Outdated technology could be costing U.S. hospitals $8.3 billion annually, according to a recent survey by the Ponemon Institute (link opens PDF). The study found that inefficient pagers, poor email communications, BYOD (bring your own device) bans, and a lack of widespread Wi-Fi connections wasted an average of 46 minutes per day for each clinician.

The lack of proper Wi-Fi connections locks many hospitals out of new mobile EHR (electronic health record) services and popular medical reference apps such as Epocrates. Restrictive security policies are a major obstacle for the modernization of these hospitals, with 59% of respondents stating that complex compliance regulations were the primary culprit. 63% of the hospitals also experienced data breaches over the past two years.

Creating the hospital of the future
Cisco (NASDAQ:CSCO), the largest networking equipment manufacturer in the world, is modernizing these outdated hospitals with its Cisco Medical-Grade Network. Cisco's product includes hospitalwide wireless connections, a real-time notification system that reaches all medical staff across multiple devices, and video streaming technology for remote diagnoses and treatments. It also provides EHR integration through a partnership with Allscripts Healthcare Solutions (NASDAQ:MDRX).

Cisco is also working with IBM (NYSE:IBM) to digitize hospitals by using RFID tags to track patients in real time and by adding biometrics (fingerprint/facial recognition) to enable secure sign-ins at point-of-care terminals. These measures ensure that patients are always treated for the correct procedure by the right medical team. Cisco and IBM's solution also digitizes a hospital's prior records, streamlining administrative processes and allowing easy access to records through a portal or a mobile device. In other words, Cisco and IBM are creating the hospital of the future.

For Cisco, expanding into the health care industry is a wise tactical move that can offset losses from the enterprise and government sectors, which are more vulnerable to economic downturns. Last quarter, global macro weakness caused Cisco to announce plans to cut 4,000 jobs, or 5% of its workforce. Digital hospitals are also an extension of Cisco's bundling strategy -- offering multiple products and services at a lower cost than its competitors -- which has proven effective at taking out smaller competitors such as Aruba Networks.

IBM's Dr. Watson outsmarts other medical apps
For IBM, partnering with Cisco is a part of a broader effort to focus more on health care solutions. In February, IBM's supercomputer Watson, which is best-known for appearing on Jeopardy, found a new purpose as a medical assistant. In May 2011, Watson received the training equivalent to a second-year medical student. The following March, IBM made a deal with Memorial Sloan-Kettering Cancer Center to process and analyze the institution's patient records, histories, and research.

As a medical assistant, Watson can provide treatment options with varying degrees of confidence, and if an optimal treatment is suggested, it provides supporting evidence for the claim. Using an iPad, doctors can type in a medical question and receive an analysis within half a minute. 90% of the nurses using Watson directly follow its guidance, according to IBM Watson business chief Manoj Saxena. Watson is also much smaller than before, with a server roughly the size of a pizza box, compared to its prior bedroom-sized versions, making it easy to install in hospitals.

What better connectivity means for hospitals
Of course, cutting-edge services like Watson won't be available if hospitals lack reliable Wi-Fi connections. Many other companies, especially those focusing on EHRs, are relying on companies like Cisco and IBM to be successful at modernizing hospitals so their technologies can be used. One major company that will benefit from a smarter hospital is Cisco's partner Allscripts.

Allscripts recently introduced the second version of its native iPad app, Allscripts Wand. Whereas the first version was used as a reference tool for physicians, the new version adds mobile EHR capabilities, including order entry, clinical documentation, and the ability to directly use the iPad's camera to take photos for medical records. Allscripts Wand 2.0 also adds an App Store with 54 apps that can be used for specialized needs.

Cerner (NASDAQ:CERN) has even added CLU (clinical language understanding) speech recognition to its native iPad EHR app via a partnership with Nuance Communications. That enhancement allows Cerner's EHR software to listen to a physician's spoken notes, analyze and summarize them, then intelligently catalog them into electronic records. If Cerner and Nuance's enhancements are eventually combined with a medical AI like IBM's Watson, we could only be a few steps away from creating a robotic House, M.D.

Allscripts and Cerner's native iPad apps with EHR capabilities represent the type of product that many physicians are looking for. According to a recent survey from Black Book Rankings, 83% of surveyed physicians expressed the need for a viable mobile EHR app, and other companies have been scrambling to meet that demand. 

A Foolish final thought
In conclusion, equipping hospitals with better Wi-Fi connections will be the first step in creating "smart hospitals" in America. Plenty of companies like Allscripts and Cerner are developing incredible new technologies to improve the efficiency of hospitals and the quality of patient care, but first we need companies like IBM and Cisco to lay down the wireless networks for their products to operate on.

Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems. The Motley Fool owns shares of International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.