THE CHINA MINISTRY OF HEALTH DELEGATION EDUCATIONAL VISIT TO HARVARD

1. THE CHINA MINISTRY OF HEALTH DELEGATION EDUCATIONAL VISIT TO HARVARD Boston, Massachusetts December 13, 2012 Where Does China Stand onthe Global HIT Continuum? How Can China “Leapfrog” in HIT Use?

2. Presentation Agenda Page Evolution of Global HIT 3 Current Status and Future Direction of HIT in China 11 Where Does China Stand on the Global HIT Continuum? 21 How Can China “Leapfrog” in HIT Use? 23 How Does Dorenfest Help? 29

3. Opportunities to Improve the Healthcare Delivery Process Have Been Pursued for Many Years • Great redundancy of information • High error potential • Lack of timeliness • High cost • Organization complexity

4. The U.S. Hospitals Have Sought an EMR/EHR Since the 1960s through Four Generations of IT Systems • Finance Systems (1960s and 1970s) • Limited Clinical Systems (1970s and 1980s) • More Advanced Clinical Systems (Late 1980s and 1990s) • Electronic Health Records (2000s)

5. But Poorly Implemented Change Created Redundant Work on Top of Original Inefficiency Growth in Redundancy 4x New Thrusts of the 2000s 3x NOW 1990's Systems and Surrounding Integration 2x Legacy I.T. Systems Before IT=1x Manual Total Hospital Work Process

6. At the Beginning 1. Large vision 2. Hardware technology limited and expensive • Large computers • Inefficient software development methodologies 3. Self development was the only software approach and remained the preferred approach for a period of time 4. Packaged software emerged first as a customizable starter set and later became products requiring less customization from user to user 5. As time passed, packaged software products became preferred • Less expensive • Faster to implement • But many problems in implementation

7. The Late 1970s and 1980s 1. Several generations of technology, software vendors, software approaches, and products came and went 2. Software buying and implementation methods improved • Users and management became more involved • Functional requirements to define needs and compare vendors became more complete and useful • User site visits, user customer references, and user discussions with counterparts at other hospitals became part of an improved buying approach 3. Integration became a large problem as the number of software vendors used by a hospital increased • Started out all manual with duplicate entry into multiple systems • Moved to “hard coding” of interfaces between systems • Caused a focus on the development of standards for software products of different vendors to communicate with each other

8. The 1990s and 2000s 1. Management of the buying and implementation of IT software continued to improve 2. A new generation of software systems emerged, with better features and functions built on superior technological platforms 3. Integration problems kept growing, causing the movement from hard coded interfaces to standards such as HL7, and interface engines which facilitated the transfer of data in a more efficient way between software systems 4. Clinical data repositories, data analytics tools, and clinical decision support systems emerged 5. The pressure for physicians to enter orders through CPOE grew in the late 1990s and early 2000s. 6. The U.S. 2009 Healthcare Stimulus Program emphasizes the further expansion of EHR use, and today much activity is going on in this area

9. HIT Evolution in the Rest of the World • Canada started in the late 1970s • Europe and Australia began in the early 1980s • Asia began in the 1990s • Canada, France, Germany, England, and Australia all started later than the U.S., Invested less, and have made more progress • Hong Kong started even later, invested less, and now is the state of the art in HIT use in the world • China HIT is now at an earlier stage of development. China has the goals and desire to “leapfrog” the rest of the world in HIT use in the next few years

10. China Ministry of Health Delegation at Harvard Current Status and Future Direction of HIT in China

11. The Development of HIT in China Chinese hospitals began to computerize in the early 1990s The initial focus of computer efforts was on financial systems In the early 2000s, Chinese hospitals began to implement IT for clinical systems Many software solutions are now available, with well over 1,000 smaller software companies now operating in the HIT market in China Between 2005 and 2010, China hospital spending on IT grew from 5 billion RMB in 2005 to 16 billion RMB in 2010, and to 21.5 billion RMB in 2011 This rapid growth in spending will continue at an even more rapid pace over the next several years

12. Factors Contributing to Future Spending Growth in China HIT Redundant, expensive, and error-prone hospital work processes led to the initiation and development of HIT in China Fueled by the Ministry of Health (MOH) guidelines for health IT development issued in 2003, calling for all cities in China to implement RHNs and digital hospitals by 2010, hospitals began to purchase clinical systems in a variety of areas In 2009, China Healthcare Reform was passed, and a stimulus spending program of almost one trillion RMB in new spending was initiated to support Healthcare Reform Improved use of IT is one of eight pillars of the new China Healthcare Reform. The 3521 project national vision for HIT was summarized in the twelfth five-year plan for HIT to provide the framework for HIT and RHN development in China from 2011 to 2015. Focuses of HIT development include: Improve hospital IT systems leading to digital hospitals Implement electronic health records (EMR and EHR) Create the second wave of RHN development to provide data sharing throughout cities, provinces, and at a national level IT systems to support expanded healthcare insurance

13. Factors Contributing to Future Spending Growth in China HIT (Continued) The vision document for 3521 is comprehensive and extensive, and may be summarized as follows: 3 levels of health information platform – nation, province and region (city or county) 5 groups of applications – public health, healthcare service, health insurance, drug administration, general management 2 basic databases – resident electronic health record and electronic medical record 1 dedicated health infrastructure network 2 sets of systems – data standards system and network security system Much spending is going on right now to implement first steps in the execution of this vision.

14. What Are the Key Factors Impeding Success in Chinese Hospital IT Use? Low investment in the 20-year period 1990 to 2010 caused slow progress in HIT Weaknesses in the approach to buying and implementing new IT systems has created unnecessarily redundant work processes, poorly integrated systems, and unhappy users The weaknesses in approach to buying of HIT software products in China followed a similar path to how earlier adopter countries started their HIT efforts. Most of the world has learned from their own bad experiences to find better ways to buy and implement HIT systems

15. What Are the Key Factors Impeding Success in Chinese Hospital IT Use? (Continued) The current foundation of HIT efforts in China, including software and hardware platforms, and integration tools, is in need of improvement to support the accomplishments of China’s vision for HIT improvement On many occasions hospital and health bureau leadership, not knowing what they do not know, are continuing to make similar mistakes to the past. By paying much greater attention to what worked and did not work in early adopter countries of the world and using more of what worked and less of what did not work, Chinese hospitals and health bureau leaders will make much greater progress toward their vision and “leapfrog” goals

16. Cashiering (Vendor 2) General Accounting (Vendor 2) The Current Computing Environment in a Typical Large Complex Chinese Hospital Today Sample Current Systems (High Level View) Office Automation Systems Core Vendor (Vendor 1) Major Financial Systems Major Ancillary Systems Major Clinic Order Management Inpatient ADT and Billing Performance Assessment System (Vendor 13) Financial (Vendor 2) R.I.S./PACS (Vendor 4) Inpatient Physician Workstation Policy Exchange Platform (Vendor 13) Outpatient and ER Registration L.I.S. (Vendor 3) MD Workstation (Vendor 2) Webport System (Vendor 13) Outpatient Physician Workstation Outpatient Pricing and Charging Pharmacy (Vendor 2) Blood Bank (Vendor 3) Major Admin Systems Hospital Website (Vendor 13) Inpatient Pharmacy L.I.S. (Vendor 3) Material Supply Bar Code (Vendor 3) Medical Ins (Vendor 9) Outpatient Pharmacy Smart Card OR/Anesthesia (Vendor 5) Medical Ins (Vendor 10) Lab Price System Ultrasound (Vendor 6) Patient Consultation Survey Medical Records (Vendor 11) Inpatient Insurance Interface Stomatology (Vendor 7) RF Card Producing Sub-System Human Resources (Vendor 12) Instrument and Equipment Management Many Other Niche and Specialty Systems Inpatient EMR (Vendor 8) Note: Chart taken from a couple of real hospital situations with each vendor or product family shown in a different color

17. The Competitive Environment 1. There are over 1,000 small software vendors active in China HIT 2. The market segments with the most vendors are HIS, PACS, RIS, LIS, and EMR 3. All HIT vendors in the market started in a city and most are still operating in that city or a small region around the city. Many of these smaller local vendors have a dominant market share in the area they service. Some HIT vendors are becoming more national in scope 4. Many vendors in the hospital computer systems market offer heavily customized solutions rather than products. These heavily customizable solutions create greater dependency on the software vendor and are more difficult/expensive to keep current when vendors release new software updates periodically 5. Chinese hospital leaders would like to see a new generation of HIT software developed for the country to assist in helping them accomplish their “leapfrog” objectives

18. Major Areas of Future Development and Opportunity in the China HIT Market 1. Application software will become more productized with greater tools to support the growing use of IT in hospitals 2. New application software to serve the not yet automated areas of clinical work processes are emerging very quickly 3. Integration tools to facilitate the development of an improved IT environment will emerge 4. Data analytics products and support tools to facilitate better data analysis, reporting, and decision making will emerge as Chinese Hospital Managers grow in sophistication 5. New service and implementation approaches are beginning to emerge • General contracting for entire efforts with some company software and some partner software • Front end planning, buying, and implementation services purchased from independent third parties to help hospitals make better buying decisions and create more successful implementation of software

19. Today Chinese Hospital HIT Investment Is Spent Differently Than the Rest of the World SOURCE: CCW Research

20. China Ministry of Health Delegation at Harvard Where Does China Stand on the Global HIT Continuum?

21. Broad Comparison of U.S. and China HIT Situations . Key Element U.S. China Per Capita Healthcare Spending $8,500+ $100+ Employees per bed 6 to 12 1 to 2 HIT Spending Very high Very low Number of Software Vendors in a Hospital 80+ 20+ Integration Status Okay Very bad Size of IT Staff Very Big Small Dependence on Software Vendors Medium Very High Implementation Approaches Fair Bad Historic Data Available in Any Form Lots Very Limited Historic Data Available in Accessible Automated Form Considerable Very limited Clinician Use of Data Growing Limited to none

22. China Ministry of Health Delegation at Harvard How Can China “Leapfrog” in HIT Use?

23. China Healthcare Leaders Want to “Leapfrog” the World in IT Use Chinese hospitals and health bureaus are carefully considering how to be more successful in taking next steps forward in IT use There is a recognition that for China to accomplish its objectives in HIT requires the following: Learning quickly from the global experience Overcoming resistance to change Knowing how to manage change Doing more of what the rest of the world did right and less of what they did wrong to avoid mistakes other countries have made and China is still making Developing more expertise in these areas of need quickly

24. How Did the Rest of the World Get to Their Present Level? 1. The U.S. started first, made a huge amount of error from inexperience, and has created an advanced, but very inefficient HIT program 2. The next group of adopters, including Canada, Europe, and Australia, did better than the U.S. by learning from the U.S. experience 3. Later adopters in Asia, such as Hong Kong, have accomplished the best results in the shortest period of time by paying very close attention to the experience of others and doing more of what they did right, and less of what they did wrong

25. What Are the Key Success Factors in HIT Use in the Rest of the World? 1. Good front end methods for buying and implementing new HIT systems, with a focus on functional specifications and user buy-in 2. Physician and user leadership with the involvement of many physicians and users 3. Good integration tools to support the purchase of software products from different vendors in a more seamless way 4. Software products with user modification tools that match the needs of the hospitals and can easily be upgraded to reflect changes and new rules 5. Careful learning from their own experience and the experience of other countries to minimize mistakes in the process of buying and implementing HIT systems

26. China Has Moved Too Fast in the Following Areas of HIT Development 1. Oversimplifying vision and ideas so that execution brought disappointment 2. Buying HIT systems too quickly with too little front end planning and too little user involvement 3. Adopting best of breed software acquisition approaches without adequate attention to how these different software vendor products would fit together as a unit and work seamlessly in the hospital

27. China Has Moved Too Slow in the Following Areas of HIT Development 1. To recognize the value and to invest in the methods to integrate a variety of different software vendors, and to not use too many software vendors if they cannot be integrated 2. To address cultural impediments to good change management by involving the users more and adopting processes that lead to good buying decisions

28. Creating More Success in the Current China Healthcare Environment 1. There is much momentum for change. More money will be spent and better results are mandatory 2. Because of limited investment for many years in China HIT, Chinese hospitals have created a poor foundation for implementing its HIT vision of the future, and have made many of the same mistakes that the U.S. made in its early adoption of HIT • Now China is at a crossroads. It is spending much money to accomplish a very grand HIT vision • But more careful front end planning at every level of the country – from the hospital to the health bureau to the national level – must be done to support the execution of what could be a wonderful vision if successfully implemented • By recognizing what the rest of the world learned from their successes and failures, and doing more of what the rest of the world did right, and less of what the rest of the world did wrong, China will be able to make much faster and better progress in the future of HIT implementation

29. China Ministry of Health Delegation at Harvard How Does Dorenfest Help?

30. The Dorenfest Group Is Bringing Needed New Skills to China 1. Hospital Operations Improvement and Change Management 2. IT Program Improvement, Problem-solving, Strategy, and Planning 3. New Approaches to Buying IT Systems in a Stronger Partnership with Users 4. New Ways to implement IT Systems

31. Examples of Dorenfest Projects in China The Dorenfest China Healthcare Group was formed in 2006 to offer consulting services to China Hospitals and Health Bureaus. We have worked with over 25 Hospitals and Health Bureaus to help them use information technology more effectively and have consulted with a variety of Western companies Examples of Health Bureau Clients for RHN and digital hospital planning Chongqing Shenzhen Examples of Hospital Clients Beijing Electricity Hospital Foshan City First People’s Hospital Peking University Third Hospital Rizhao City People’s Hospital Shanghai Changning Maternity & Infant Health Institute

32. Examples of Dorenfest Projects in China(Continued) Examples of helping Clients from Other Locations bring their skills to China Aetna − Intel Hong Kong Hospital Authority − Microsoft China IMS China − Phillips Healthcare China Examples of helping Chinese Companies with HIT market questions Donglian–Hangzhou East Associates − Simcere Pharmaceuticals Heren Health − Sinopharm

33. THANK YOU. FOR MORE INFORMATION CONTACT: SHELDON I. DORENFEST OR XIAO LIU THE DORENFEST GROUP THE DORENFEST CHINA NBC TOWER, SUITE 2725 HEALTHCARE GROUP 455 N. CITYFRONT PLAZA DRIVE HUAIHAI EAST ROAD NO. 45 CHICAGO, IL 60611-5555 HUAIHAI PLAZA U.S. OF AMERICA SUITE 908 PHONE: 312-464-3000 SHANGHAI, CHINA FAX: 312-467-0541 PHONE: 021-51001821 WEB SITE ADDRESS: www.Dorenfest.com E-MAIL ADDRESS: info@Dorenfest.com SHELDON’S E-MAIL ADDRESS: sheldon@Dorenfest.com XIAO’S E-MAIL ADDRESS : xiao.liu@Dorenfest.com