But while the IT-driven model does offer a way out of the health-care swamp, it also introduces profound ethical issues. Critics of the new approach raise the specter of rationing, saying it will shift the high cost of medical care to the sick and the poor.

"Whenever you substitute savings for insurance, a question of rationing comes up," says Deborah Chollet, a health-care policy expert at think tank Mathematica Policy Research in Washington, D.C. "We’re going toward a system where the wealthy and healthy can opt out of the problems."

If CIOs such as Goodman are using CRM to empower this revolution, as they will tell you they are, then they had better be prepared to understand and respond to its social implications. And what they learn in the process?about implementing the technology and managing its use?goes well beyond health care. Other industries, from financial services to retail, are also exploiting CRM to profile customers and develop customized products. The best practices developed in health care will be of value to CIOs in those sectors as well.

"The role of the CIO is much more critical now," says Ken Linde, the CEO of Destiny Health in Bethesda, Md., a subsidiary of South Africa’s Discovery Health company that offers health insurance under the new model. "This consumer-driven area relies so heavily on information that the CIO becomes one of the most critical positions in the company."

HMO RIP

Health insurance started in the United States as a simple fee-for-service business. You received care and the doctor charged a fee that the insurance company paid. By the mid-1980s, that approach was generating annual double-digit cost increases. Managed care was meant to straighten out the mess. Insurers kept cost down by organizing exclusive networks and deciding how much to reimburse doctors and hospitals for procedures. If the provider didn’t agree to the new rates, the insurer denied access to its insurance network and the patients who used that network. In a reasonably short time, the health maintenance organization was king.

But not for long. Patients rebelled against being limited in their choice of physicians and hospitals. And doctors and hospitals banded together to demand better reimbursement rates. The HMOs had to listen because their patient population insisted on having those doctors in their network. Patients also insisted on access to expensive new drugs and treatments.

By 2000, health-care costs had exploded again. Trying to control cost seemed like pressing on a balloon. Push down in one spot and cost bulged out in another. To stabilize cost, health insurers have now latched on to the customized health plan approach with CRM technology as its linchpin.