Healthcare spending represents some 20 percent of US GDP annually, yet technology driving the industry remains archaic. Doctors continue to keep track of patient health records in paper files, and clinical trial research is often conducted on paper. Boston has long been a hotbed of technology and startup activity, and two young companies that claim its suburbs as their home are improving how pharmaceutical companies and physicians use technology.

Athenahealth (NASDAQ: ATHN) is an on-demand software company that serves the medical industry, providing tools for medical practice management and electronic medical records (EMR). Due in part to the archaic nature of healthcare technology and the maze of insurance company billing procedures, revenue collection for physicians is a hopelessly challenging task. Doctors frequently lose out on revenue due to complicated billing procedures, constantly changing rules, and inefficiencies in the process, despite hiring teams dedicated to the job. Athenahealth’s flagship product, Athenacollector, launched in 2000, allows medical practices to outsource the process of billing paying entities like Medicare and private insurance companies. Leveraging modern technologies like Software as a Service and a social networking inspired rules engine, Athenahealth brings a large degree of automation to the claims process and drastically reduces the time it takes for doctors to get paid. Close to 15,000 physicians currently use the Athenacollector product, and customer satisfaction is very high.

Athenahealth’s second product, AthenaClinicals, was launched in 2006. It is an EMR product that is sold alongside AthenaCollector, and unlike the majority of solutions on the market today, is delivered in the Software as a Service model. Because Collector is a cloud solution rather than a client server product, it can partner with third party providers like radiology and blood labs to digitally track test results, entirely removing paper from the clinical process.

Phase Forward (NASDAQ: PFWD) is the market leader in Electronic Data Capture (EDC), software products and services which automate the clinical trial process. Founded in 1997, the company’s flagship product is InForm, which allows pharmaceutical, biotech, and clinical research organization conducting clinical trials to record, track, and analyze data in digital form. It is estimated that 60 percent of clinical trials launching this year will use an EDC product, up from 50 percent last year, leaving a surprising 40 percent that continue to use other methods including paper and disjointed excel spreadsheets.

Standardized digital capture of clinical trial data allows research organizations to rapidly analyze and identify relevant trends and signals as they develop. This allows the research organization to cancel and reallocate funding early on when a trial is showing signs of failure. It is estimated that drugs cost $800 million on average to be developed and brought to market, with the clinical trial process being a significant expense. Further, Phase Forward’s system is web-based and supports many languages, allowing data to be collected in various countries and languages. Increasing the population a research organization can draft to test new treatments and drive down costs are additional benefits provided by Phase Forward.

Athenahealth and Phase Forward, based near Boston, are improving efficiency and removing costs from clinical trial and ambulatory medical processes. Investors are becoming increasingly aware of the crucial role these companies are playing in driving healthcare into the 21st century.