Functional Outsourcing

Pacific Partners Management Services (PPMSI), a Foster City, CA-based company, was actually formed when its parent, the Santa Clara County Individual Practice Association (SCCIPA), decided to stop outsourcing its administrative functions in 1996 and 1997. SCCIPA took those operations in-house and later spun out PPMSI as a separate entity. According to COO Randall Frakes, PPMSI, which is a wholly owned subsidiary of SCCIPA, eventually decided to offer its administrative abilities and software to other health organizations. Current clients include Affinity Medical Group, Sutter Health, HealthCare Partners Medical Group, UCLA, Regal Medical Group and the Greater Newport Physicians — all based in California.

PPMSI built a medical management system that offered physicians and their offices customizable administrative and workflow management and eventually the ability to connect with each other and a mechanism for accepting authorization requests and routing them. That software is offered under the name Health Access Solutions and is enhanced and maintained by a compact team of six developers with four implementations going currently. The program acts as a "bolt-on" friendly front-end to back-end legacy data.

What the fundamental system didn't offer was a way for patients to communicate with physicians online, which, as Internet use soared, is becoming more of an imperative. Since the need was unproven, PPMSI opted to outsource its online consulting architecture to another vendor.

That's where RelayHealth comes into the story. This company, located in Emeryville, CA, had succeeded in attracting Blue Shield as a client for its Web software. Through its parent company, PPMSI entered into a program whereby Blue Shield subsidized the use of RelayHealth for a while for the physicians, then SCCIPA subsidized it for a while, to get them interested in using the service.

Because of this corporate connection, Mr. Frakes said there was no need for the company’s management team, which developed its practice management software, to conduct a detailed empirical analysis before deciding to outsource to RelayHealth.

PPMSI put the RelayHealth functionality into its user management portal as a link. "So the physician can go from our application or from the RelayHealth application for these Web visits that RelayHealth provides," said Mr. Frakes.

The RelayHealth service gives patients access to their lab records, pharmaceutical needs, and appointment schedule. PPMSI’s affiliated physician organization, the 800-member Santa Clara County Individual Practice Association, participated in a Blue Shield-sponsored pilot study of the e-consult service. Eric Zimmerman, vice president of marketing for RelayHealth , said the results of the pilot study, which showed physicians saved $3.69 per patient per month, convinced health plans and tech-savvy physicians the online advice concept had matured enough to take the full deployment plunge.

"It’s very hard to find things that are good for the insurer and the doctor and the patient," Mr. Zimmerman said. "The research shows this actually drives the benefits in all directions."

RelayHealth's service offered something else as well — online medical consultations. Numerous studies had demonstrated that online medical consultations could offer many of the same advantages other e-commerce transactions offered — namely significant cost savings over office visits for routine patient care and greatly reduced error rates over technologies such as faxing and phone calls. Yet physicians were leery of offering advice electronically.

Until mid-2004, there were several obstacles to deploying online consultation services. There was no billing or transmission infrastructure to assure physicians that advice they gave online would be securely transmitted and properly billed. There was no easy software that would eliminate the open-ended nature of email, potentially leaving them liable in the event something they wrote was misconstrued by a patient.

To add to the complexity, unlike other e-commerce transactions, where the customer pays a merchant directly for services, most medical transactions involve that third-party payer, usually the insurance company. Both public and private-sector payers require some sort of standardized reference for a given procedure. In July 2004, The American Medical Association published a uniform billing code for online consultations accepted industry-wide. Soon thereafter, several large insurance plans, including the Blues of California and New York, agreed to begin reimbursing for online sessions. That heralded routine acceptance by most other plans. Also, the Health Insurance Portability and Accountability Act (HIPAA) mandated the security and safety of information transmitted electronically. So, after several years of ad hoc false starts, Web-based patient care was beginning to enter the mainstream.

The RelayHealth webVisit technology features a multitude of interviews, written by a team of physicians and peer-reviewed for accuracy. The interviews feature branching logic, in which the answer to a particular question leads to one of several possibilities for the next question. In that way, patients are directed to a relatively narrow description of their condition, eliminating ambiguity and vague answers that could lead more easily to misdiagnosis. The application is also hosted by RelayHealth and its encryption and transmission security is HIPAA-ready.

"In many ways, we’re the classic case of where you want to go to an [application service provider] (ASP) strategy because we have to connect your patients, your doctors, pharmacies, and health plans," Mr. Zimmerman said. "It becomes much easier in that context to say, ÔHere’s your ASP. All you need is a browser.'"

Mr. Frakes said the administrative ease was a selling point for the PPMSI executives. One advantage of having RelayHealth's services integrated via a link means it can also fairly easily be yanked out of the offering should it prove unpopular. No extensive reprogramming would be required on the part of the IT team.

"You can't be an expert in everything. We don’t want to divide our attention, in terms of our products, with getting involved with RelayHealth’s functionality," he said. "It was very important RelayHealth did all this itself. We think it’s a good product and as a consequence we're happy to send our providers into the RelayHealth system for handling the Web visits. And, actually, I think more popular than the Web visits with the patients has been the ability to look at their lab results, to schedule appointments, to interact administratively with the office online. People couldn’t do that before."

PPMSI's philosophy, said Mr. Frakes, "has been to connect best-of-breed products into our [software], to be able to offer members — patients or physicians — entire suites of products they can use."

The company has done that in another area too. Its physician clients get lab results online using a lab suite service from a Los Angeles company called 4medica, "Stanford, our laboratory provider, uses4medica to report lab results and the physician offices connect to 4medica through our Access Express desktop.

Though PPMSI will continue to develop its own software for other medical groups, it will also look to outsource and nest other vendors’ products in its desktop, so it can offer its contracting physicians the best selection of medical e-commerce.

"Basically, we become the desktop for our doctors and then we add on other software," Mr. Frakes said. "We think we do the best job in utilization management, but doing the best job in [that] and physician connectivity is a big job in itself. So, since there were products out there that were good products, it didn’t seem like we should take the time and invest the effort. Why not just partner with somebody else to put out this other functionality? And, I can see us doing that with a whole host of other products."

Two areas PPMSI has started work on is coverage for EMRs — electronic medical records — and pay-for-performance.

EMR functionality will probably be outsourced. Mr. Frakes said a number of EMR products are on the market, driven by Medicare's push to computerize patient records. The challenge for his team is to connect PPMSI's software with the external solutions, since all of them have a user management component built in. But, he said, "As long as the EMR can put out the standard record, then we'll be able to connect to it."

Pay-for-Performance (P4P) has become pervasive in California and may gather steam in the rest of the country if recently introduced national legislation is approved. P4P gives healthcare providers incentives for adhering to specific care guidelines and rewards physicians for helping patients actually get well.

Since PPMSI works with California medical groups, it has already built the P4P monitoring functionality into its software. Explained Mr. Frakes, "It wouldn't be good to go out of house for that because the point at which you need to enter the information is contained in our applications."

"When those things come along, there's always somebody who wants you to build something or buy something and have it available. Some of it arises out of operational needs. So we have to go out and look. We're constantly evaluating whether or not we should get involved in a relationship with another software company or whether we should add it to what we have," said Mr. Frakes.

He said he thinks the acceptance of basic transactional IT has finally reached a critical mass in the healthcare sector. More organizations are showing interest in the PPMSI management software, and he thinks the market is beginning to finally boom in general.

"I think there’s a groundswell of need, for Web-based stuff particularly."

Dian Schaffhauser contributed to this article.

Useful Links:

Health Access Solutions

Pacific Partners Management Services

Santa Clara County Individual Practice Association