HEALTHEON/WEBMD: Acquires Claims-Processing Firm
Healtheon/WebMD solidified its position as the "preeminent Internet health conglomerate" Monday when it acquired a major electronic health insurance claims processor, Envoy Corp., from Durham, N.C.-based Quintiles Transnational Corp. for $2.5 billion, the Los Angeles Times reports. PaineWebber analyst William McKeever said the deal "puts Healtheon/WebMD in the leading position in the electronic claims processing world, which will be very important when they put [claims] on the Internet" to reduce costs and expedite payments. With the acquisition, Healtheon/WebMD, which provides online consumer health information and manages medical records, is the largest Internet site linking doctors, health insurers and patients. Healtheon/WebMD asserts that the consolidation of services will increase health care efficiency, and Claudine Singer, an analyst with Jupiter Communications in New York, concurs, stating, "Connecting payers, providers and consumers in an intelligent way has, potentially, enormous value for consumers." But the company still has a long way to go, she said, adding, "Doctors aren't online yet. They are not using the Internet to facilitate the business of health care. They have to do that for Healtheon's proposition to work" (Piller, 1/25). After the purchase, Healtheon/WebMD CEO Jeff Arnold said the firm will process around 2 billion health insurance transactions annually, with an average fee of 30 cents for each transaction. Envoy currently works with about 250,000 doctors, 35,000 pharmacies, 47,000 dentists, 4,500 hospitals and 900 insurers and other health care payers. Tim Price, an analyst at the Berkeley, Calif.-based research firm Net Market Makers, said that Healtheon is "locking up most of the major players in an industry" with the move (Tessler, San Jose Mercury News, 1/25).
Quintiles Benefits Too
Quintiles also will benefit from the sale, as it has struck a deal with Healtheon/WebMD to provide services to pharmaceutical companies via the Internet. Quintiles performs clinical trials and marketing for drug manufacturers and hopes to "mine" the "deidentified" data contained within the millions of claims processed by Envoy and sell it to drug companies to help them market their products. By retaining access to the data without having to operate the transaction system, Quintiles "gets to have its cake and eat it too," said Adams Harkness & Hill analyst Charles Trafton. Quintiles will also provide Healtheon/WebMD with as much as $100 million in the next 18 months to create Web-based services and products with the aim of streamlining drug development and marketing to consumers and physicians (Carrns, Wall Street Journal, 1/25).