In a development indicative of a major trend, Global Med Technologies, Inc., a Lakewood, Colo.-based medical technology company, says it has signed a $2.8 million contract with "a division of one of the largest HMOs in the United States" to provide disease management (DM) services as an Application Service Provider (ASP). The pact is contingent upon Global Med Technologies successfully obtaining the needed funds to transition its DM software from the design phase to the coding phase.

     The contract may be a harbinger of the increasing role of Internet-specialist ASPs in DM, industry observers say."ASPs have an opportunity to develop into `killer applications' in health care and disease management," says, for instance, Vince Kuraitis, a principal in consultant Better Health Technologies (Boise, Ida.). ASPs are organizations that manage and host software-based services, including software deployment, implementation, maintenance, support, and security, for contracted organizations.

     ASPs quickly have emerged as a major trend in information technology (IT) outsourcing, according to a November 1999 report published by Wit Capital Corporation, Inc., a New York based online investment banking firm.

     The health-care market, including the DM industry, is "well-poised to benefit from the added values of the ASP model," the report says. The reason, according to the report: "Health-care organizations have traditionally lacked comprehensive IT infrastructure and strategies, suffered from inexperienced IT management and staff, have been unable to afford the large upfront payments typically required of IT investments, and have suffered from time-consuming implementations and maintenance."

     Peter DiBiaso, director of marketing at CareTools, Inc. (Waltham, Mass.), a World Wide Web-enabled heath-care IT company, agrees with the Wit report's conclusions. "The value of ASPs is of particular interest to organizations that rely on a cost-effective option for implementing and maintaining systems for multiple users and/or locations. The DM industry fits this profile nicely given the reliance on patient tracking and communication from multiple caregivers (nurses, physicians, etc.) in often geographically distributed locations," he says.

     The Global Med deal may indicate the Wit report and DiBiaso are on target. "Signing a multi-million dollar contract while the product is being developed is evidence that our products are at the cutting-edge of e-commerce health care," says Michael Ruxin, M.D., chairman and CEO of Global Med and its ASP subsidiary, PeopleMed.com, Inc. The PeopleMed.com ASP software now is being beta tested, he says.

     Ruxin would not disclose the identity of the HMO or details of the contract, but indicated that the agreement is to provide ASP services for one chronic disease for a small division of a large HMO. He would not identify the disease involved. The HMO will pay Global a per-member, per-month (PMPM) fee under the pact, Ruxin says.

     He expresses hopes that PeopleMed.com can ink several similar pacts soon. "There are at least 20 manageable diseases. The total market opportunity is enormous," he asserts. Under future pacts, Ruxin adds, HMOs may pay "minimal" transaction fees instead of PMPM fees.

     Under its first agreement, PeopleMed.com will collect and warehouse data about patients' histories and symptoms to help physicians and case managers intervene earlier and more effectively in the care process.

     PeopleMed's software uses the Internet to coordinate diverse sources and users of patient clinical information, including laboratories, pharmacies, primary- and specialty-care providers, claims, and medical records. "By having this information readily accessible, physicians, nurses, case managers, and other health professionals can essentially function as a virtual care team and effectively make critical and timely decisions," Ruxin says.

     Current systems cost HMOs and hospitals hundreds of thousands of dollars to install and maintain and can effectively manage only relatively small patient populations, he says. By contrast, he adds, PeopleMed.com software will be easily downloaded from the Internet free of charge.

     There are very few HMOs and third-party payors that now have the capability for using their own servers to process diverse data for DM purposes, industry experts say.

     Kuraitis expects HMOs eventually to turn to ASPs to help manage chronic diseases, but he cautions that their first utilization will be in physicians' back-office operations. "First, you've got to establish connectivity with the doctor's office. Then you can provide practice management applications for physicians. And after that, you can begin thinking about DM applications," he explains.

     But the advantages for physicians participating in DM programs are clear, according to Kuraitis. Under the old client/server model, he says, physicians had to purchase, install, and maintain both hardware and software at their local offices. Under the new "thin client" ASP model, software is purchased, installed, and maintained centrally at the ASP's site. Physicians need only minimal hardware and software to access ASP services, Kuraitis says.

     He also expects that, eventually, all DM vendors will have to offer ASP services to their clients. "The DM vendor that just hands diskettes over to providers and says, `okay, here's the software, now it's up to you to install and maintain,' will be at a significant competitive disadvantage," he asserts.

     The "high value" ASPs will be able to integrate data from several sources and mesh the software from several different vendors to provide effective DM services, Kuraitis says. As an example, he cites The Trizetto Group (Newport Beach, Calif.), which provides software applications from numerous health-care ITs. Trizetto has more than 50 ASP clients, including Humana (in a three-year deal signed last November), PhyCor, Arizona Community Physicians, and US Oncology, according to the Wit report.

     There's no doubt, Kuraitis says, that ASPs hold tremendous promise in the DM field. However, he says, the ultimate success of ASPs will depend on how they are adopted in local markets.

     There are two possible scenarios, according to Kuraitis. Local markets could converge around one common Internet technological infrastructure and work cooperatively on care management initiatives. Or the local markets could fragment into two or more technological Internet infrastructures. Under that scenario, clinical data are viewed as competitive tools and are not shared freely among health-care providers, he notes.

     DiBiaso says that while ASPs can reduce infrastructure costs and enhance system performance, they also present several potential disadvantages for HMOs and other third-party payors, including recurring expenses, reliance on third-party capabilities, and dependence on a relatively new and emerging industry.

     However, DiBiaso generally is bullish on ASPs. "An ASP's greatest appeal is to an organization that chooses to outsource their network infrastructure while having the flexibility to rapidly deploy their systems through the Internet," he says.