Posted At Reuters.com

BY : Ben Hirschler

By Ben Hirschler, European Pharmaceuticals Correspondent

LONDON (Reuters) - Medicine is an increasingly hi-tech business, but doctors and hospitals around the world remain bogged down in paperwork.

The result can be lost records, clerical errors and mis-prescribing of drugs.

Now, in a bid to improve patient care, governments in Europe and North America are pushing for the adoption of electronic records and data transfers, which is kick-starting the growth of a hybrid business that attracts companies from both the healthcare and tech arenas.

Worldwide, the healthcare information technology market is estimated to be worth more than $50 billion a year, and industry executives -- lining up for a slice of the action -- told a conference this week its growth would be in double digits for the foreseeable future.

The sector has become a lure for industrial giants such as General Electric Co. (GE.N: Quote, Profile, Research) and Siemens AG (SIEGn.DE: Quote, Profile, Research), both of which have targeted health as an area for future growth.

Traditionally, IT has been used within healthcare mainly for back-office functions, such as billing and hospital admissions.

The big prize, however, lies in incorporating IT into patient treatment via a process known as "clinical decision support" that can guide physicians through their options.

"We have a long way to go in healthcare. We are bound by paper, and paper is not working," Mark Dente, director of GE's Healthcare Solutions division, told the Kepler Equities conference.

GE, like its German rival Siemens, reckons it can become a major player in this business by combining its IT skills with its existing capability in making medical monitoring equipment.

The healthcare IT business currently is fragmented and represented by a large number of often regional players.

But consolidation is picking up.

GE made a splash in September by agreeing to buy IDX Systems Corp. (IDXC.O: Quote, Profile, Research), a maker of software used to track patient records, for $1.2 billion in a move to help it compete with rivals such as Cerner Corp. (CERN.O: Quote, Profile, Research) and McKesson Corp. (MCK.N: Quote, Profile, Research).

In Europe, meanwhile, Belgium's Agfa Gevaert (AGFAt.BR: Quote, Profile, Research) has struck a number of deals to secure its position in digital picture archiving and communications as hospitals move away from traditional medical film products.

UNDERSERVED AT PRESENT

Spending on IT currently accounts for just 2.2 percent of sales in healthcare, against 3.9 percent in retail and 11.1 percent in financial services, according to consultancy INPUT.

In part, that may reflect the complexity of a medical diagnosis.

But cheaper computing power is starting to change the attitude toward spending on IT, and governments -- including those of the United States, Canada, Germany and Britain -- are putting in place specific healthcare policies that are expected to accelerate demand for IT services.

"Without the government pushing, a lot of this work wouldn't be getting done," Dente said.

In the United States, where a bill to encourage IT development cleared the Senate's Health, Education, Labor and Pensions Committee in July, a recent study predicted that computerized medical records could save $81 billion a year.

Roche Holding AG (ROG.VX: Quote, Profile, Research), the world leader in diagnostics, believes it also stands to gain from the growing demand for more sophisticated health information.

"Governments and payers are increasingly asking for better ways to decrease medical errors and increase accuracy," said Per-Olof Attinger, general manager of Roche's Instrument Center.

In the past, diagnostic tests produced simple, easily interpreted read-outs, such as blood glucose levels. But the analysis of complex diseases, such as leukemia, produces hundreds of data points, putting a premium on interpretation, he said.