The health care technology company athenahealth Inc. is teaming up with Beth Israel Deaconess Medical Center to design an Internet-based system to manage medical records and compete in a growing, multibillion-dollar market for sales to big hospitals around the country.
Converting to electronic from paper records has received a major push — plus billions in federal funding — and is seen as essential to modernizing the industry, improving care, and controlling costs. Many large hospital systems are installing proprietary systems purchased from technology vendors that can have price tags exceeding $1 billion.
Athenahealth, of Watertown, is set to disclose Tuesday that it is buying what it says is a lower-cost and easier-to-use hospital software system designed by Dr. John D. Halamka, chief information officer at Beth Israel Deaconess, for an undisclosed price. Athenahealth will integrate the software into one of its existing products, primarily used in doctor offices, and market the new system to hospitals.
Electronic medical records systems in most big hospitals use in-house computer servers to store data, which is generally available only to providers within their networks. Instead, athenaheath’s system will use the Internet, storing data in the so-called cloud, so it can be downloaded and shared with providers both in and out of health care networks.
“Economically, clinically, operationally, and morally, the cloud is on the right side of history,” said athenahealth’s chief executive, Jonathan Bush.
The Beth Israel Deaconess system, called webOMR, will be incorporated into the Watertown company’s athenaNet, which includes functions such as patient registration, referrals, insurance claims, and payments. One goal is to make it easier for the records to follow patients from a referring doctor to a hospital and back.
Under the agreement with athenahealth, Beth Israel Deaconess will test the integrated system at its 58-bed hospital in Needham. Separately, the hospital system will install athenaNet for its affiliated primary care and specialty physicians at 38 sites in Eastern Massachusetts.
For Beth Israel Deaconess, the partnership with athenahealth is a validation of a system built by its doctors and programmers over the past 30 years. Even as other big teaching hospitals have outsourced records systems to national technology vendors, such as Epic Systems Corp. and Allscripts Healthcare Solutions Inc., Beth Israel Deaconess has held on to its in-house program.
“For the moment, the industry has not offered a product like that,” Halamka said.
Halamka said Beth Israel Deaconness spends about 2 percent of its overall budget on information technology, while other big teaching hospitals typically spend twice that much.
Athenahealth’s ultimate plan is to market the Beth Israel Deaconess-designed system to hospitals nationally. Bush acknowledged his company faces an uphill battle against more established rivals that already have their software installed at many leading hospitals.
The company, which until now has focused on doctors offices, remains one of the smaller players in the national market for electronic health records at hospitals. The company made a significant move into the hospital market last month when it acquired Atlanta-based RazorInsights LLC, a vendor that sells electronic health records and financial software to community hospitals.
The partnership with Beth Israel Deaconess is part of athenahealth’s effort to market products to larger hospitals.
Judy Hanover, research director for the technology research firm IDC Health Insights in Framingham, said many large-scale clinical software systems are designed to connect hospitals within a system but not to share information outside the system.
“They’re designed to lock in patients and information,” she said. “A patient who goes outside the system doesn’t have the benefits of their records, their medical history, and information from any tests of procedures they underwent.”
Hanover said there may be room for competing Internet products as new technologies emerge. But they would have to become more sophisticated and be tested at smaller hospitals before they can be marketed to large hospitals nationally, she said.
Shawn Kiesau, a spokesman at Epic headquarters in Verona, Wis., said Epic systems are proprietary but have the ability to connect and communicate with other systems, including Internet-based systems built by competitors such as athenahealth.
“Interoperability is Epic’s strength,” Kiesau said.
Epic, used by many Boston-area health care organizations, is seen as the top-shelf technology system on the market, but also as one of the most costly.
Partners HealthCare is rolling out a $1.2 billion Epic system for its network of 10 hospitals and 6,000 doctors. The system will eventually hold records for as many as 4 million patients.
With regulations and demands on health care technology systems increasing, Partners executives decided in 2012 to replace their in-house systems with Epic’s so they could focus more on patients without getting “bogged down on maintaining an [IT] system,” said Dr. Gregg Meyer, chief clinical officer at Partners.
“We needed to make a change,” Meyer said. “It’s expensive but it’s incredibly important.”