Down in the trenches of healthcare electronic commerce, Christopher Williams describes what it takes to connect a provider to Envoy-NEIC, his employer and the nation's largest clearinghouse for health insurance claims. "We usually have to analyze and develop a keyboard emulation scheme and a screen scraper," he said. "It's old stuff. You can't hire kids out of school to do it. They all want to build objects and Web sites."

Craig Muzilla might have been one of those "kids." He's Williams' counterpart at InStream Corp., a Burlington, Mass., company whose core solution is an open, flexible system for private IP networks that uses standard technology to transmit ASCII files of healthcare records between managed care organizations and providers - definitely not "old stuff."

"In the old days, you had one transaction - a claim - and that was a one-way flow of information between the doctor and the payer," Muzilla said. "Now, because of managed care, you might have 15 different types of transactions that have to go back and forth."

Welcome to the brave new world of healthcare electronic commerce. Even as market forces for cost control, regulatory initiatives on cost and quality, and consumer demands for quality care and greater choice drive a massive shift toward managed care, healthcare's venerable electronic data interchange (EDI) marketplace is fast being transformed by dramatic increases in computing power, cascading innovations in communications and software, and the Internet. "Historically in healthcare, electronic commerce has been confined to more to EDI. It's been batch processing, and it's been financial data from the provider to the payer to speed claim processing," said Janice Young, an analyst at Gartner Group, Inc. "It's definitely broader than claims now, definitely broader than financial," she added.

Broader--and much more complicated, said Tim Breaux, an associate partner at Andersen Consulting. "What's complex about healthcare now is not just that it is a bunch of virtual enterprises but that most participants are in multiple concurrent virtual enterprises," he said.

John King, director of the Provider Technology Group at Blue Cross/Blue Shield of Massachusetts, the largest provider of managed care services in New England, said healthcare electronic commerce's large data transaction sets, the wide range in size of its trading partners and disparate levels of user knowledge (from information technology specialists to clinicians) only add to its complexity.

Meanwhile, the industry restructuring has dramatically increased competition and incentives to install IT to cut costs. Blue Cross, for example, uses an automated network to process 95% of its managed care referrals and most of its member eligibility transactions. Of the company's 14,000 providers, 10,000 access the network in real time with credit-card swipe boxes, client/server PC setups, or terminal emulation. Blue Cross made a point of first connecting high-volume providers with the most to gain from various cost savings afforded by the network. The result: The 71% of its providers that now use the network serve 80% of the company's 1.8 million members. Total savings from the network more than paid for its implementation in less than three years, King said.

Besides helping healthcare cut back on its paperwork, the new networks are streamlining patient utilization of provider space, facilitating integration of databases among trading partners and enabling two-way communication between providers and payers, all of which adds to the industry's bottom line, said Michael Eliastam, an associate partner at Andersen. And they go along nicely with healthcare's larger trend away from a supply-driven to a demand-driven "patient-centric" market, he added. "The only way to take out any more costs and to improve service is to satisfy people's needs rather than force them to match their needs to the supply side architecture," he said. Eliastam pointed to Healthdesk Online, a Berkeley, Calif, service that offers in-house health management through links to primary providers, electronic data transfer of test results, scheduling and reminder services, secure two-way messaging and access to healthcare content at a private Web site. Not only do more informed consumers lower costs by using provider services and facilities less often, but they also buy more healthcare products and services when they know what's good for them, Eliastam said.

Although healthcare electronic commerce is definitely adding market opportunities and enhancing competitiveness within the industry, widespread, seamless connectivity is still a long way away. Passage last year of the Health Insurance Portability and Accountability Act, with its call for national uniform standards for electronic transmission of healthcare information, has raised hopes that at least some of the logjams will be loosened. But industry insiders doubt they'll be effective without common implementation guidelines, while others say the law's implementation deadlines may be headed for a rude collision with data processing's dreaded Year 2000 problem.

Even without the current uncertainty over standards, healthcare faces an array of electronic commerce challenges, from coordinating its transition from paper to electronic transactions among various sectors to deciding who pays communications and database costs and who's liable for the veracity of information flowing through the new networks.

Last but far from least are public concerns about the privacy of patient records, although industry analysts agree that most such worries have more to do with misguided perceptions than facts and that any necessary solutions will come through improved policies and procedures, not technical fixes.

Andersen's Breaux said he also sees more than just technical challenges ahead for healthcare electronic commerce. "When we're trying to resolve the many-to-many relationships between trading partners, the key barrier to e-commerce isn't technical - its spending time and money to gain critical mass to make the network have value for the business function," he said.

One solution is already evident in the hordes of "niche" businesses now appearing in the busy intersections where healthcare electronic commerce has traditionally bogged down. "To the extent that intermediaries crop up in the marketplace to handle some of the many-to-many complexity issues, it actually improves the business process by routing complexity through external trusted third parties," Breaux said. "That's the stuff that's substantially enabled by the Web." He cited as a prime example ChannelPoint, an IT software and services start-up in Colorado Springs that has a single Web-enabled front end, where insurance brokers employers hire can review multiple bids from multiple healthcare plans, saving time and money for all concerned.

Meanwhile, back in the trenches, Envoy-NEICs Williams isn't holding his breath waiting for this new era of healthcare electronic commerce to arrive. Although he predicts that providers would be conducting real-time eligibility transactions at Envoy-NEICs pilot Web site by the first quarter of next year, he isn't quite ready to hang up his screen scraper.

"There will never come the day when every payer can certifiably and reliably deal with every provider in the world without a clearinghouse in between," he said. He's thinking about the "kids" these days and all the fancy stuff they're doing on the 'net. "You want to get into Web design?" he asked. "First you have to hang some sheetrock."