HEALTHEON/WebMD: Moves to Acquire Rival CareInsite
In its "biggest gamble yet," Healtheon/WebMD cut a deal to acquire rival CareInsite and its parent, Medical Manager Corp., for stock valued at $5.4 billion, the Wall Street Journal reports. The acquisition merges "the two most competitive companies in the burgeoning 'e-health' arena into one formidable player." Healtheon/WebMD and CareInsite provide health information for both doctors and consumers, while Medical Manager makes practice-management software (Carrns, 2/15). Bill McKeever, a PaineWebber analyst, said, "There's now one 800-pound gorilla in this space, and that's Healtheon" ( Bloomberg News/Dallas Morning News, 2/15). Both Healtheon/WebMD and CareInsite had been "racing to make the health care industry more cost-efficient by linking its disparate, paper-dependent elements -- doctors, patients, hospitals, pharmacies, labs and insurance companies -- over the Internet." Only 10% of the estimated 30 billion health care transactions each year are conducted electronically and both companies have been maneuvering to acquire a bigger chunk of those transactions. In six months, once CareInsite's services are merged with Healtheon/WebMD's, doctors will be able to access their office-based computers from home or other remote locations. Fully implementing the systems will take at least two years.
Bumps in the Road?
With the merger, the company faces some obstacles, one of which is getting more doctors to use the Internet. While both companies claim "relationships" with 400,000 doctors, it is not clear how many are using the companies' services online (Wall Street Journal, 2/15). Claudine Singer, a Jupiter Communications analyst, said that the merged company suddenly is the "largest electronic processor of claims transactions and ... will have the largest access to physicians," adding, "They have their tentacles in every established health care connectivity player that's out there. The biggest challenge is to get the rest of the doctors online. Their biggest competitor is inertia" (Freudenheim, New York Times, 2/15). With the size of the new company, the combination "could bring scrutiny from the U.S. Federal Trade Commission because it involves such a large portion of doctors." James Kumpel, a Raymond James Financial Corp. analyst, said, "I would imagine there would be extensive regulatory review." But Jeff Arnold, Healtheon's CEO, said "he doesn't anticipate antitrust hurdles holding up the purchase" (Bloomberg News/Dallas Morning News, 2/15).