Science: Lean and hungry after a visit to the doctor: GPs spell squeezed profits for software firms, says Lynne Curry

The seduction of general practitioners by the grey keys and green lights of office computers was initiated by a Midlands software company, Meditel, whose intentions, at least at first, were not to corner the market.

Department of Health figures suggest that today 80 per cent of the 10,000 general practices in the UK have installed computer systems, a sharp rise from the figure of 30 per cent only three years ago. 'The general practices in the UK lead the world in terms of usage of computers by GPs,' says Dr Simon Jenkins, a GP in Bury, Lancashire.

Meditel began by offering free computer systems in exchange for access to data which could then be sold to drug and pharmaceutical companies and used for marketing. It was this wrongfooted generosity, some say, that has inclined the medical profession to believe ever since that free is just about the right price to pay for becoming computerised.

Dr Jenkins, chairman of three medical sub-committees looking into information technology, describes GPs as 'perceptive purchasers'. Their unwillingness to part with large sums of money means that computer systems in surgeries have remained at very modest price levels. An average figure is around pounds 3,000 per GP, and the medical software sector (at least at surgery level) is one of the slimmest cats in an industry where a few thousand here and there is usually irrelevant.

Meditel, now AAH Meditel, no longer gives away systems and has switched course to a more conventional trading arrangement. With Vamp, it currently shares dominance of the 100 companies active in primary health care. However, this figure is set to shrink as the industry is subjected to rigorous new regulations from the Department of Health, brought in this month.

The department's Requirements For Accreditation expect, among other things, that all medical software should be compatible, that it should be able to speak to family health service authorities' computers and that its fundholding functions be standardised. According to Dr Jenkins, software houses will then be 'squeezed from both ends'; at one end by 'careful' doctors and at the other by these strict new requirements. 'With pressure from both ends, those without capital behind them will find it hard to survive.'

He considers the marriage of public health and private technological enterprise a highly successful one, especially in terms of individual patient care. Doctors can now search through a database to find patients who should be vaccinated; those who should have cervical smears; those who have been prescribed particular drugs. They were able to react quickly in recent meningitis outbreaks by vaccinating vulnerable patients with a speed that surprised the Department of Health.

AAH Meditel has a turnover of between pounds 11 and pounds 12m, and with AMC, which it took over in 1992, has about 22 per cent of the market (about 2,200 surgeries). AAH Meditel's 1992-93 profit of pounds 1.5m, comparatively low for a software house, reflects the degree of research and development it has to undertake. Vamp, now owned by Reuters, is slightly ahead with 25 per cent.

Behind them lies a layer of medium-sized companies which supply between 400 and 800 surgeries each. They include Genisyst, Emis, Amsys, Medicus and Hollowbrook Computer Services. Hollowbrook was set up in 1986 by Dr Laurence Atkinson, former head of information technology at Sheffield University. It now has 70 employees and works on a 'bundled' approach of providing the whole system.

Mike Wray, the general manager, said the sector had remained reasonably diversified in spite of its small base because different systems offered different advantages: 'Some are more easy to use than others; some have a terrific speed of operation; some huge storage capabilities; some have been very aggressively sold and marketed. I think we are probably unique in that we don't have any sales force and the company has grown from personal recommendations.'

With only 20 per cent of GP surgeries left to convert from brown packets of traditionally indecipherable handwriting to clean, green on-screen notes, medical software companies are looking for other ways to keep their share of the market.

The coming year should be interesting for medical software companies, as the government stipulations result in mergers and takeovers. The Department of Health has made it clear to general practices that only systems that conform to the regulations will qualify for the standard 50 per cent contribution. Announcing the new controls in December 1992, Tom Sackville, the Health Minister, said his impression was that doctors and nurses were enthusiastic about the use of computers in patient care, 'but incompatibility in existing systems has to be eliminated in future to ensure that we get the maximum benefits from our investment in IT'.

(Photograph omitted)

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