Smart card technology has been deployed in industries other than healthcare for over 20 years. ATM cards credit and debit cards, calling cards, cellular phones, and television "v" chips, are all examples of past applications of the technology in other industries. The application of smart card technology to health care has been retarded, though, for a number of reasons. Cost, lack of demand, and limitations of card storage capabilities have made it difficult to establish a firm value proposition for medical smart cards to date. According to Chuck Saunders, Chief Medical officer at Healtheon /WebMD, smart cards have been such a success in the financial services sector because they employ far simpler data sets, offer a simpler value proposition, and have met with widespread demand and acceptance. The healthcare industry, says Saunders, is a more difficult market to penetrate due to privacy issues, infrastructure costs (including site based card readers), and more complex data sets. Additional barriers to market entry have included the lack of uniform data standards, up-front development and distribution expenses, and general industry reluctance to accept new technologies according to Larry Gigerich, Senior Vice President of Corporate Affairs, RealMed

Despite these obstacles, smart card technology has been employed elsewhere - successfully- in health care for years. Medical smart cards are in wide use throughout Europe, where government sponsored social service and health insurance programs have underwritten in large part the cost of introducing this technology on a national scale. In Germany, over 78 million cards have been issued, in Belgium; over 11 million cards are in use. This success is due in part, according to Chuck Saunders, to the size and consolidation of European payer and provider organizations, which allows technology solutions to be mandated and implemented more efficiently.

In its simplest form the smart card serves as a "key" that establishes the identity of the cardholder and grants access, through an Internet connection, to a secure server containing patient information. More advanced forms of the card can hold up to 64 kb of information on the card - programmable information that is updated and available for review each time the card is inserted into a smart card reader. To be functional, the card must be matched to a smart card reader at every point of care location. This means that readers must be ubiquitous for the cards to have any real value. Card readers can be situated in facility based kiosks, in stand-alone desktop readers; even in PC based smart card ports.

Like so many other emerging health care technologies, medical smart cards offer ways to conduct health care faster, better, and cheaper. The cards can enable provider communications, streamline point of care business transactions, create a portable patient record that is updated in real time, and defragment the historically uncoordinated collection, storage, and distribution of patient information among all members of the care continuum. Electronic transfer, storage, and access of financial, statistical, and clinical data remains a pocket of staggering inefficiency throughout the health care industry. Proprietary software, decentralized data collection centers, massive duplication of effort, connectivity limitations, and dysfunctional data networks are just a few of the information inefficiencies of the current health care business model. The medical smart card addresses these issues by providing instant authentication and eligibility verification, accelerated payment processing, instant access to current patient health information, and streamlined administration of patient accounts. Here's how it works: upon arrival, the patient presents the smart card to verify to the care giving facility his/her identity and eligibility to receive defined services. These identifiers can include thermal thumbprints, photos, PIN codes, etc. The card is inserted into a card reader, and information regarding the patient's insurance coverage, medical history and associated clinical imagery, and personal biography are instantly available for review or transaction purposes. Upon receipt of service, the card can be employed to update patient data (either resident on the card or stored remotely via an Internet connection), claims can be submitted or MSA (Medical Savings Account) type account automatically debited. By using the card, clinical information, shared among appropriate members of a patient care team, is updated in real time. Similarly, economic transactions are conducted immediately at the point of care, collapsing the receivable cycle and improving provider cash flow.

INSERT ILLUSTRATION1 "MEDICAL SMART CARD INFORMATION AND TRANSACTION FLOWS"
There are two main approaches to deployment of medical smart card technology - card based information storage and transaction devices, and browser based storage devices, which use the card as a "key" and the Internet as a platform to conduct transactions and transmit and retrieve patient information. For example, the RealMed smart card contains a 16kb chip (moving towards 32 kb) that can store biographical and insurance data specific to the card holder, and which when presented can be employed to conduct claims payments. Presently the RealMed smart card is limited to the processing of claims data - but plans call for he card to have sufficient storage capacity to hold clinical data as well. PersonalMD is deploying an alternate browser based card strategy. The true purpose of the smart card is to capture information at the point of care, and to employ chip based information that serves as a "digital certificate" to authenticate the user and grant access to card holder information, either card based or stored remotely, according to Dr. Alan Zwerner, Senior Vice President of Strategic Planning, PersonalMD. The PersonalMD card strategy is to employ smart card technology as a digital key that grants the holder access, via the Internet, to a centralized data repository. This approach, it is felt, removes the issues of card storage limitations, and vastly reduces the cost of the card. A third approach is being deployed by Lifestream Technologies. Lifestream has developed a card reader that it sells directly to the health care consumer. The Lifestream smart card, according to company President Christopher Maus, serves as a conduit to conduct any number of transactions including online, real time data processing and data management. The security issue is addressed by data splitting and redundant verification, including an identification number, signature recognition, and photo imprinted on the card. The Lifestream card allows health care consumers to perform diagnostic tests relative to chronic conditions such as hypertension at home or in a medical service setting, to receive the results of such tests immediately, to monitor their health status, and to relay that same information to care providers.

Browser based is the cheaper strategy, since the card requires less storage capacity and can be produced at less cost. However it is vulnerable to operational issues related to Internet bandwidth and security. Security is a primary market driver -and to date a significant market barrier - to widespread introduction of smart card technologies in the health care industry. To be practical, the medical smart card must provide the holder with absolute confidence of the confidentiality of personal data, and security of all transactions that occur through use of the card.

Older card technologies, like the magnetic stripe ATM card, can be produced at marginal cost (approximately $.25 per card). Smart cards, however, can cost as much as $15 per cards, depending on resident features. To be economically rational, according to Microsoft, the cards must be deliverable at an average cost of between $2-$8, depending on the robustness of storage and transaction capabilities. Meeting these price points - and the ability to introduce the card and card reader technology on an economically rational scale - will be a critical factor in determining the pace and applications of smart card usage in this country.

So where is smart card technology headed? Will we one day soon have a single credit card sized device that we can slip into a standard home computer port, and which will allow us to conduct bank transactions, make consumer purchases, review our personal health files, and more? In the short term, a more likely scenario will be the widespread distribution of cards and readers with less ambitious capabilities. Accelerating claims payments, empowering health care consumers and creating portable, accessible patient data are going to be primary market drivers of smart card demand. From an operations perspective, the growth drivers of health care smart cards, according to Microsoft, include:

• Diversification of vendors and applications
• Growth of PC networks
• The Internet
• Interoperability of cards
• Consumer demand for health information portability, access, and security.

Mr. Krohn is President of HealthSense, a health care business development and management-consulting firm based in Guyton, GA (www.health-sense.com). He can be reached at 912.772.4018