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HIMSS ASIA-PAC 2008

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  1. HIMSS ASIA-PAC 2008 MAY 22, 2008 HONG KONG, CHINA THE CURRENT STATUS AND FUTURE DIRECTION OF H.I.T. IN CHINA

  2. AGENDA • ABOUT THE DORENFEST GROUP • OVERVIEW OF CHINA HEALTHCARE • THE H.I.T. SITUATION IN CHINA • SUMMARY • QUESTIONS AND ANSWERS

  3. THE DORENFEST GROUP • HEALTHCARE CONSULTING AND INVESTMENT FOCUS • OFFER HEALTHCARE IMPROVEMENT SERVICES TO SUPPORT A MORE POSITIVE WORLD FUTURE • HELP HEALTHCARE ORGANIZATIONS TO IMPROVE HEALTHCARE SERVICES WHILE REDUCING COSTS BY IMPROVING WORK PROCESSES, MANAGEMENT SYSTEMS, SERVICES TO PATIENTS, AND QUALITY OF MEDICAL CARE • IN 2006 THE DORENFEST GROUP FORMED THE DORENFEST CHINA HEALTHCARE GROUP, BASED IN SHANGHAI, TO BRING OUR SKILL, TECHNOLOGY, AND CAPITAL TO CHINA IN A TWO-PHASE PROGRAM • WE ARE NOW OPERATING IN PHASE 1 OF THIS PROGRAM, OFFERING A VARIETY OF CONSULTING, TRAINING, AND EDUCATION SERVICES TO THE CHINA HEALTHCARE SYSTEM • WE EXPECT TO ENTER PHASE 2 OF OUR ACTIVITIES IN CHINA IN 2009 WHEN WE WILL BEGIN TO MAKE INVESTMENTS IN WELL-DEFINED, GOOD BUSINESS PROJECTS, IN PARTNERSHIP WITH CHINESE HEALTH BUREAUS AND HOSPITALS

  4. BRIEF SUMMARY OF SHELDON’S PAST EXPERIENCE IN H.I.T. • FORMED COMPUCARE 1969; CEO 1969-1976 • FORMED SHELDON I. DORENFEST & ASSOCIATES, LTD. IN 1976; CEO 1976-2004 • LONG, RICH HISTORY OF MAJOR CONTRIBUTIONS TO HEALTHCARE I.T. UNDERSTANDING AND PROGRESS • WAS RECOGNIZED AS THE LEADING SOURCE OF INFORMATION ABOUT HEALTHCARE I.T. AND A LEADING HEALTHCARE CONSULTING FIRM • KEY BUSINESS UNITS INCLUDED THE DORENFEST INTEGRATED HEALTHCARE SYSTEM DATABASE™ AND HOSPITAL OPERATIONS IMPROVEMENT AND MEDICAL SUPPLIER CONSULTING • SOLD THE DORENFEST INTEGRATED HEALTHCARE DELIVERY SYSTEM+ (IHDS+) DATABASE™ TO HIMSS ANALYTICS IN JULY, 2004 • DONATED ASSETS TO THE HIMSS FOUNDATION TO FORM THE DORENFEST INSTITUTE FOR HEALTH INFORMATION TECHNOLOGY RESEARCH AND EDUCATION.

  5. DORENFEST ACTIVITIES IN OTHER COUNTRIES • CONDUCT MARKET STUDIES AND CONSULTING ASSIGNMENTS ON USE OF INFORMATION TECHNOLOGY IN HEALTH CARE IN A NUMBER OF COUNTRIES • CONDUCT WORLDWIDE STUDIES COMPARING THE STATE OF THE ART IN HEALTH CARE I.T. • CONTINUOUSLY MONITOR AND UPDATE OUR UNDERSTANDING OF WORLDWIDE HEALTH CARE I.T. THROUGH A VARIETY OF ONGOING ACTIVITIES: • IN-PERSON AND TELEPHONE DISCUSSIONS WITH NUMEROUS HOSPITAL EXECUTIVES AND I.T. SUPPLIER PERSONNEL • REVIEW OF I.T. IN USE AT HOSPITALS THROUGHOUT THE WORLD • WORLDWIDE EDUCATIONAL SERVICES

  6. DORENFEST INVESTIGATION OF HEALTHCARE IN CHINA • VISITED 17 CITIES IN CHINA • VISITED WITH HUNDREDS OF LEADERS IN THE HEALTHCARE INDUSTRY IN CHINA TO LEARN ABOUT HEALTHCARE REFORM IN CHINA – ITS PROGRESS, ITS PROBLEMS, AND ITS NEXT STEPS • VISITED WITH OVER 100 HOSPITALS TO GAIN AN UNDERSTANDING OF HOSPITAL OPERATIONS IN CHINA, THEIR CURRENT STATUS, AND OPPORTUNITIES FOR IMPROVEMENTS • VISITED WITH PROVINCIAL AND CITY HEALTH BUREAUS TO LEARN WHAT THEIR GOALS ARE FOR THEIR PROVINCIAL AND CITY HOSPITALS • VISITED PRIVATE HOSPITALS TO OBSERVE THE RESULTS OF HEALTHCARE REFORM PRIVATIZATION EFFORTS IN CHINA • VISITED WITH COMPANIES SELLING PRODUCTS AND SERVICES TO THE HEALTHCARE INDUSTRY IN CHINA AND WHAT THEY BELIEVE ARE APPROPRIATE NEXT STEPS FOR REFORMING THE CHINESE HEALTHCARE SYSTEM • EVALUATED A GROUP OF HOSPITAL MANAGEMENT AND OWNERSHIP OPPORTUNITIES THAT WERE PRESENTED TO THE DORENFEST GROUP TO BECOME MORE FAMILIAR WITH THE ALTERNATIVE WAYS TO PROCEED IN BUILDING A “MODEL HOSPITAL” IN CHINA • DEVELOPED A STRATEGY FOR BRINGING DORENFEST SKILL AND EXPERIENCE TO CHINA

  7. HIMSS ASIA-PAC 2008 OVERVIEW OF CHINA HEALTHCARE

  8. 7.00% 5.55% 9.00% $276.9 (2146 RMB) $97.0 (759 RMB) $356.0 (2759 RMB) Government Social Insurance Out-of-pocket 5.62% $84.9 (659 RMB) 5.13% $59.1 (459 RMB) 5.51% 3.69% $74.7 (579 RMB) $27.8 (216 RMB) 4.03% $9.6 (75 RMB) 3.17% $1.8 (14 RMB) HEALTHCARE COST AS A PERCENT OF GDP ($ AND RMB IN BILLIONS) $ in Billions RMB in Billions 3,000 2,500 2,000 1,500 1,000 500 0 30,000 25,000 20,000 15,000 10,000 5,000 0 Forecast at 7% of GDP Forecast at 9% of GDP SOURCE: MINISTRY OF HEALTH ANNUAL STATISTICS YEARBOOK

  9. Medical Services Exam/Test Drug AVERAGE MEDICAL EXPENSE PER OUTPATIENT HOSPITAL VISIT $16 (126RMB) $15 (118RMB) $11.1 (85RMB) $5.1 (39RMB) SOURCE: MINISTRY OF HEALTH ANNUAL STATISTICS YEARBOOK

  10. Medical Services Exam/Test Drug AVERAGE MEDICAL EXPENSE PER INPATIENT HOSPITAL STAY $601.4 (4661RMB) $552.8(4284RMB) $397(3083RMB) $215.2(1667RMB) SOURCE: MINISTRY OF HEALTH ANNUAL STATISTICS YEARBOOK

  11. CHALLENGES OF THE CHINESE HEALTHCARE SYSTEM • ALMOST 60% OF ALL HEALTHCARE COSTS ARE PAID BY PATIENTS OUT-OF- POCKET • LACK OF MEDICAL INSURANCE OPTIONS • LOW GOVERNMENT FUNDING • ACCESS TO HEALTHCARE FOR THE POOR IS LIMITED • THE MIDDLE AND UPPER CLASSES ARE DISSATISFIED WITH HEALTHCARE SERVICES • THE WAY DOCTORS EARN THEIR INCOME RESULTS IN A WEAK DOCTOR-PATIENT RELATIONSHIP • DRUGS AND DIAGNOSTIC TESTS ARE TOO IMPORTANT TO THE FUNDING OF THE HEALTHCARE SYSTEM • HOSPITALS NEED TO MAKE PROFITS TO SUPPORT THEMSELVES • PRIMARY CARE IS NOW IN THE EARLY STAGES OF BEING OFFERED SEPARATELY FROM HOSPITALS THROUGH NEWLY DEVELOPED COMMUNITY CLINICS • AS THE COUNTRY CHANGES ITS HEALTHCARE SYSTEM, THE COST OF HEALTHCARE TO THE COUNTRY WILL RISE RAPIDLY

  12. CURRENT ENVIRONMENT CREATES OPPORTUNITIES FOR FOREIGNERS IN CHINESE HEALTHCARE • THERE IS RAPID GROWTH IN HEALTHCARE SPENDING AND A DESIRE TO IMPROVE HEALTHCARE SERVICES • THERE IS A DESIRE TO MOVE TOWARD INTERNATIONAL STANDARDS FOR SERVING THE GROWING MIDDLE CLASS AND WEALTHY POPULATION • THERE IS LIMITED SKILL IN CHINA TO ACCOMPLISH CHINA’S HEALTHCARE IMPROVEMENT OBJECTIVES • FOREIGN SKILLS ARE CONSIDERED IMPORTANT AND MANY UNIVERSITIES AND HOSPITALS ARE HELPING BY BRINGING THEIR SKILLS TO CHINA

  13. HIMSS ASIA PAC 2008 THE H.I.T. SITUATION IN CHINA

  14. U.S. H.I.T. HAS GONE THROUGH 4 GENERATIONS • FINANCE SYSTEMS (1970s) • LIMITED CLINICAL SYSTEMS (LATE 1970s AND 1980s) • MORE ADVANCED CLINICAL SYSTEMS (1990s) • ELECTRONIC HEALTH RECORDS (2000s)

  15. EVOLUTION OF H.I.T. IN CHINA • CHINA BEGAN TO COMPUTERIZE ITS HOSPITALS IN THE EARLY 90’S. • CHINA MADE SLOW PROGRESS WITH MOST OF ITS FOCUS ON FINANCIAL SYSTEMS. • ABOUT 5 YEARS AGO CHINESE HOSPITALS BEGAN TO MOVE MORE AGGRESSIVELY TOWARD I.T. USE FOR CLINICAL SYSTEMS. • ALONG THE WAY, MANY SOFTWARE SOLUTIONS WERE DEVELOPED WITH SEVERAL HUNDRED SMALL SOFTWARE COMPANIES EMERGING IN CHINA. • IN 2005, CHINA SPENT LESS THAN 1% OF TOTAL HEALTHCARE COSTS ON I.T. OR ABOUT $600 MILLION (USD) • IT IS ESTIMATED THAT BY THE END OF 2007, CHINA SPENT OVER $1 BILLION (USD) ON H.I.T. • WE PREDICT THIS VERY RAPID GROWTH WILL CONTINUE OVER THE NEXT 3 YEARS WITH H.I.T. INVESTMENT IN CHINA RISING TO BETWEEN $2 AND $3 BILLION (USD) BY 2010.

  16. H.I.T. MARKET CHANGES RAPIDLY DURING DORENFEST’S PRESENCE IN CHINA • WHEN WE FIRST CAME TO CHINA IN LATE 2004 TO STUDY THE HEALTHCARE INDUSTRY, ATTITUDES TOWARDS H.I.T. WERE VERY CONSERVATIVE: • HOSPITAL MANAGEMENT WAS NOT HAPPY WITH I.T. SYSTEMS IN USE • FUNCTIONALITY OF APPLICATION SOFTWARE AVAILABLE FOR PURCHASE IN CHINA WAS VERY LIMITED AND THE MOST FUNCTIONAL SYSTEMS WERE SELF-DEVELOPED • THE SKILLS TO MANAGE MAJOR I.T. UPGRADES WERE FELT TO BE IN SHORT SUPPLY • AS A RESULT, HOSPITAL MANAGEMENT WAS HESITANT TO INVEST IN MAJOR UPGRADES TO I.T. SYSTEMS • FOR THESE REASONS, THERE WAS VERY LIMITED BUYING OF MAJOR NEW I.T. SYSTEMS IN CHINESE HOSPITALS IN EARLY 2005 • DURING THE PAST 3 YEARS, THE SITUATION HAS CHANGED • MANY HOSPITALS ARE CONSIDERING MAJOR UPGRADES OF I.T. SYSTEMS • BIG BUDGETS ARE STARTING TO BECOME AVAILABLE TO MOVE TOWARD DIGITAL HOSPITALS WITH PHYSICIAN WORKSTATIONS, ELECTRONIC MEDICAL RECORDS, PACS, AND OTHER SYSTEMS • BUT WEAK APPLICATION SOFTWARE AND IMPLEMENTATION SKILLS ARE DELAYING PROGRESS

  17. FACTORS CONTRIBUTING TO FUTURE SPENDING GROWTH IN CHINA H.I.T. • CHINA HOSPITAL WORK PROCESSES ARE REDUNDANT, EXPENSIVE AND ERROR PRONE WITH GREAT OPPORTUNITIES FOR IMPROVEMENT WITH APPROPRIATE USE OF I.T. • CHINESE HOSPITAL LEADERS WOULD LIKE TO TAKE A BIG LEAP FORWARD IN IMPROVING WORK PROCESSES AND IN DIGITIZING CHINESE HOSPITALS. • THE MINISTRY OF HEALTH (MOH) GUIDELINES FOR HEALTH I.T. DEVELOPMENT CALLS FOR ELECTRONIC MEDICAL RECORDS AND REGIONAL HEALTH NETWORKS TO BE IMPLEMENTED BETWEEN 2003 AND 2010 PROVIDING MUCH MOMENTUM FOR HOSPITALS AND HEALTH BUREAUS TO INVEST MORE IN I.T. NOW. • THE SOON TO BE FINALIZED HEALTHCARE REFORM IN CHINA WILL BE FACILITATED BY BETTER USE OF I.T. IN CHINESE HOSPITALS.

  18. FACTORS IMPEDING SUCCESS IN CHINA H.I.T. • CHINESE HOSPITALS HAVE NOT INVESTED A LOT OF RESOURCES IN I.T. SYSTEMS AND INFRASTRUCTURE TO GET TO THE PRESENT LEVEL OF ACCOMPLISHMENT. WHILE CHINA WOULD LIKE TO CONTINUE THIS LOW INVESTMENT APPROACH, ITS NEXT STEPS FORWARD WILL REQUIRE GREATER INVESTMENT. • THE POOR RESULTS ACCOMPLISHED FROM PAST INVESTMENTS IN I.T. ARE CAUSING HESITATION AMONG LEADERS OF CHINESE HOSPITALS TO MAKE FUTURE INVESTMENTS IN I.T. • THERE IS CONCERN AMONG H.I.T. EXPERTS IN CHINA ABOUT THE READINESS OF H.I.T. SOFTWARE PRODUCTS, HARDWARE PLATFORMS, AND INTEGRATION TOOLS TO FACILITATE THE ACCOMPLISHMENT OF CHINA’S GOALS. • INEXPERIENCE IN THE BUYING OF H.I.T. SOFTWARE PRODUCTS HAS FOLLOWED A SIMILAR PATH TO OTHER COUNTRIES AROUND THE WORLD IN THEIR EARLY STAGES OF EVOLUTION AND HAS RESULTED IN POOR BUYING DECISIONS.

  19. FACTORS IMPEDING SUCCESS IN CHINA H.I.T. (CONTINUED) • LIKE OTHER COUNTRIES AROUND THE WORLD, IMPLEMENTATION OF NEW I.T. SYSTEMS IN CHINA HAS OFTEN ADDED WORK INSTEAD OF REDUCING WORK AND HAS CREATED UNNECESSARILY REDUNDANT WORK PROCESSES. • THE IMPLEMENTATION SKILL AND EXPERIENCE AVAILABLE IN CHINA NOW TO TAKE THE BIG LEAP FORWARD THAT IT WOULD LIKE TO TAKE IS LIMITED. • SOMETIMES, HOSPITAL LEADERSHIP NOT KNOWING WHAT IT DOES NOT KNOW, IS CONTINUING TO USE POOR BUYING AND IMPLEMENTATION APPROACHES BECAUSE THEY DO NOT KNOW BETTER WAYS ARE POSSIBLE AND THERE IS A STRONG MOMENTUM TO CONTINUE WITH THESE APPROACHES.

  20. NEXT STEPS IN H.I.T. DEVELOPMENT IN CHINA • BETTER USE OF I.T. IN CLINICAL SERVICES • BETTER USE OF I.T. IN HOSPITAL MANAGEMENT • DIGITAL HOSPITALS WITH ELECTRONIC HEALTH RECORDS WILL EVOLVE WITH GREATER FREQUENCY • REGIONAL HEALTH NETWORKS WILL EVOLVE • BETTER SYSTEMS INTEGRATION AND MORE STANDARDS TO SUPPORT I.T. PROGRESS • IMPROVED BUYING AND IMPLEMENTATION OF I.T. SOFTWARE • MORE USE OF CONSULTANTS IN I.T. PLANNING AND IMPLEMENTATION

  21. ALLOCATION OF H.I.T. INVESTMENT AROUND THE WORLD SOURCE: CCW Research

  22. CHINA HEALTHCARE I.T. IS MOVING TO ITS SECOND GENERATION • CHINESE HOSPITALS AND HEALTH BUREAUS ARE CAREFULLY CONSIDERING HOW TO BE MORE SUCCESSFUL IN TAKING NEXT STEPS FORWARD IN I.T. USE. • FOR CHINA TO ACCOMPLISH ITS OBJECTIVES IN H.I.T. 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

  23. SOME STEPS TO IMPROVING I.T. INVESTMENT RESULTS IN CHINESE HOSPITALS • DEVELOP BETTER I.T. PLANNING AND PRIORITY SETTING METHODS • DEVELOP BETTER WAYS OF BUYING SOFTWARE TO INCREASE SUCCESS • ACCURATELY AND THOROUGHLY DEFINE USER NEEDS PRIOR TO BUYING SOFTWARE • USE BETTER METHODS OF ASSESSING SOFTWARE PRODUCT CAPABILITIES PRIOR TO PURCHASE • DEVELOP BETTER APPROACHES TO SYSTEM IMPLEMENTATION SO THAT IMPLEMENTATION OF NEW I.T. SYSTEMS WILL NOT ADD WORK AND CREATE UNNECESSARILY REDUNDANT WORK PROCESSES • DEVELOP BETTER APPROACHES TO TRAINING USERS AS PART OF THE IMPLEMENTATION PROCESS • IMPROVE I.T. GOVERNANCE STRUCTURES

  24. HIMSS ASIA PAC 2008 SUMMARY

  25. SUMMARY • CHINA IS TAKING MAJOR STEPS TO IMPROVE ITS HEALTHCARE SYSTEM. • BETTER I.T. WILL BE A KEY TO ACCOMPLISH FUTURE HEALTHCARE IMPROVEMENT • FOREIGN SKILL IS NEEDED TO HELP CHINA AVOID MISTAKES OF OTHER COUNTRIES AND AS A RESULT “LEAPFROG” THE REST OF THE WORLD • THERE ARE MANY OPPORTUNITIES AND NEEDS FOR EXPERIENCED FOREIGNERS TO SHARE THEIR WISDOM AND CAPABILITIES WITH THE CHINESE HEALTHCARE SYSTEM • BUT THERE IS A NEED TO BE CAREFUL IN ORDER TO CREATE SUCCESS

  26. THANK YOU. FOR MORE INFORMATION CONTACT: SHELDON I. DORENFEST OR YU ZHIYUAN (GRACE) THE DORENFEST CHINA HEALTHCARE GROUP SUITE 908, NO. 998 RENMIN ROAD, SHANGHAI PHONE: 021-63203522, 63269722 WEB SITE ADDRESS: www.dorenfest.com E-MAIL ADDRESS: info@dorenfest.com SHELDON’S E-MAIL ADDRESS: sheldon@dorenfest.com YU ZHIYUAN (GRACE) : yuz@dorenfest.com