This morning WebMD, the de facto giant of the transaction processing and physician office software markets, announced that its earnings and revenues for the next two quarters will be below expectations. The stock price traded down about 10% in early trading.
What’s puzzling is that this shortfall is due to lower than expected revenue growth. Most analysis (such as cited in this post) seems to be showing that IT spending in health care is increasing quite fast. Consensus forecasts for WebMD had been 13% annual revenue growth to about $1.1 billion. However, that number will be significantly lower, and revenue growth is likely to be in the single digits. What’s problematic for Wall Street is that WebMD has done most of the reorganization and cost-cutting that it needed to after its chaotic emergence from the Internet bubble. (For more on that and WebMD’s structure see this post). Plus the new numbers do not include any impact from the smoldering DOJ investigation into accounting irregularities at Medical Manager before WebMD bought it.
So it’s probably fair to conclude that this is a market-wide rather than company-specific slow down. WebMD cited the delaying of full HIPAA implementation as slowing the increase in its data transactions. Maybe, but don’t forget most of those are Rx transactions which have been all electronic long before HIPAA was around, so the lower than expected growth is probably on the provider side. The other area doing worse than expected was physician office software. Overall this suggests that physicians are not using HIPAA as an excuse to totally revamp their office software, and that–despite signs that some physicians are adopting technology in their clinical work–slow, incremental evolution is still the likely pace of change in that environment.