WATPA: FW: WebMD Wants to Go Beyond Information

From: Norm Jacknis <norm@jacknis.com>
Date: Fri Feb 24 2006 - 22:35:33 EST

WebMD Wants to Go Beyond Information
im/index.html?inline=nyt-per> MILT FREUDENHEIM
Published: February 23, 2006

Marty Wygod, the entrepreneurial deal maker who built
arketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=HLTH> WebMD
Health into one of the most-visited medical information sites on the
Internet, is promoting the site as the next big thing in health care. Will
shareholders reap the benefits?

Jeff Zelevansky/Associated Press

Martin Wygod is chairman of WebMD, one of the most-visited medical
information Web sites.

By helping people enrolled in employer health plans compile personal health
information online, Mr. Wygod wants to tap into the growing corporate trend
of having employees pay more, if not all, of their own health costs. With
more of their own money at stake, the thinking goes, people need information
to help make decisions about health care.

WebMD says it has signed contracts with big health insurers and employers to
operate private-access sites where employees can keep track of their medical
records, look up information about diseases and compare costs and ratings
for doctors and hospitals. Employers or their insurers pay licensing fees to
WebMD, based on the services and number of health plan members.

Mr. Wygod's latest effort, which is still in the early stages, could be the
most visible test yet of whether the time has finally come for using the
Internet as much more than an online medical encyclopedia and health care
news medium.

"Corporate America is looking for a way to educate its employees about
health care costs, and hopefully to move a substantial amount of those costs
off their books," Mr. Wygod said in a telephone interview. But for investors
in WebMD Health, which will post its quarterly results today after the stock
market's close, the big question is how much of the potential upside might
be theirs to share. So far, they can hardly complain. In the four months
since the current iteration of the stock was issued at $17.50 - and closed
its first day of trading at $24.40 - the price has soared to a high of
$41.62 on Jan. 21, before slipping. Yesterday, it closed at $34.92, up 32
cents - still nearly double its initial price.

But only about 15 percent of WebMD Health is publicly held as a stand-alone
stock. The rest is owned by Emdeon, a holding company controlled by Mr.
Wygod that has been on a years-long acquisition spree. Emdeon, whose stock
languished for several years, has been buying back its shares and announced
last week that it was talking to prospective buyers for two of its main
businesses other than WebMD. On that news, Emdeon's stock has risen 15
percent over the last five trading days.

For a shareholder who might have invested in the original version of this
company - Healtheon, which went public in February 1999 as a venture of Jim
Clark, the Netscape founder - the road to the future has been a long,
winding path. Mr. Wygod, who sold his earlier venture, the pharmacy benefits
manager Medco Containment Services, to
arketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=MRK> Merck for $6
billion in 1993, said that when he took charge of Healtheon in 2000, it "was
losing $400 million in cash a quarter and was very close to bankruptcy."

Operating as Healtheon/WebMD, it acquired an office management system used
by thousands of doctors. That business was combined with the WebMD health
information and news site, as well as a widely used medical clearinghouse
for paying medical claims. It is those two non-WebMD Health businesses that
Emdeon now hopes to sell.

These days, two-thirds of WebMD Health's revenue comes from advertisers,
mainly drug companies and medical device makers, that buy ads on the
consumer site and on a separate service, <http://medscape.com/>
Medscape.com, a site where doctors can get treatment and diagnosis
information as well as additional medical education.

For WebMD's personalized information service, the company says it has signed
multiyear licensing contracts with big health insurers that include
arketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=AET> Aetna,
arketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=CI> Cigna and the
nation's largest, Wellpoint, and with nearly three dozen of the nation's
biggest employers, including
arketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=BAC> Bank of
arketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=CSCO> Cisco
arketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=DELL> Dell
arketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=IBM> I.B.M.,
arketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=PFE> Pfizer,
Shell Oil and the state of North Carolina.

"The opportunity for WebMD is enormous," said Larry Feinberg, managing
partner of
arketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=ORCL> Oracle
Partners, a health care hedge fund. "It is so dominant in direct-to-consumer
and direct-to-doctor access that it will be very difficult for anyone else
on the Internet."

Under the personalized WebMD service, employees go to private Web sites to
fill out health status questionnaires. At some employers, like Pfizer and
Dell and North Carolina, employees use WebMD programs to combine the answers
with medical payment data from doctor visits and hospital stays to create
personal health histories. Employees receive reminders for periodic checkups
like mammograms, and online alerts about conditions that need early
attention - to stave off heart problems or diabetes, for example.

WebMD is also holding talks with banks and financial giants like Fidelity.
The banks view the trend to so-called consumer-directed health care as a
huge opportunity to manage tax-sheltered health savings accounts that many
workers are now being offered in tandem with low-premium, high-deductible
health insurance.

Christopher McFadden, a healthcare analyst at
arketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=GS> Goldman
Sachs, said he had concerns about the company's prospects. "WebMD is a
recognized brand name and it has a bit of a first-mover advantage," he said.
However, he said, the company "may be at risk from growing competition and
the prospects that more technology decisions are centered within hospital
networks, rather than physicians' offices."

Health care information technology specialists say that the personal health
profiles that WebMD creates, drawing on medical billing claims, are only an
interim step. Down the road, they say, are the oft-discussed databases of
detailed electronic medical records that the Bush administration and
Congress are promoting as a measure for patient safety and efficiency. Those
electronic records would include information like lab results, drug history
and a doctor's clinical notes on a patient's health, which would be
accessible online by doctors and hospital emergency rooms.

Companies much bigger than WebMD are vying for that market.
arketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=GE> General
Electric, for example, recently purchased IDX Systems, which provides
software for thousands of doctors' offices and hundreds of hospitals.
General Electric's Healthcare Integrated Information Technology unit sees an
opportunity to convert many patients' charts to electronic medical records,
said Vishal Wanchoo, president of the G.E. unit.

But in the nearer term, WebMD can point to its already close online
relationships with doctors. The idea of "the electronic medical record has
been around for 20 years," said Eric Brown, a vice president at
arketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=FORR> Forrester
Research who follows health care information technology. But then as now, he
said, the time frame for this electronics record future always seems to be
"within the next five years."

When WebMD posts its financial results later today, analysts are expecting
quarterly earnings of 9 cents per share. What they are waiting to hear is
the company's guidance on the business prospects for Mr. Wygod's next big


Received on Fri Feb 24 22:35:32 2006

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