Cisco: Paging Dr. Info Tech

If its online push cuts costs and improves care, the plan could prompt wide change

Back when he was an executive at insurer Blue Shield of California, Dr. Jeffrey A. Rideout marveled at how tech companies thought hospitals and doctors should use more information technology but didn't use their clout as buyers of health insurance to make it happen. Now the 43-year-old former Rhodes scholar is medical director of Cisco Systems Inc. (CSCO ) And if he has his way, Silicon Valley is about to take a big step forward.

Rideout is quietly organizing Bay Area companies to support pay-for-performance in health care. Specifically, he's backing a plan in which big companies such as Cisco will give doctors financial incentives to adopt technology, with the goal of cutting costs and improving care. In recent months, Cisco has met with execs from chipmaker Intel (INTC ), software leader Oracle (ORCL ), and computer maker Hewlett-Packard (HPQ ) to organize the effort.

Will the initiative work? All three of the other companies declined to say whether they will join Cisco's plan. But Rideout says Cisco will go it alone if necessary. "This is something we've made an internal commitment to," he adds. "We want to demonstrate the value of health technology with our own employees." That translates into plenty of impact: Cisco has about 25,000 employees or dependents in the Bay Area.

Big Tech traditionally hasn't been a leader in the drive to bring accountability to health care. Instead, the federal government's Medicare program has led the way, launching a three-year pilot in 2003 to pay hospitals more if they score highly on several measures of patient quality. To the extent that Big Business has gotten involved in health reform, it has focused mostly on hospitals. For example, the Leapfrog Group for Patient Safety, with 172 corporate members, monitors everything from hospitals' adoption of info tech to the staffing of intensive-care wards.


What distinguishes Cisco's effort is that it focuses on doctors. They typically adopt technology in their offices more slowly than hospitals do because of the expense. Cisco is taking this approach because its employees are generally so young that they rarely go to hospitals. The most common hospital admission for Cisco workers is for childbirth.

Experts think Silicon Valley's nascent campaign could help usher in a new era of health care. The payoff, they say, is not so much the cost savings that typically come with the adoption of technology. The real goal is to build huge warehouses of data about how health care is delivered, what works, and what doesn't. With that information, companies that pay for workers' health care can insist on the adoption of more effective and cost-efficient treatments. "They can transform the way outpatient care is performed," says Suzanne DelBanco, Leapfrog's CEO.

Early experiments show that pay-for-performance plans are a powerful tool for improving the quality of care. In the first nine months of Medicare's pilot, quality at more than 270 hospitals jumped about 6%, as measured by hospitals' rate of compliance with a series of best medical practices, say execs at Premier Inc., a Charlotte (N.C.) consultant that's helping to run the test. That leap prompted Senators Charles E. Grassley (R-Iowa) and Max S. Baucus (D-Mont.) to draft a bill, expected to be introduced on June 30, that would authorize Medicare to expand the pay-for-performance idea nationwide.

The road to the Silicon Valley alliance began last fall. The Health & Human Services Dept. asked tech companies to submit ideas for how to develop a nationwide network of electronic health records. Cisco joined with seven other tech companies -- including HP, Oracle, and Intel -- to develop a response. In short order, the four companies began talking about working together to test health technologies with their own workers. They figured they could reap the benefits themselves, then use their experience to tap a huge potential market. "Our goal is to develop best practices and then take them to our customers," says Rideout.

Unlike other pay-for-performance programs, Cisco's coalition will tie payments explicitly to technology adoption. One example is e-mail messaging between doctors and patients. Typically, doctors have been reluctant to trade e-mail with patients because they usually don't get paid for sending them, and they're leery of the liability of making a diagnosis over the Net. Now, however, Cisco is offering financial incentives to 8 to 10 big Bay Area medical groups to provide secure messaging to patients. Cisco will pay a fee for an online consultation -- exact prices are being negotiated, but they'll likely be some discount to an office visit. So doctors make money for offering their expertise. And patients don't have to miss a day of work to get routine stuff like sore throats or fevers treated.

Cisco already has taken steps in this direction. Employees who go to Palo Alto Medical Foundation, a 650-doctor practice that serves 10% of Cisco workers, can use an early version of secure messaging. This year, Cisco started picking up the $60-a-patient yearly subscription fee for the service.

Rideout plans to push doctors to adopt two other key technologies in the first stage of his plan. One is electronic health records, which let patients keep a comprehensive digital record of their care, and the other is electronic drug prescriptions, which help reduce prescription errors by eliminating problems such as indecipherable handwriting. The software for both is available now, but many doctors have been reluctant to buy, in part because the technology can cost more than $1 million for a large practice. Rideout says Cisco is likely to make up-front contributions to doctors to persuade them to install the technologies, though the exact incentives have yet to be determined.

Next year's goals are even more ambitious. Cisco plans to unveil a Net portal in 2006 to collect reams of medical information. Workers could log on to see their electronic health records or to get quality ratings for Bay Area hospitals.

Rideout's plan is to put Silicon Valley in the vanguard of health-care reform. By focusing their buying power on a single leading market such as San Francisco, companies can multiply their impact. "Employers want their bills to reward better performance, and that's a local issue," says Peter V. Lee, president of Pacific Business Group on Health, a coalition of 50 big California companies. If Rideout's efforts work out as he hopes, companies will build a better health system one community at a time.

By Timothy J. Mullaney in New York

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