Dell Targets State Health Services

An expected 30 million Americans will join Medicaid and private insurance plans as a result of health-care reform signed into law by President Obama on Mar. 23. When they do, they will have to register through "health information exchanges" that the federal government requires states to set up by 2014.

Dell, the world's third-largest computer maker, has assembled a team of consultants to help U.S. states meet those mandates. On June 9, the Round Rock (Tex.) company said it has formed a state health services group to provide consulting to states as they work to comply with the legislation.

"There is not a lot of time to get these exchanges built," says Melissa Boudreault, director of state health services at Dell (DELL), who is heading the initiative. "You're going from zero to 100 in a relatively short amount of time."

Federal Money to Build Exchanges

The company is angling for a slice of the $386 million awarded by the government to help 40 states build the exchanges, which will include websites, computer systems, and telephone support for citizens enrolling in insurance plans. In all, the government has set aside almost $1 billion for advancing the use of information technology in health care, including use of electronic medical records and worker training.

Joshua Greenbaum, principal of research firm Enterprise Applications Consulting, based in Berkeley, Calif., says there's "an enormous opportunity" to connect citizens to government services by using customer management software and business applications to power agencies' websites. "The software for government relating to its constituents is some of the most abysmal stuff you've ever seen," he says.

Dell's effort is the fruit of its $3.6 billion acquisition of Perot Systems in November 2009, a transaction designed to help it expand in technology services and better compete with Hewlett-Packard (HPQ) and IBM (IBM). Perot's strengths include health care and government, areas that are benefiting from higher spending by the Obama Administration.

Boudreault, who joined Perot just before it was bought by Dell, previously worked for Massachusetts on a program that signed up low-income residents for insurance plans. Her team will initially include a half-dozen people, and will work with other parts of Dell, including its computers systems groups, to try to win contracts with states building the exchanges.

Services Revenue Growth

Dell reported $5.6 billion in services revenue during its 2010 fiscal year, which ended Jan. 29. Services, which accounted for about 11 percent of total revenues, have held up better than other areas, increasing an average of 2.9 percent in the past two fiscal years. At the same time, sales of PCs, laptops, servers, storage devices, and software have declined on average over the past two years, according to data compiled by Bloomberg. Total revenue fell 13.4 percent to $52.9 billion in fiscal 2010.

Dell shares fell 25 cents, or 1.9 percent, to $12.68 in Nasdaq Composite Index trading on June 8.

IBM, HP, and other technology companies are also pursuing health-care technology spending by companies and government agencies. IBM is working with more than 40 information exchanges that include health-care providers, and is competing for contracts among state and regional exchanges, says spokeswoman Holli Haswell. Information about patients "is scattered all over the place," says Bill Conroy, president and chief executive officer of Initiate, a unit formed by IBM after its Mar. 1 purchase of Initiate Systems, whose technology can link patient data across computer systems.

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