Medical records policy likely to benefit Net firms

Congress is considering a dozen medical information bills, but the front-runner is the Patient's Bill of Rights, which requires health care providers, employers, and insurance companies to let individuals inspect and copy their records and make any necessary corrections. The bill also calls for technical and physical safeguards to protect the confidentiality of the documents, imposing a $500 fine for each such violation and up to $5,000 for multiple breaches.

In the wake of the Net pharmacy and health information boom--including yesterday's Drugstore.com IPO--online firms are on deck hoping to cash in on the proposed federal mandates to give patients unprecedented access to their medical records and to institute stronger privacy safeguards.

Still, the sensitivity of medical records means that allowing online access could create new opportunities for exploitation. Patients' employment and insurance status could be gravely harmed if a doctor's notes were to fall into unauthorized hands.

In addition, although there has been a great deal of activity in the Net health care arena with IPOs, mergers, investments, and the like, the potential for long-term financial success is still up for debate, analysts say.

Undoubtedly, the success of sites that allow providers and patients to file insurance claims, access medical records, and fill prescriptions will hinge on the privacy defenses in place.

One company that stands to benefit if a medical records access law is passed by Congress is MedicaLogic, a 14-year-old medical software firm that brought its business online today, with whispers of a ".com" initial public offering lingering close behind.

With more than a dozen former Netscape Communications employees on board, MedicaLogic launched a test involving more than 16,000 patients and 100 doctors for AboutMyHealth.net, which allows patients to get free access to their doctors' files via the Net.

Physicians will support the program by licensing Logician Internet, the firm's Web package that lets health care providers put records online and communicate with patients. The product is scheduled to be on the market in November.

"The opportunity for securing the data in the electronic world is greater than in the paper-based world," said Dr. Blackford Middleton, the public policy expert for MedicaLogic.

Safety first
Arguably, technology can shield medical records better than manila folders and metal file cabinets. Still, once records are digitized in huge repositories and become accessible from the global Internet, just one breach could have serious repercussions. That's why privacy advocates want clear legal protections passed before companies such as MedicaLogic offer online services to the masses.

"People should be reluctant at this point to allow their personal medical information to go online until there are appropriate legal and technical safeguards--and the bottom line is that they aren't there now," said Marc Rotenberg, executive director of the Electronic Privacy Information Center, who last week testified before Congress about medical privacy.

Already MedicaLogic has 56 percent of the market for electronic medical records, with about 7 million patient records stored electronically, according to the company.

Other firms are moving in this direction as well. WellMed collects and stores medical information directly from individuals to provide health assessments and online access to records; Healtheon WebMD processes health care transactions online and gives physicians access to medical records and lab orders; and PersonalMD.com allows people to fax the company their medical records and then puts them online.

If legislation such as the Patient's Bill of Rights passes Congress this year, MedicaLogic, for one, could be in a prime position to profit from AboutMyHealth.net and its touted "military grade" security. If Congress fails to pass the bill by its August 21 deadline, the secretary for Health and Human Services will then draft rules, which are expected to include an access provision.

"The legislation is a real boon for us," Middleton said. "The primary bill calls for improved access to health care information to let patients review, contribute, and file grievances. We provide that opportunity."

If new laws aren't passed, Rotenberg warned that "patients should be cautious about who is going to have access, how [it is] going to be used, and [whether] they have recourse if the information goes to the wrong people."

For its part, AboutMyHealth.net stores the medical files, which are locked in separate storage blocks so they can't be accessed in one fell swoop should a break-in occur. The company also requires fingerprint verification and an access card before employees can enter its facility.

And unlike the case with paper files, at any time a consumer can ask to see a log of who has accessed his or her records. If MedicaLogic is the source of a breach, the company said it accepts liability.

MedicaLogic is banking on its security provisions to win favor with consumers. AboutMyHealth.net users will have to sign up for the service at their physician's office and will then be given a password to access their files from a secured Web server that employs the strongest data scrambling technology, 128-bit encryption.

MedicaLogic says it only transmits health information to third parties when authorized by both a caregiver and patient for treatment, coordination of care, payment of claims, and medical research purposes.

"This is secure and it empowers patients," said Dr. Richard Gibson, medical director of information services for Providence Health System, which is testing AboutMyHealth.net in Oregon for potential use at its 19 nonprofit hospitals and clinics.

"This is a chance for error checking, personal education, and for patients to do more research," he added. "What we want is better outcomes for our patients. It's entirely for the patient and nobody else--not employers or insurance companies."

Policy could help Net health sites cash in
Health care is a $1 trillion industry offline, research shows. Although several notable services have popped up online, analysts predict that the Net still is an underexplored--yet potentially lucrative--frontier for this sector. The online consumer health care market could grow to $1.7 billion by 2003, according to a May report by Jupiter Communications.

"It is going to be the next big boom--the Net has opened the floodgates to a whole new type of vendor, which MedicaLogic is now becoming," said Daren Marhula, an online health industry analyst at U.S. Bancorp Piper Jaffray.

"Patients feel neglected and like they can't make good decisions for their own health," he added. "So there is a huge opportunity to provide medical access and tying together the different health care constituents."

But some say the firm needs to do more than offer access to medical records.

"There is a market if they build content around the records service, because health sites need registered users to have a reason to return--health isn't a daily event like sports scores or stock quotes," said David Restrepo, a health sector analyst with Jupiter.

"But over the last seven months the amount of activity in this space came out of nowhere," he added. "People who offer different solutions will be attractive acquisition [and IPO] candidates."