahic/materials/02_07/ehr/prerec.doc (May 7, 2007)

7 The Community: American Health Information Community. 2007 April 24.

8 Miller R, West C, Brown T, Sim I, Ganchoff C. The value of electronic health records in solo or small group practices. Health Affairs. 2005; 24(5):1127-1137.

9 Brief Report of the AAFP’s EHR Pilot Project: Key Learnings from Six Small Family Practices. American Academy of Family Physicians Center for Health Information Technology. 2005 March 8.

10 Eriksen L. Why utility computing will succeed where asps and outsourcing failed. 2003 August 6. http://www.utilitycomputing.com/news/355.asp (June 7, 2007).

11 Eriksen L. Will the real utility computing model please stand up. 2003 July 30. http://www.utilitycomputing.com/news/342.asp. (June 9, 2007).

12 Eriksen L. Overcoming the nmh syndrome. 2003 August 19 http://www.utilitycomputing.com/news/369.asp (June 7, 2007).

13 Eriksen L, Utility computing: finding the right project and picking a service provider. 2003 September 12. http://www.utilitycomputing.com/news/385.asp (June 7, 2007).

14 Software as a service. http://en.wikipedia.org/wiki/Software_as_a_Service . (June, 16, 2007).

15 Harlow, D. IRS finally green-lights hospital underwriting of physician EHR systems. 2007 May 14. http://healthblawg.typepad.com/healthblawg/2007/05/irs_finally_gre.html

16 Research Papers: Utility Model