Health IT revives old startup battles – patents v. open source

Now that federal health care reform has survived a Supreme Court challenge, many health IT initiatives in the legislation are moving forward. Still others supported by the Department for Health and Human Services (HHS) including grant money for electronic medial records, or 90/10 funding from the Centers for Medicaid and Medicare Services (CMS) to modernize systems have all served to provide significant firepower to the growth of health IT as a market. Private sector health IT firms are finding themselves flush with cash and strong vendor demand. Now, health IT is falling into a familiar plot line – patents versus open source.

According to a recent Deltek report on health IT spending, the federal government spent $4.5 billion on health IT in 2011 and is expected to increase that to $6.5 billion this year. States and municipalities with large health systems are on pace to spend millions themselves adding to their own health IT capabilities. This demand has pushed the young health IT industry into overdrive, rushing to provide technology solutions and cash in.

As the first part of a new $1 million Health Innovation Program, Allscripts, a US-based health care firm has announced an Open App Challenge which asks developers and vendors to to “Start a Revolution” by creating and integrating applications that become an extension of Allscripts’ Open Electronic Health Records software. The company is open to any applications that come out of the challenge but is especially interested in finding applications that manage chronic diseases which are known for their high costs.

The contest will dole out $1 million in award money with the official winner getting the most of that – $250,000. The challenge is meant to highlight the company’s Platform for Innovation. 15 additional apps will be chosen and developers will receive $10,000 awards. A second set of awardees will be chosen based on which application demonstrates the most positive clinical, financial or performance improvement results after deployment at a client site.

Other health IT firms are working to build innovation and draw funding in similarly open source ways. Health Tech Hatch (HTH), a seed money and development platform for health IT entrepreneurs, announced its launch yesterday, and will provide crowd funding, prototype testing and mentorship for burgeoning health IT projects. Health Tech Hatch’s leadership team are founding members of the National Crowd Funding Association – a trade association formed last year to support crowd funding projects, and want to use social media, group collaboration and testing to grow new projects.

However, not all firms in the space are taking quite such open approaches – MMRGlobal, another US based health care company recently announced the expansion of its patented suite of electronic health care tools. The announcement is notable as patent wars have been an ongoing issue in the broader IT community for several years, with some developers arguing that the rush to patent actually limits technological innovation and can increase costs, while others see patents as a means of ensuring profitability. An interesting and telling phrase was included in the announcement, “the MMR patent portfolio is believed to be relevant to virtually any provider who transmits electronic health records in that it will limit their ability to communicate protected health information without potentially infringing on MMR’s patents.” In essence, anyone operating in this space may be obligated to establish a vendor relationship with MMR lest they draw the wrath of its patent enforcers.

Indeed, MMR President and CEO Robert H. Lorsch, is open about his plan on this score, “we have invested heavily in the development of our patent portfolio and are now positioned to reap the benefits of such investment by compelling doctors, pharmacies, insurance providers, electronic medical record providers and other healthcare professionals to choose negotiating a license with us for the use of our intellectual property or face potential infringement actions. With Meaningful Use requirements for patient engagement taking effect in 2014, which stipulate that patients have online access to their medical records within a certain period of time following the receipt of healthcare services, we believe the MMR portfolio is extremely relevant.”

The MMR portfolio is the result of a six-year collaborative effort with the law firm of McKee, Voorhees & Sease, PLC (“MVS”), and the parties intend to continue to expand the reach of MMR’s patent portfolio concurrently with the licensing and enforcement efforts of Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP. The Company’s patent portfolio also includes numerous other issued patents and pending applications in the U.S. and countries of commercial interest including Australia, Singapore, New Zealand, Mexico, Canada, Hong Kong, Japan, South Korea, Israel, and European nations.

“The Company has instructed us to begin enforcement of its intellectual property, and as a result, we have already begun contacting physicians, hospitals, pharmacies, and others who use or market methods and systems of providing Personal Health Records to patients or healthcare professionals. We are also pleased that this most recent application 13/352,026, which was filed on January 17, 2012, was issued in less than nine months,” explained Ted Ward, lead patent litigation counsel at Liner.

As more health IT companies announce newly completed rounds of venture funding for their ideas, we may start to see more of these types of statements from providers. If so, health IT may be headed down the same path as other parts of the IT landscape, forcing vendor relationships in order to avoid legal fees instead of focusing on maximizing value and outcomes based care – the original goals of many of these reforms. Watch this space.