HEALTHEON/WEBMD: Low Doctor Participation Adds to Company Woes

      Since the company's inception in 1996, Internet health services company Healtheon's bright future has dimmed, Forbes reports. Healtheon, the brainchild of former Netscape executive Jim Clark, was originally designed to link doctors, patients and payers -- including the government, insurers and HMOs -- to information on prescriptions, lab orders, patient information, health plan eligibility and billing and claims forms. After going public in February 1999 and generating $7.8 billion in capital in just four months, Healtheon went on a "buying spree," spending $15 billion on purchases or partnerships with 80 other firms, including a merger with WebMD. But a 400% drop in stock price over the past six months has stunted Healtheon's growth. Industry insiders cite different reasons for the decline, including Healtheon's failure to attract doctors. Hopes of gaining 455,000 of the nation's 600,000 practicing physicians as customers have dwindled, as few doctors have left their traditional administrative practices to embrace the new services of the online world. Although subscription fees have been waived, only 15% of the 100,000 participating doctors actually use WebMD for administrative transactions. While physicians often are too busy to learn how to navigate Healtheon's system, William Parrish, CEO of the Santa Clara Medical Association, blamed the Internet company's outreach efforts. "(Healtheon) didn't come to the medical associations and reach out to physicians. I visited with Healtheon and then they never really got back to me," he said.

One Size Fits All?
      Analysts cite the magnitude of Healtheon's efforts as another flaw, as the company proposes to manage the nation's health system via one large interconnected system. Kevin Hickey, CEO of IntelliClaim and former Aetna vice president, said, "Scale hasn't been shown to be much of a benefit in health care ... Health care is a hands-on business better managed locally." He added, "There's an unwillingness of doctors to organize ... Even hospitals companies are becoming smaller." Jeffrey Peters, senior health care analyst at Dain Rauscher Wessels, agreed. He said, "Health care is local. ... You need a local strategy. Doctors aren't going to sign up with a system unless they have all the major payers in their area signed up." Further complicating Healtheon's goal of a streamlined health care system, payers have failed to provide access to detailed patient information. Although Healtheon has 900 different payers on board, lack of access to patient records hinders physicians' ability to authorize referrals or approve special procedures. Recognizing their advantage, insurers are beginning to establish their own portals to compete with Healtheon. For example, a number of big insurers, including WellPoint and U.S. Healthcare, in March launched MedUnite, an online claims processing exchange. Peters said, "Payers realized they have a valuable asset and want to leverage it rather than go through a third party." With all the new competition, Forbes warns that Healtheon/WebMD needs to get more doctors on board "soon or it will be doomed" (Setton, 7/17 issue).