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Electronic Child Health Network

Case Analysis

Austin Holmes

School of Public Health, New York Medical College

HPM6058

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PROBLEM:

Szende is preparing for a board meeting where at he will present an overview of electronicChildrens Health Network (eCHN) strategic plan. During this presentation he must addressseveral questions including; how to identify potential customers for eCHNs various services,what approach will be used to create value and achieve buy-in from the customers, how eCHNs

services will be priced to achieve maximum profit potential. The answer to these variousdifferent questions will determine the course that eCHN takes in the future.

PROBLEM ANALYSIS:

eCHN was developed in 1998 as a cooperative effort between Hospital for Sick Children (HSC),IBM Canada, and four other health institutes with large pediatric departments located in Ontario.The largest financial contributors of eCHN are HSC and the Ontario Ministry of Health, with aninvestment of 7.5 million each. Currently eCHN offers three separate services, Your ChildsHealth (YCH), PROFOR, and Health Data Network (HDN). Each of these services targetsa different customer base, and each service requires a slightly different strategic approach. Letsanalyze both the environment and the company:

1. Environment: There is a large demand for eCHNs services. The Health ServicesRestructuring Commission (HSRC) passed a mandate that required hospitals to developpolicies [and systems] that will increase both coordination and cooperation among healthcare providers. Several years ago, the HSRC also mandated the development of adesignated Child Health Network for the greater Toronto Area. eCHN envisions that thishealth network could be expanded to an area greater than just Toronto.

2. HSC: Hospital for Sick Children has operated in the Toronto area for over 100 years andhas earned a reputation of excellence. Currently, the hospital boasts a capacity of 383beds and an operating budget of $305 million per year. HSC is active in all aspects ofhealth care including; engaging in compassionate care, acting as a teaching facility, being

highly involved in academics through scientific research and increasing the boundaries ofmedicine through participation in clinical research. HSC has an aggressive strategic planthat includes becoming the pre-eminent research center for pediatrics worldwide, and tobe a leader in the development of new treatments for children. HSCs expansion strategymay fit in with eCHNs strategic plan, however, how much power should allowed to justone company in the control of eCHN? This is a topic for another discussion.

3. Services provided: As described above, eCHN offers three separate services to differentmarkets.

a. Your Childs Health: This service is dedicated to parents and their children sothat they may stay informed on various health topics. Your Childrens Health

was awarded a Canadian Online Product award last year for [standing out as] anexcellent example of how health care organizations could effectively use the webto better serve their community. One of the biggest value points of YCH is thatthe site included a section labeled My Child is Sick, which acted a basictriaging tool to help parents determine if their childs health issue was anemergency and a trip to the emergency room was warranted. This would helpprevent parents from waiting needlessly in the ER. However, one of the biggest

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issues with YCH is that the website had extremely high maintenance costs.Currently, YCH is not producing any revenue to off-set these costs.

b. PROFOR: Is a service to be used by physicians and other health careprofessionals (including researchers) to allow collaboration and cooperation in thetreatment of diseases. The site is broken down into two major sections: Handouts

and live discussion boards. All the handouts or articles are reviewed by the eCHNeditorial board prior to posting. The live discussion board allows physicians topost questions that can be answered by other physicians. The site is then furtherbroken down into specialty ( i.e. cardiology, ophthalmology, oncology, etc). Uponentering the site, one would see these tabs; Presentations, Collaberation,Standards, Research, Journals and Parental Education.

i. Presentations: This allows access to video presentations that discussrelevant health care issues.

ii. Collaberation: This allowed professionals to ask questions and shareinformation. It is like a discussion board.

iii. Standards: This has handouts which delineate the Standards of Care for

each major disease. This allows more consistency in the standard of careamong health care professionals, and creates more efficiency in theperformance of care.

iv. Research: Provides information about on-going research within the eCHNnetwork.

v. Journals: Has selected literature covering patient care. A discussion aboutwhy the journal article was chosen is included with some articles.

vi. Parental Education: This includes handouts for parents explaining theirchilds disease and all other pertinent information.

In order for PROFOR to be successful, physician buy-in is required. Szende knewthat investment in new technologies could either raise over-all expenses or

decrease over-all expenses. It was his hope that PROFOR would, in the end,decrease over-all costs of performing care.

c. Health Data Network: This is by far eCHN most significant revenue generator.HDN allows physicians to post patients charts, test results and procedure results(echocardiogram, electrocardiogram, fluorescein angiogram, optical coherencetomography, etc) onto a secure database that is only accessible through a WAN.Since this connection is not done through the internet, separate connections mustbe installed and routed to eCHNs server. This unfortunately requires a high costof installation, since technicians must be hired and sent out to perform theseconnections. This installation cost and the cost of maintaining the system are byfar the two largest expenditures. This has lead to an agreed price of $150,000/yearto access the HDN. However, this is problematic for smaller hospitals, or long-term care facilities who run on a much tighter budget. Also of concern isconnection speed and connection reliability.

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PROBLEM STATEMENT:

How can we create a system where each service is affordable to the respective targeted marketsegment and allows for an expansion of eCHNs services to the largest geographic area possiblewhile still maintaining profitability in both the short-term and long-term.

ALTERNATIVE SOLUTIONS:

In creating our long-term strategy, we must create a plan that includes several different stages orsolutions. Below are some ideas, with several of them being discarded and others being includedin the over-all package. We will merely liste them here.

1. Create a level of service (or membership packages) that are tailored to a businesses size.

2. Continue to make each business pay $150,000/year.

3. Create a fundraising department and host fundraising events.

4. Create a system whereby large institutions get a discount for each privileged LIP theyinclude in their system. This would lower over-all costs for the hospital or long-termfacility.

5. Create a members only area in Your Childs Health.

6. Allow business to advertise on Your Childs Health.

7. Close Your Childs Health.

8. Expand services for HDN to include non-pediatric practices.

DECISION CRITERIA

Fits in with eCHNs objectives

Allows affordability to all types of clients.

Creates value to both the physicians and the patients. Off-sets operating cost of Your Childs Health.

Allows maximum profitability.

DISCARDED SOLUTIONS:

The solutions below either did not fit in with the decision criteria, or where out-weighed by otherdecisions.

1. Close Your Childs Health: Even though Your Childs Health is currentlycosting eCHN, a plan to try reducing costs should be implemented first. YCH hasbecome valuable to numerous parents, and having received awards, is a good structuralfoundation to build on. Keeping YCH open is essential to further eCHNs objectives.

2. Continue to make business pay $150,000/year for access: First off, there hasgot to be a better way. In out competitive market, if we do not adapt to the forces, wewill lose market segmentation. To charge large fees on top of not having flexible serviceoptions is a recipe for certain mediocrity and loss of growth potential. It goes back to theold saying, its better to capture a larger market segment with a reduced profit margin,than to have a small market segment with a higher profit margin. Good examplesinclude Microsoft and Southwest Airlines.

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3. Create Institution Discounts: This would work, however, it cuts into profits. Havinglevels of service is a better option that fulfills our objective of maximizing profit.

4. Expand HDN services to include non-pediatric care providers: This option does notfit in with eCHNs over-all objectives. Also the name explains why this is a bad option;Childrens health network.

eCHNs STRATEGIC PLAN:

All the other above solutions are included in the following plan. However, I will discuss the planby breaking it down into each constituent service.

1. Your Childs Health: As discussed, YCH must stay active on the internet. However,costs must be off-set and controlled. In order to do this, we propose several options:

a. Membership Section: Still allow free access, but also have a membershipservice. In this section, allow patient to look up and compare physicians and alsoaccess relevant statistics for these physicians, including out-comes, patientsatisfaction, lawsuits, etc. This will create a positive sum competition as specifiedin Porters Re-defining Health care. Good examples to use as models are

ucomparehealthcare.com or vitals.com.i. Also included in this section would be the ability to access the sameStandards of Care as found on PROFOR. This would allow the parentsto become more interactive in their childs care, allow for greaterunderstanding and give credibility to the physicians providing care andthus allowing for more efficient care.

ii. Create a members only discussion board where doctors also give advice.Good model, WebMD.

b. Advertising: Allow companies to advertise. This would bring in large amounts ofrevenue to off-set costs.

2. PROFOR: This service is essentially optimized, however its target and access should be

more flexible. Instead of only HDN eCHN members able to access this service,physicians and other healthcare providers (like researchers) should also be allowed toaccess this service independent of HDN membership.

a. Pricing: Pricing for access should start at $1,200/year per user. This is affordable,yet still allows for profitability. This pricing strategy is to encourage users topurchase other services based on the Foot in the Door principle. It is our hopethat once providers see the value in using eCHN services, they will want tocontinue using services with the HDN.

3. HDN: This service presents both the most complex problem and requires the mostcomplex solution. Like many RHIOs, they are both expensive to set up and operate.Once the infrastructure is in place, fixed costs of maintaining the server will be easier to

estimate. The HDN should be set up as a WAN, utilizing a phone connection equivalentto a T1 that is routed through a tunneling VPN. This allows access to the server withoutconnecting directly to the internet. Also, local telecommunications companies should becontracted under the control of the CTO to set up these connections.

a. Pricing: As discussed, a flexible pricing option should be available. A way to setthis up is the creation of user licenses as would be found in MicrosoftsTerminal Server (formerly known as remote desktop). Each user could sign ontothe system and access the database from any computer that is connected to the

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RHIO system. This would also allow multiple users at a single facility to accessthe system. Several levels of service follow:

i. Small Business: 5 user licenses are provided at a cost of 50,000/year.Access to PROFOR would cost an additional $1,200/year per user. Propercomputers would have to be supplied by the provider.

ii. Medium business: 15 user licenses are provided at a cost of$100,000/year. Access to PROFOR would cost an additional 1,000/yearper user. Proper computers would have to be supplied by the provider.

iii. Large Businesses: Unlimited licenses are provided at a cost of$150,000/year. Access to PROFOR is included for users on-site.However, off site access to PROFOR would be an additional $500/yearper user for providers under the Large Business plan. Proper computerswould have to be supplied by the provider.

FORSEEABLE PROBLEMS:

1. Depending on future fixed cost, small business plan for HDN access may not be

profitable.2. Reduced demand for access to Your Childs Health due to fees. What price targetwould be good?

3. Control of eCHN services. HDN members may feel as if they have a right to control orinfluence business decisions since they are paying such a large fee.

4. Demand may be low if proper value isnt created.5. PROFOR price may be too high for service provided. How can this site become more like

JSTOL. Also, may need to re-make PROFOR as the pre-eminent source for pediatricresearch and journal access. This could be done by quality of research or ease of databasesearch.

CONTROL AND EVALUATION:

1. Collect sales data on types of HDN services purchased2. Create more accurate estimate of fixed costs through time analysis.3. Track number of membership sign-ups to number of hits on Your Childs Health.4. Create a feedback box on both Your Childs Health and PROFOR.5. Survey level of satisfaction with service.6. Survey perceived value index for the three services.