Here’s WebMD’s dream:
You go to your doctor’s office for a physical. The secretary calls up your appointment on her computer, then hits a button and hooks into the Internet where she instantly checks your insurance coverage and co-pay.
While you’re in the examining room, the doctor taps another computer screen to pull up your medical history, lab and X-ray results and a record of your last hospital visit. When he orders a referral on the computer, a software program first checks to make sure the specialist is on your insurer’s list. When he writes an electronic prescription, the computer checks to make sure the drug is on the HMO’s approved drug list. If not, it immediately requests the HMO’s approval.
The prescription zips via the Web to a drug store on your insurer’s network. The referral to a specialist pops up on a computer screen in that physician’s office.
When you walk out of the exam room, the clerk pulls up the doctor’s notes on her computer and immediately files a claim for your visit through the Internet. When you get home, you can e-mail the doctor’s office with follow-up questions or consult a consumer Web site for more details about your diagnosis, as well as your personal health history.
Call it traditional health care at Internet speed.
And, because this is WebMD Corp.’s dream, guess what company would provide the online medical services and take a profit every step of the way?
To make this ambitious dream a reality, WebMD has been moving at a pace that makes even the Internet look slow.
Jim Clark, billionaire founder of Netscape Communications Corp. and Silicon Graphics Inc., started a company called Healtheon four years ago when he sketched out plans for bringing health care’s back-office functions into the electronic age. In November, his company finalized its merger with WebMD, an Atlanta consumer health information site founded by 30-year-old Jeffrey Arnold. Since then, the combined company has acquired or partnered with more than 80 companies that do business with the medical community, including buying the largest processor of electronic health care transactions.
With the completion last week of its latest deal, the merger with Medical Manager Corp., formerly of Tampa, the company now known as WebMD says the dream is one step closer to reality.
“We’ve done a wonderful job of assembling the assets to deliver the vision,” said Arnold, who is co-chief executive of the new merged company with Martin Wygod of Medical Manager. “Now the challenge comes down to execution.”
That’s no small challenge. A year ago, WebMD had 200 employees; today, it has 5,000. The company, which had an undisclosed number of layoffs in August, said it expects more cutbacks at the end of this month as it consolidates operations. Last week Arnold declined to comment on the future of Medical Manager’s office in Tampa, which has about 150 employees.
With Medical Manager, which sells software to manage doctors’ offices, WebMD gets access to the desktops of nearly 200,000 physicians. Now the company has to build a connection from the doctor’s scheduling software to the Internet. That on ramp will allow WebMD to act as a toll taker each time those doctors or their back-office employees file a claim, order an X-ray or buy a stethoscope through the Web.
The key will be for WebMD to get doctors, who now might use the Internet after hours to check stock prices, schedule flights or take continuing medical education courses, to integrate the Web into their office practices.
The payoff, WebMD claims, will be instant connectivity to everybody that matters: insurers, hospitals, pharmacists. And with each connection comes a payoff, averaging 25 cents per transaction, to WebMD. Those quarters would add up quickly, with billions of transactions expected annually. WebMD estimates it will reach profitability by the end of next year.
In some ways, WebMD has been the prototypical dot-com company, relentlessly promoting itself in slick, prime-time TV ads, while burning cash and posting losses. Even WebMD’s youthful-looking Arnold, who made his first $25 million by age 28 with an earlier endeavor, fits the get-rich-quick formula.
Like many Internet start-ups, WebMD has yet to turn a profit, losing $518.3 million in the last quarter alone. Its stock has been hammered since investors lost their once boundless faith in dot-com companies in April. From a high of just more than $71 in January, its stock fell as low as $11.25 in August. It closed Friday at $15.19, down 81 cents.
But the company, which is headquartered in Atlanta, has avoided the fate of Internet washouts like DrKoop.com. In a brutally tough market, WebMD has emerged as a powerful survivor because it accumulated high-profile, deep-pocketed backers who were willing to believe in the company’s dream while it was little more than vapor. Among its big backers: Microsoft, with $250 million; Janus Capital, with $930 million; and News Corp., with $1 billion.
James Kumpel, e-health analyst with Raymond James & Associates Inc., said he was initially skeptical about WebMD when he began covering the company in November.
“But the breadth of its backers creates the impression of inevitability,” he said. “They’ve been winging it till they can make it. And they’ve got an awfully over-reaching set of goals. If they can even deliver on half of them, WebMD will be considered a success.”
There are a few stumbling blocks, however, not the least being skepticism from health professionals who have been hearing promises of a paperless doctor’s office for ages.
Analysts, who have been surprisingly upbeat about WebMD’s prospects even as investors have driven down its share price, also are likely to have a change of heart if WebMD doesn’t succeed in moving doctors’ transactions to the Internet — and fast.
