Health Care Plays Catch-Up In IT; Need for more accurate record-keeping rises with cost of medical errors.(INDUSTRY SNAPSHOT)(MEDICAL SOFTWARE)

Byline: KEN SPENCER BROWN

Sheldon Dorenfest launched his first software firm with a dream of revamping health care.

His vision had all the right post-dot-com buzzwords: Computerized paperwork would cut costs and give doctors more time for office visits. It would also minimize errors by making records more accessible.

Only this was in 1969. Thirty-five years later, the industry is still searching for those efficiency gains, Dorenfest says. He now heads a market research firm that studies health care information technology spending.

No doubt, technology has transformed medicine. Cheaper, faster chips have put massive computer power in the hands of researchers. And new gadgets such as magnetic resonance imaging scans and tiny heart defibrillators have let millions live longer. Yet when it comes to services and paperwork, the sector has barely budged in decades.

"Hospitals lag significantly behind other service industries," said Jack Kane, CFO of IDX Systems Corp., a company that makes software used to store and transmit medical info.

It may be catching up soon. Government pressure, labor shortages, better technology and consumer activism are fueling an IT spending wave in the health care segment.

** The name of the game: Medical software firms are a …