TECH: Lost in the memory hole at McKesson

I’ve given my view on RelayHealth before—Nice product but apparently no physician or actual patient demand for it, well not enough that would have sustained a real business that didn’t get unbelievably lucky with its financing in the dotcom days. Now McKesson has bought it to roll it into their health management side that includes the old Access Health and a whole lot of other stuff. If you wnt to read more take a look at this Modern Healthcare article which by its title, McKesson deal gives docs new PHR purveyor, seems to think that RelayHealth is a PHR (stop laughing you at the back).

But what fascinates me is how this stuff happens in Corporate America. In 2000 McKesson purcahsed a company called Medivation. Medivation was tossed into its iMckesson subsidiary and obviously didn’t make it out alive. But the key point is that Medivation’s technology—at last when they bought it—did exactly what RelayHealth’s (the then Healinx) did. Given that neither of them has established much in the way of what you’d recognize as market share or profitability—cue yet more angry emails from Relay Health’s lovely marketing people—I assume McKesson is buying RelayHealth for the technology not to double up on market share. So that means whatever Medivation had has since been lost. And those of us who remember iMckesson may find this line from the story strangely familiar.

In addition to RelayHealth, McKesson’s personal health systems include in-home patient monitoring, web portal technology, triage software and personal emergency response systems. The full suite will include products and services from recently acquired HealthCom Partners, LLC, which provides patient billing solutions designed to simplify and enhance financial interactions between healthcare providers and their patients.

Longtime McKesson observers may not be too surprised —after all I don’t use their products, I just get my cues on their lack of interoperability that from HISTalk. But what I’d like to know is who’s getting fired for buying the same thing twice? For that matter when’s Charlie McCall finally going on trial for screwing up McKesson in the first place? It’s 7 years since that happened? Answers on a post card….

Coda: My best guess is that RelayHealth had c. $40m in funding in rounds C, D & E, so perhaps $45m overall. Now that no one’s feelings can get hurt, and now that the health care Internet is sexy again, I wonder whether their investors got out whole. I assume that we’ll find out in the next 10Q. Any guesses in the comments?

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  1. PeterB, To be fair to the original author (me!) the 2012 version of RelayHealth was nothing like the 2006 version as a whole bunch of other stuff (notably the old NDC claims clearinghouse network) was tossed into it. And its current success is mostly in the world of HIEs.

    And the points that a) McKesson had already bought that functionality years before and b) that RelayHealth had spent $60m and never came close to making that amount back by 2006 is for sure true

  2. Too bad this post couldn’t be lost in a memory hole. A bit embarrassing in hindsight, I would say, as RelayHealth has since proven its doubters quite wrong.

  3. Emergency response is one of the services mentioned that would appear to be an easy game to get into.
    Wrong! This is a complex and highly specialized personal service. It is also at the other end of the spectrum from Mck’s core services.

  4. Total funding was about $60M.
    The preferred stock was at 75 cents on the dollar, and common stock was shafted.

  5. Does anyone know about a company called RxHope(www.rxhope.com)? I’ve heard that McK and WebMd are “lookng at them” but they aren’t public and I can’t seem to find out much about them.

  6. Actually, they got to round “G” if you count all the placements…
    Total: $62.4M
    2005 – round G – Cisco/McKesson – (rumored $7M)
    2004 – round F – Corning – $10M
    2003 – round E – $6.3M
    2001 – round D – $13.1M
    2000 – round C – $19M
    1999 – round A/B – $7M
    Cisco/McK investment in ’05 was supposed to be for 20% of the company so if the rumored figure is right, then RH was valued at $35M.
    So, I’d be surprised if they got out whole even given the the hot healthcare IT market…but what’s mind boggling is the kind of revenue RH was able to generate after all the $.
    Looking at Hill Physicians 2005 annual report (which I would venture is one of RH’s most successful implementations) they had 900 docs enrolled and had only 1000 total webvisits that year. Based on their model from many moons ago, they were hoping for a $5-10 cut for each reimbursed web visit (where the doc would get $50-75). So a RH revenue stream of $5-10K per year from a big customer. You’d need a LOT of customers to make that model work.
    RH must have added other revenue sources (software license/implementation fees) to make this worthwhile, and I know that the RH features beyond webvisits (e.g. escripts, messaging) have value. But the true value of RelayHealth’s products were as marketing tools (aka shiny hood ornament) for most of RH’s customers.
    Here’s guessing that RelayHealth will wind up being a shiny hood ornament for McKesson too…