U.S. e-health requirements a boon for IT lenders

As hospitals and physician practices wrestle with the technically daunting and expensive task of rolling out electronic medical records systems quickly enough to gain government reimbursement monies, the financing arms of IT giants such as IBM and GE Healthcare hope to profit by loaning money to jump start such projects.

As part of the American Recovery and Reinvestment Act of 2009, about $19 billion in incentive money has been earmarked to help health care operations roll out electronic health records (EHR) systems. The Health Information Technology for Economic and Clinical Health (HITECH) Act calls for providing incentive payments of up to $64,000 to each health care operation that deploys an electronic health records system and can prove they're using it effectively by January 2011.

Each successive year, the amount of reimbursement through the Office of the National Coordinator (ONC) drops, so it behooves hospitals and physician practices to roll out systems as quickly as possible.

To date, however, few EHR systems have been rolled out. Industry observers cite the high price tag of EHR systems, which can run into the millions of dollars for hospitals and tens of thousands of dollars for small doctors' offices.

The available government financing can help, but isn't available until hospitals and physician practices can prove "meaningful use" of their EHR systems to the ONC. Thus, there is no reimbursement for roll out costs.

The ONC has also yet to specifically define "meaningful use."

Meanwhile. the legislation calls for HITECH to begin cutting Medicaid and Medicare reimbursements to medical facilities that don't deploy EHR systems by 2015.

In light of such deadlines. IBM Global Financing announced announced it has signed deals to provide financing for e-health systems sold by four IT partners, Siemens Healthcare, Lavender and Wyatt Systems Inc., SCC Soft Computer, and Healthcare Management Systems.

Richard Dicks, general manager of IBM Global Financing for North America, said his company is offering interest rates as low as 3% to health care customers that have top credit ratings. "We've seen significant uptick not only from clients but medical solutions providers for financing of these systems," said Dicks, adding that he expects electronic medical systems to be a $5 billion market by 2015. "This is a huge space."

Currently, IBM Global Financing, a $34 billion IBM subsidiary, accounts for some 40% of financing of e-health projects by health IT vendors, according to IBM.

"It's a chicken and egg scenario facing medical providers. Many are waiting for government funding working its way through the system, but need the benefits of the technology today. Technology financing helps speed up implementation in a more cost effective manner," Dicks said.

Christine Chang, a Health IT analyst with research firm Ovum, said government e-health requirements come at a good time for lenders that deal with health care operations.

"No one was saving up money to do" to create the additional IT infrastructure needed to meet the requirements, Chang said. "Early adopters went ahead and made the investment, but most were waiting. Suddenly, if you don't do it now -- literally in 2010 -- you won't get the incentives."

Chang said hospitals with large IT shops and physicians with smaller practices alike should look into new financing options for deploying e-health technology because many vendors are becoming more flexible, offering monthly payment plans and guarantees that refunds will be offered if their systems don't meet the government's criteria.

Copyright © 2009 IDG Communications, Inc.

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