Wednesday, February 20, 2008

Marlene Smitherman of CriticalConnection solves the Universal Patient Medical Record Problem

Marlene Smitherman of Critical Connections talks about the medical records problem, why the RHIO initiative failed, and what generates the most revenue in a medical records company.

What’s the main issue with medical records in healthcare today?

There’s no single place to store and retrieve electronic medical records for patients. Most records are still paper.

What is Critical Connections about?

We’re in the healthcare information business. You hear in the media about the mess the healthcare industry is in with respect to medical records and communication. The doctors, outpatient physicians are in the dark about information.

What is your background?

Several years ago I was working in Fort Wayne, Indiana and they came to me to see if I could put together a one-record system so everyone could look in one place for the entire medical record of a patient. I started looking into IT technology and found that no one understood the healthcare environment and how you work with that environment. I came back to Austin and went to the Travis County Medical society and said I have a request and I don’t know how to answer it. Can you help me better understand what physicians need. I spent two years working with a group of 60 physicians to understand their needs to bring physicians together so they could readily share data. The first thing is to not change their workflow. Also, managed care has changed the dynamics of the doctor/patient relationship that the doctor has to see at least 30 patients a day just to keep a practice up and operating. That means the doctor can spend only about 10 minutes with each patient. If there’s anything that takes you 3 minutes longer with that patient means there’s fewer patients treated.

From that engagement, I came out with a requirements document to create a universal patient medical record. To start a business I needed funding. First, I went to VCs, but found it was the wrong place to raise money. A medical records company wouldn’t turn a profit quickly enough because we’re changing the way an entire entity – doctors, hospitals, etc, operates. If we’re successful, the way patients receive medical care will change dramatically. It will take some time to implement but if we’re successful, it will be huge because no one has figured this out yet.

I started to contact groups and institutions in the healthcare industry and raised some funding -- about $4.5M so far.

The business model requires us to create an entity at a local level that is physician owned. The only way doctors will buy into a solution like this is peer to peer. Sending out salesmen is not going to work. Once you have that entity in place there’s an opportunity to build other products and services – one of those is group purchasing. There are also transaction fees.

How do you convince doctors to come together?

We’ve already done that. We call it the connected cluster. It starts with the primary care physician and we connect to the specialist groups he refers to. We are taking this to the next level to create a regional co-op. The charter is being filed today. We intend to connect 500 doctors this coming year. We are also looking at Dallas, San Antonio, and Houston to create a regional co-op.

We don’t require the doctor to change what they do as long as they are capturing data electronically.

Why did the US government fail at this?

The whole electronic medical records effort did not achieve the goals set for them. The RHIO idea or Regional Health Information Organization was tried by the US government but with little direction. Last year there were 200 groups working on this. Today there are only 22 or so that havew actually achieved a modest level of data sharing and it’s mainly in the sharing of lab and radiology data. Most projects failed because it was a top down initiative focused on the technology. The challenge is getting people to work together. We were able to build the trust of the physicians.

In your system, who pays for the services?

It’s very untraditional. Doctors pay a nominal membership fee. The physician group purchasing entity can generate significant revenue through rebates. The electronic data will build up into a substantial database which could be sold by the doctors to pharmaceutical companies and others—this is where most of the revenue comes from. There will also be transaction fees on various other services.

How big does a region have to be, to create a co-op?

A co-op requires about a million people to sustain it.

Do you have a trial up and running?

We’re running the trials now with 16 clinics accessing the data.

So what are you raising funds for?

Critical Connections needs equity partners to take the technology to the next level. We are electronically registering patients. We’ll have 300,000 patients registered by the end of this quarter. We’re bypassing the second phase and going from pilot to production.

So how much are you seeking to raise?

Between $2M and $5M.

Best regards,
Hall T.