TECH: WebMD, a little curious…

Milt Freudenhiem gets to chat with Marty Wygod, and what he wants to talk about is how WebMD Health “Wants to Go Beyond Information”. WebMD is the old consumer web businesses of WebMD plus the private-labeled consumer sites they run for health plans and employers. Now while you could have (or maybe did) read all about WebMD Health’s strategy on THCB last year (hey the Times is only 6 months late so we’ll be charitable), the weird thing is why it’s being featured.

After all EmDeon, which is the old WebMD’s businesses that comprises the old Envoy claims transaction system and the older Medical Manager practice management system, and the Porex plastics company that was Wygod’s original holding company, still owns most of WebMD Health. Plus it’s vastly bigger. The web business brought in $4 million profit on $45m in revenue last quarter (or an annual run rate of $200m). Pretty decent growth from a $120m business in FY 2004, but not exactly Google-type margins. Meanwhile the real revenue (some $1.2 bn annual run rate) is in the old transaction services and practice management systems. Although the margins there are of course much lower (under 4% compared to 10% on the web side).

Now they say they want to sell off the transaction business and the practice management part. Which leaves them the WebMD Health web business and the plastics company. This is full circle. WebMD was originally a fake web-company. It couldn’t make its core web services work (either technically or as a business), so it took the logical approach of converting its incredible bubble stock price into the acquisition of MedEAmerica, Envoy, Medical Manager and a few other companies that had actual businesses. Now with Web2.0 emerging, and health plans finally deciding that they do give a rats arse about their customers’ online experience, it’s going back to being a web company.

The key issue though is that it’s doing it as an ASP, and it’ll be putting its client health plans’ members’ data on its own servers. That potentially gives it lots of power, which is whey health plans were afraid of it back in the late 1990s and created a fake competitor to it called….(forgot the name, answers on a post card please) Medunite (thanks!) which they later disbanded. Theoretically WebMD could be moving clients between plans as they own the relationship. So it’s an interesting concept, and they have enough tools that they could get it — the consumer eHealth experience — right eventually.

But all the same, 10 years to build a web business that’s $200m in revenue.  Given the amount of cash Marty Wygod already had, it barely seems that all this chopping and changing to come out with a small web company justitfies the brain damage of the last decade. And furthermore, is it really worthy of a NYT exclusive profile?

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8 replies »

  1. Psst – FYI – McKesson is powered by WebMD. That’s right! McK’s ‘guts’ if you will, are powered by WebMD technology.

  2. Hmmmm. WebMD couldn’t do a proper interface. What you have described tells me that the WebMD folks see informatics standards mostly as a nusicance to be avoided rather than a language to be learnt and a business model for the industry. But they are not the first to put a minimal implementation on the market and fool people into thinking they had a solution.
    I did lots of HL7 (and numerous other protocols, both standard and not) back in the day, but only a handful projects on the “financial” side of the world. Sometimes you cannot avoid doing a lossy protocol conversion, but you CAN save the state of guzinta (“goes into”) transaction so that when you get the guzoutta back, you can fill in the missing stuff in an intelligent way for the original sender (this might include more than simple crosswalks). I’ve done work like this. Too bad WebMD didn’t…

  3. You’d think it would be that easy, wouldn’t you? But WebMD’s systems are far worse than you can imagine. What they were doing when I was working with them was taking your HIPAA-compliant X12 transactions, converting them to a WebMD standard format of some kind that I believe resembled NSF (the pre-HIPAA “standard”), then they were converting THAT to a X12 transaction the payor could understand. Of course, the problem with this is that there’s a lot more information in the X12 standard than there is in NSF (one of the reasons HIPAA was adopted in the first place was NSF wasn’t sufficient for all the data needs the industry had), so a lot of the information you tried to put in your claims would drop out in that translation process. So even McKesson wouldn’t be able to help you out.
    You’d think it wouldn’t be that hard, but clearly it was. I think part of the problem was that WebMD grew so fast and entirely through acquisition that they had an almost insurmountable task of integrating all of the different systems and standards running around under their flagship.

  4. Thanks.
    I don’t know much about this side of the world, so pardon the stupidity of this question.
    Can’t McKesson deliver to WebMD a transaction that WebMD can figure out? While you might have to pay a ch-ching twice for the small payors, at least you only have to deal with McKesson.
    And isn’t it now in the post-HIPAA days incumbent on the payors to deal with a legal X12.n? I understand payors might foul-up with respect to getting the actual contract terms and payment right, but accepting and generating X12s is not rocket science. I’ve done a little of it myself. What’s going on with this?

  5. McKesson is the yin to WebMD’s yang. Everything WebMD does horribly, McKesson does expertly. Their customer service is amazing because their leaders have designed systems that an idiot can figure out, then they hire competent people who can go above the systems and take it to the next level. The only problem is that many of the smaller payors only go through WebMD, so if you want to deliver electronic transactions to those payors, WebMD is your only choice. That is changing over time, but as of now it’s still the case for many mom and pop healthplans.
    My billing company had become so dependent on McKesson it was becoming a strategic risk. But they were the only capable clearinghouse out there, so we didn’t have a choice. If you happen to be in Texas (or apparently elsewhere as they are growing by leaps and bounds), THIN is excellent as well.

  6. I’m with Spike. Who cares whether they came up with anything new? It would be a Very Good Thing make the mundane stuff work real well. And they evidently haven’t.
    So who has? If I want to help a doc outsource the kinds of things WebMD says they do, where do I turn?

  7. From my experience in billing, I can tell you that they never failed to innovate new ways of failing to deliver electronic transactions properly. They are easily the worst clearinghouse out there, just utterly incompetent. Many will rejoice if they truly are selling off their transactions business, preferably to a company that doesn’t have its head up its ass.

  8. I am missing the point here.
    What is that WebMD doing to call itself a Web 2.0 company? Has anything changed to make health plans willing to give up the keys to the kingdom (data) vs. set up MedUnite or sites under their own control?
    Sure, WebMD is playing shell games with stock but this does not qualify as a real business breakthrough. Nor does it mean that running private label websites gives them rights to do as they please with data.
    Did they come up with anything really new over the last 5 years???

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