Health Insights & Outlooks - Silverlink Communications

Health Insights & Outlooks

A bi-weekly newsletter

Welcome to the March 7, 2008 issue of Health Industry Insights’ newsletter, Health Insights &
Outlooks. We publish every two weeks, examining recent events and offering opinions on key trends
in the healthcare and life science industries. Please feel free to forward this newsletter to colleagues
or others who might find it relevant.

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Google Health Finally Revealed at HIMSS

By Lynne A. Dunbrack

Eric Schmidt, CEO of Google Inc., introduced Google Health in his closing keynote at the Health
Information and Management System Society conference held in Orlando, FL last week. Mr.
Schmidt's address highlighted what is so painfully obvious to us in the health industry: patient
information is widely scattered, and most often inaccessible to patients and clinicians alike. What
information consumers do keep in electronic personal health records (ePHRs) is often tethered to the
stakeholder sponsoring the PHR, such as an employer or payer, and not portable to other PHRs, or
other forms of electronic health records (EHRs), including electronic medical records (EMRs). The
stated objective of Google Health is to address these issues by providing consumers a Google
application to create and store their personal health records on-line, as well as a platform upon which
other companies using Google Data APIs can develop applications that enable consumers to
aggregate (and share) their data among multiple sources and make better use of their health
information. Cleveland Clinic will be the first to pilot Google Health. In the first round of the pilot
project, 1,500 to 10,000 patients will be able to upload their data from Epic Systems' MyChart, the
patient portal for the EpicCare EMR used by Cleveland Clinic.

Google has been working on Google Health for more than a year and a half. The departure of Adam
Bosworth, former VP of Product Development and Google Health architect, last year seemingly
stalled the initiative allowing Microsoft to eclipse Google PHR project and launch HealthVault in
October 2007. The first iteration of Google Health, released in May 2006 consisted of Google Co-Op
for health topics. Google Co-op is a tool that allows users to tag web sites to refine searches. The
PHR component of Google Health is a fairly basic application requiring consumers to create their own
problem (conditions), treatment and medication lists. (That latter does support drug-drug and drug-
allergy interaction checking.) Using Google's search and map tools consumers can also search for
providers and add them to an electronic directory in their PHR. Google Health currently is no different
than many other first generation PHRs that require the consumer to do all the heavy lifting to populate
their PHR. Adoption rates of these static PHRs are practically nil.

Schmidt indicated that Google would not monetize the new PHR application by placing ads on
Google Health. (However, other Google executives have suggested in the press that ads might come
later, so Google is sending mixed messages to the marketplace). Instead, Google Health is expected
to drive consumers to the main Google search page to look for health information, where links to
relevant health advertisements will appear. He also emphasized that "trust will be the most important
currency for Google", and that if consumers don't trust Google to protect their data, than they will go
elsewhere. Privacy and security concerns are a significant impediment to consumer willingness to
have personal health information aggregated on-line. PHR vendors are not covered entitles as
defined by HIPAA, thus raising red flags for consumer privacy advocates.

The entry of major household names, such as Google and Microsoft, will certainly elevate the
discussion surrounding PHRs and help to increase consumer awareness of the concept. The real
value for consumers will be when critical mass is achieved and a number of healthcare organizations
and software companies have developed useful applications to provide interoperability and

Page 1 © 2008, Health Industry Insights, an IDC company
www.healthindustry-insights.com

connectivity between consumers and providers using these platforms. PHR adoption by consumers
will not happen overnight despite all the hype and hoopla of Google Health and Microsoft HealthVault.
In another keynote address, Steve Case, CEO of Revolution Health, spoke about his new healthcare
venture that also offers a free PHR in the clouds. Wisely, both CEOs recognized in their respective
talks that their companies are at the beginning of a long journey in engaging consumers to use
healthcare IT, much like the e-commerce sites were a decade ago when consumers were reluctant to
use their credit cards on the Internet. Time will tell how patient these executives, beholden to
impatient Wall Street, will be.

Further Health Industry Insights research will compare and contrast Google Health and Microsoft
HealthVault.

***

Dell, Microsoft, and IBM Secure Top Life Science Vendor Positions for 2008

By Eric Newmark

Health Industry Insights' 1Q08 Leading Indicators in Life Science IT Spending Survey, a quarterly IT
budget tracking survey of several hundred life science companies, recently published its 2008 top 10
vendor list across software, hardware and IT services. The survey asked 154 industry leaders to
identify which vendors servicing the life science market they expect to spend money with during 2008.
Respondents identified Dell (hardware), Microsoft (software), and IBM (IT services) as the three
leaders in their respective categories.

Dell placed first in the hardware category with 45.41% of respondents stating they expect to purchase
hardware from Dell over the next 12 months. HP came in second with 31.51%, closely followed by
IBM in third with 31.40%. Microsoft led all software vendors with 57.26% of the market planning to
purchase from them during 2008, followed by Oracle and SAS, each with 24.66% and 18%
respectively. Finally, regarding IT services, IBM placed first with 12.53% of respondents expecting to
use their services, followed by Accenture in second with 6.78% and HP in third with 6.14%

Notable changes since last year include Apple breaking into the top 5 hardware vendors, SAP joining
the top 5 software vendors, SAIC entering the top 5 IT services vendors, and Accenture more than
doubling its percentage, jumping up to second in the IT services category. This year’s and last year’s
rankings can be contrasted by viewing figures 1 and 2 below.

Figure 1:
Q: Which vendors are you most likely to spend money with during 2008?

Hardware Software IT Services

1 Dell 45.41 Microsoft 57.26 IBM 12.53
6.78
2 HP 31.51 Oracle 24.66 Accenture 6.14
5.68
3 IBM 31.40 SAS 18.00 HP 4.81

4 Apple 18.63 Symantec 14.00 SAIC

5 Cisco 17.27 SAP 12.75 CapGemini

n=154

Figure 2:
Q: Which vendors are you most likely to spend money with during 2007?

Hardware Software IT Services

1 Dell 49.76 Microsoft 59.63 IBM 11.14
8.83
2 HP 35.44 Oracle 26.90 HP

Page 2 © 2008, Health Industry Insights, an IDC company
www.healthindustry-insights.com

3 IBM 27.61 Symantec 18.91 Deloitte 7.13
4 Cisco 19.80 SAS 18.27 Accenture 3.90
5 Intel 16.97 Apple 12.16 CapGemini 3.90
n=152

Note: Rankings are based on the percentage of life science companies planning to purchase goods
and services from the vendors listed below. Rankings do not reflect dollar size or volume of
purchases.

Leading Indicators in Life Science IT Spending Survey is a subscription-based program that provides
quarterly guidance on life science IT spending trends, technologies priorities, and vendor
preferences, segmented by company size, industry subsegment, organization type, and functional
area. For further information on data from this quarter's survey, including the complete top 10 vendor
ranking list, please refer to HII's 1Q08 Leading Indicators in Life Science IT Spending Survey.

***

HIMSS 2008 – What Have We Learned?

By Marc Holland

Well, another HIMSS has come and gone. Before introducing Thursday’s keynote speaker, Google
CEO Dr. Eric Schmidt, John Wade, the current President of HIMSS, announced that this year’s event
attracted 28,340. This was a mere 28,000 more than attended my first HIMSS, which was held in a
Hilton hotel in Saint Petersburg, Florida in 1977 that was, literally, being stripped of its Hilton
franchise while the conference was in session.

In 1977, HIMSS was simply a collegial conference, set up to allow 50 or so members to present peer-
reviewed papers. Vendors were invited to share the podium with their customers, but only a “color
commentators”, and only if their product was an integral part of the presenting hospital’s realization of
the cost savings or quality improvement that was the principal focus of the presentation. There were
no vendor booths. This year, there were more than 1500 booths and, judging by the booth staffing I
saw, vendor personnel likely accounted for well over half, perhaps as much as two thirds, of the total
registrants. So if you were an attendee walking down the main aisle of the exhibition hall, and felt like
a wounded tuna trying to swim through a school of sharks, you had good reason to feel like bait.

What’s wrong with this picture? Plenty. Health Industry Insights estimates the IT market spend by
US providers in 2008 will be roughly $21+ billion. Of this, approximately 75%, or about $16+ billion,
will be spent by hospitals, about $4 billion by clinics and physician practices and the remaining $1+
billion by sub-acute, rehabilitative, dental, and allied health care providers.

So with these numbers in mind, let’s do some math. Some of the 1500 vendors represented were
organizations offering generic products with some appeal to hospitals, but not health care industry
specific. Let’s not count those. Some were real small startups that will “drop out of school” before the
end of their freshman year. Let’s not count them, either. Few, if any, were vendors offering products
for nursing homes or dentists, so let’s exclude that revenue. What we are left with is roughly 1200
vendors chasing a $20 billion market. Let’s further assume that the top twenty or so vendors in this
market account for about half that amount and that ratio is not likely to change anytime soon. This
means that the overwhelming majority of this herd (those whose booths were not quite the size of
small rural towns) is actually chasing a $10 billion market. Now divide the two (1200 into $10 billion).
The answer is roughly $8 million, hardly enough to satisfy the venture capitalists and other investors
funding many of the herd, and probably close to what most of the “big boys” spent just to be present
at HIMSS.

Page 3 © 2008, Health Industry Insights, an IDC company
www.healthindustry-insights.com

Another interesting data point can be found on a website entitled “EHRSCOPE.COM”. This site
purports to list every vendor offering an EMR or EHR product catering to either the inpatient or
ambulatory market. While vendors offering more than one such product are represented once for
each, and other vendors listed offer products which complement or enable EMRs and EHRs but are
not themselves such products, there are, nevertheless, 317 vendors listed.

Every day I speak to clients, prospects and others interested in this industry. Some are committed to
this industry; some are considering establishing a market presence. Some have a sizable market
share; some, a small share. Some have none at all. Of the new entrants, those most anxious to “get
in the game” are often those with the least knowledge of how it’s played. I typically counsel caution
and prescribe a healthy dose of skepticism.

The bottom line? This plethora of products is simply not sustainable and, in the long run, is actually
an impediment to IT adoption and innovation. Many of the vendors you saw this year will not be
back; many of the booths in Chicago in 2009 will be more modest in size. But most of all, absent the
infusion of significant EMR financial subsidies from the payers or the Feds, 2008 will be the beginning
of a period of shakeout and consolidation unlike anything the industry has seen to date.

***

EMRs Figure Prominently in HIMSS Discussions

By Judy Hanover

At last week's HIMSS conference, EMRs once again figured prominently in the discussions among
participants, speakers, and particularly among the myriad EMR vendors exhibiting. Remarks
emphasized that adoption is growing and the utility and need for EMRs is now well proven, but issues
under debate included developing financial incentives to speed up adoption, and ways to improve
utility of EMRs and the execution of EMR projects. Highlights included keynote presentations from
Health and Human Services and the results of the HIMSS Annual Leadership Survey, published
during the event.

The keynote remarks at HIMSS that had the most bearing on the EMR debate included those of the
US Secretary of Health and Human Services, Michael Leavitt, and the US National Coordinator for
Health IT, Dr. Robert Kolodner. In his talk, Secretary Leavitt emphasized the success of the CCHIT
program he champions for EMR application certification. He cited evidence that CCHIT certification
has begun to translate into purchase requirements for ambulatory EMR buyers, and increasingly for
inpatient EMRs as well. He presented data indicating that 44% of ambulatory and 35% of inpatients
vendors had been certified to date, but also acknowledged the limitations of the program. While the
CCHIT specifications do their best to certify applications based on compliance with a consensus-
based, minimum functionality requirement, they only provide a lowest common denominator for
available functionality, security and interoperability characteristics.

Dr. Robert Kolodner spoke briefly following Secretary Leavitt's address. Dr. Kolodner spoke
optimistically about the EMR market reaching a tipping point for adoption in 2008, driven by federal
initiatives including the relaxation of anti-kickback statutes allowing hospitals more involvement in
local ambulatory EMR purchasing. As expected, both Leavitt and Kolodner's statements closely
reflected the positioning of the current administration on healthcare IT.

The growing acceptance and adoption of EMRs was further reinforced by the findings from HIMSS'
Annual Leadership survey (www.himss.org), conducted just prior to and published by HIMSS during
the event. In this study, respondents highlighted the importance of EMRs – identifying them as the
top IT investment priority in their organizations over the next two years. EMRs were also one of the
most visible technologies on the exhibit floor, with at least 50 exhibitors showcasing EMR solutions,
related applications, integration tools and hardware.

Page 4 © 2008, Health Industry Insights, an IDC company
www.healthindustry-insights.com

Health Industry Insights is currently conducting an EMR research program targeted at providing a
vendor selection tool, the EMR Shortlist, that is designed to provide a customized, fact-based
analysis for individual projects that can help guide decisions for stakeholders. If you have experience
with an inpatient or ambulatory EMR, and would like to share your experiences with us and help
shape these new tools, please contact Judy Hanover at [email protected].

***

Communications Technologies – the Industry Step Child to the PHR?

By Janice Young

Amidst the market hoopla last week at HIMSS of Google's formal entry into the healthcare market
with the GoogleHealth PHR were other significant announcements focusing on what may are
considered more mundane healthcare initiatives – consumer communication strategies. In particular,
Silverlink Communications released two announcements in the past two weeks reflecting the next
generation of healthplan investment in communications technologies. On February 19, Silverlink
reported significant growth in 2007, ending the year with reported business among 9 of the top 10
healthplans. On March 4, Silverlink announced their new Adaptive HealthComm Science Platform.
The Silverlink platform integrates decision support and analytics to create personalized customer
communications and to then track communications success and affect on customer behavior.

While the market has focused on PHR strategies, with little adoption, consumer communications
strategies and technology solutions in the past few years have quietly, but notably, shifted from basic
Plan Description and EOB data to cost, care and quality management topics. These include, among
others: health and wellness programs, care management, cost management (in the form of
prescription drug purchasing advice), coordination of benefits, and in some cases, services
scheduling and test reporting.
the successes and opportunities of new communications tools from Silverlink, Varolii and others are
largely unheralded, yet good cost/benefit studies exist. Health plans have found the return on
investment and report that automated communications programs improve prescription drug cost
management and increase COB information to health plans.

The next frontier is communications to enrollees to improve compliance with health, wellness and
disease management programs. PHR and Internet initiatives are frequently at the heart of these
discussions. However, unresolved HIPAA compliance, security challenges and low PHR adoption
rates suggest that general market adoption of PHR and related Internet initiatives is at least some
years away. In the meantime, communications solutions are emerging that not only deliver
information to consumers, but track whether information is acted upon and what type of information
delivery and timing works best for what type of consumer.

Health plan consumer communications initiatives are not a one-size-fits-all strategy. Telephone,
paper, internet, integrated PHR will all have a place in the future model, but different consumers will
respond differently to different media. Targeted multi-channel communications tools can both improve
healthplan costs and quality in the short term and also provide insight into consumer segmentation
and behaviors that will be invaluable to managing the emerging consumer communications and
information management platform, include PHR deployment and adoption.

Page 5 © 2008, Health Industry Insights, an IDC company
www.healthindustry-insights.com

***
Health Industry Insights Latest Research

Scott Lundstrom, Vice President of Research
New! Healthcare Leading Indicators 1Q08, Part I
March 2008 – Doc # HI210947 Survey

New! Healthcare Leading Indicators 1Q08, Part II
March 2008 – Doc # HI210985 Survey

Christopher Connor, Senior Research Analyst
The Clinical Development Archipelago and the Rise of an Information Economy
Feb 2008 – Doc # HI210484 Perspective

Electronic Data Capture (EDC) and Electronic Health Records (EHR): A Tale of Two Markets
Dec 2007 – Doc # HI209697 Perspective

Lynne A. Dunbrack, Program Director – Health Payer Research
Health 2.0: User-Generated Content and Web Tools Finally Arrive for Healthcare Consumers
Jan 2008 – Doc # HI210205 Perspective

Judy Hanover, Research Manager, Health Provider Research

U.S. Health Industry Provider 2008 Top 10 Predictions: The Use of IT in the Provider Landscape
Jan 2008 – Doc # HI210302 Top 10 Predictions

Healthcare Quality by Zagat
Dec 2007 – Doc # HI209642 Perspective

Marc Holland, Program Director – Health Provider Research
EMRs, Their Current State and Future Direction, Part 2: Ambulatory Care
Feb 2008 – Doc # HI210696 Looking Ahead

Dr. Alan S. Louie, Research Director
New! Theranostics: Life at the Beginning of the Economics Bell Curve
Feb 2008 – Doc # HI210952 Perspective

Notable News in the Life Sciences: 4Q07
Feb 2008 – Doc # HI210354 Update

Personalized Generics: Leveraging IT Innovation to Enable Improved Generic Drug Outcomes
Feb 2008 – Doc # HI210338 Perspective

Eric Newmark, Research Manager
New! IT Outsourcing: Motivating Factors
Feb 2008 – Doc # HI210831 Perspective

Commercial IT Outsourcing in the Pharmaceutical Industry
Feb 2008 – Doc # HI210624 Market Overview

IMAs Alone Fail to Reduce Industry Inventory
Feb 2008 – Doc # HI210590 Perspective

IT Outsourcing in Pharma Manufacturing on the Rise

Page 6 © 2008, Health Industry Insights, an IDC company
www.healthindustry-insights.com

Feb 2008 – Doc # HI210276 Perspective

Silvia C. Piai, Research Analyst, Health Industry Insights EMEA
New! Western Europe Healthcare Sector 2008 Top 10 Predictions
Feb 2008 – Doc # HIOH02Q Top 10 Predictions

New! Healthcare IT Maturity Model: Western European Hospital Overview
Feb 2008 – Doc # HI210230 Looking Ahead

Janice W. Young, Program Director – Payer IT Strategies
Healthcare Payer Business Intelligence Solution Evolution, 2008-2010
Feb 2008 – Doc # HI210376 Looking Ahead

U.S. Healthcare Payer 2008 Top 10 Predictions
Jan 2008 – Doc # HI210160 Top 10 Predictions

Healthcare Payer BI Maturity Model, 2008-2010
Jan 2008 – Doc # HI210218 Perspective

In the News

News Mentions
• The Washington Post (2/28/08)
Headline: Google Previews Google Health
Lynne Dunbrack highlights the use of e-health records.

• BusinessWire (2/24/08)
Headline: Iron Mountain Works with HP to Help the Healthcare Industry Store and Protect Growing
Volumes of Medical Images
Chris Conner details how the medical imaging marketplace is rapidly evolving.

• BusinessWire (2/24/08)
Headline: Get a Handle on Patient Care
Marc Holland discusses the value of C5-enabled care processes.

• PharmaLive.com (2/19/08)
Headline: Silverlink Reports Strong 2007 Revenue Growth
Janice Young highlights why consumer behavior will be a leading spend category for healthcare plans.

Events

Industry Events

Industry Insights ’08 Conference

Join our Insights analysts and leading CIOs at this ½ day event to discuss optimizing your go-to-market strategy.
Redeem your complimentary registration pass with the code “NEWS”.
March 10, 2008 | San Jose, CA | Complete Agenda Details

DIA 44th Annual Meeting

The DIA Annual Meeting is the "event to attend" each year for biotechnology, pharmaceutical, and regulatory
professionals. Come and meet Health Industry Insights analyst Alan Louie, Ph.D., Research Director.
June 22-36, 2008 | Boston, MA | Complete Agenda Details

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