In the dwindling days of last October, Microsoft's Peter Neupert found himself at a tiny clinic in a remote corner of northeast China.

The clinic had three doctors serving a population of 5,600 people. Their ability to provide modern medical care was severely limited by a lack of equipment. The clinic had no X-ray machine, so broken bones could not be set. Pregnant women had to travel 30 miles to the closest township hospital, where conditions were a throwback to the 1950s, when Mao Zedong was still in power. The hospital had 15 beds in a township of 12,000 people and the Xray machine was at least 50 years old.

"China has 700 million people living in rural conditions where facilities like these are their only health care options," says Neupert, the man whom Microsoft CEO Steve Ballmer has charged with building a billion-dollar software and online services business in the health care sector.

His three-day trip to China crystallized what he sees as the single biggest shortcoming in the delivery of medical services worldwide.

"Health care, at its fundamental basis, is an information management problem," Neupert says. "Microsoft can't solve this problem itself. We don't have that kind of hubris. But we can be a focal point in the process."

BUYING INTO THE MARKET

Some might debate the level of hubris currently present at Microsoft's sprawling Redmond campus, but one thing that can't be debated is the company's intentions where the health care sector is concerned.

Since late 2006, Microsoft has acquired three companies - Medstory, Azyxxi and Global Care Solutions - to build a suite of Web-based services that help people make more informed decisions about their health care. Then in January, the company entered into a strategic agreement with the Mayo Clinic to develop a health care management system.

Technologies from Medstory and Azyxxi were combined to form HealthVault - an online account launched in October, where people can store data such as their medical history, prescriptions and lab results. Users can also do online searches for health-related terms.

Microsoft isn't the only tech company with its eyes on the health care market. Some of its biggest competitors, including search engine giant Google, want a piece of what industry observers call the "health care IT market." According to New York City-based research firm DataMonitor, spending on health care IT will reach nearly $40 billion by the end of this year.

Other players include WebMD, Everyday Health, Revolution Health and GE Healthcare. While WebMD and GE have been in the health care business for years, Revolution is a relative newcomer. However, it has an Internet pioneer at the helm - America Online cofounder Steve Case. The federal government has also thrown its hat into the ring. In October, the U.S. Department of Health and Human Services awarded $22.5 million in contracts to implement its Nationwide Health Information Network - an online portal where basic health information can be exchanged by consumers and clinicians.

Microsoft is so new to the business that comScore Inc., a New York company that tracks Internet trends, hasn't even begun measuring HealthVault's Web traffic.

The wild card in this game is Google. For now, it appears Microsoft may have finally beaten Google at something. The two companies have been talking about getting into the health care business for more than a year, but Google has yet to launch a health-related Web service of any kind, and its leadership has been extremely quiet for several months. Google declined to comment for this story.

While Neupert remains aware of Google's intentions, he doesn't seem to lose much sleep over what Microsoft's Silicon Valley rival is up to.