Is it a valid business model? (1)
by: swissglobal 11/18/00 10:36 am
Msg: 50851 of 50867
Not only because of the current WebMD share price level, a question to be permanently asked in the months to come will be: "Where is WebMD headed to?". It is of limited use to analyze past mistakes made on the way to building the present WebMD structure. However, an important legacy which has an impact on the present and future valuation of WebMD is the valuation of the mergers and the ensuing number of outstanding shares and warrants.
Remains the question of the business model. It is still a valid one and what are the potential threats? There is not a "killer answer" to this question, but the following, partly disparate considerations seem to be part of the puzzle:
EHEALTH SECTORS - THE 5 "C"
There are five ehealth sectors:
(a) Content, i. e. web sites for the consumer and professional markets. The latter includes in the US alone 600,000+ physicians, 2 million nurses, 1 million administrative personnel, medical students, researchers, and not to forget the pharmaceutical industry as a source for advertising and other applications. WebMD/OnHealth is a leader in this sector.
(b) Commerce, i. e. an electronic exchange for buyers and sellers. WebMD has a limited presence in this sector.
(c) Computer applications, i. e. healthcare applications addressing the administrative, financial, clinical and imaging areas. Medical Manager's practice management system is part of this category. WebMD has therefore an important presence in this sector.
(d) Connectivity, i. e. the exchange of data transactions via electronic data interchange or the internet. With Envoy, WebMD has a very significant presence in this sector. It is important to note that Envoy seems to be the leader in medical claims with connections to most state Medicare programs, and NDC in pharmacy claims. It is estimated that, overall, electronic claims represent around 70% of all claims, with the physicians below, and the hospital and pharmacy claims exceeding, this percentage.
(e) Care, i. e. new forms of providing remote care to consumers through telemedicine. WebMD does not seem to have a presence in this sector, but could become a conduit through its infrastructure described above.
THE ENVIRONMENT
- Aging population
- Healthcare is a government regulated industry
- Healthcare, partly for lack of normal market factors, is of insufficient quality
- Healthcare is lagging behind in the use of IT, behind government, insurance and education
- The baby boomers are demanding better quality in healthcare - consumerism increasing
- It is estimated that healthcare costs in the US will be around $1.3 trillion in 2000, estimated to increase to $2.1 trillion in 2007
- US has highest healthcare costs as a percentage of GDP
- HIPPA standardization coming
- Complex industry
KILLER-APPS
- Integrating desk top applications capable of exchanging data with multiple legacy applications. This is one reason why Medical Manager needed WebMD's internet capabilities.
- Use of new technologies, such as handhelds.
- Etc.
WebMD STRATEGIC POSITION
- Principal healthcare players are the patient, the hospitals, the physician office, the pharmacies, the payers and the suppliers (pharmaceutical companies, equipment producers and others).
- It is important to have an established customer base - this is the case for WebMD/Medical Manager (physician offices) and Envoy (providers/payers).
- The consumer/health information/media portals, which could be very important in the long run but seemingly very costly in the near term, are probably causing some sleepless nights to the WebMD management since the long term benefits seem to be incompatible with the short term goal of becoming profitable.
- MedUnite wants to go around the intermediaries (connectors) and directly connect wit providers and probably pharmacies. If MedUnite succeeds it will take transaction business away from WebMD, NDC and others.
- The providers looking for integrating solutions, MedUnite could have a difficult job in executing its business plan.
- The transfer from EDI to the Internet will be gradual.
SOME OF THE BATTLES TO COME
- Physician office: WebMD, iMcKesson, others
- Integrating solutions, including the introduction of new technologies, such as handheld devices
- Transactions, incl. MedUnite
- Strategic partnerships - it is likely that there will be other moves in a fast moving market
- Integrating applications
- Forget about the international potential for the time being; it is definitely there, but WebMD needs to succeed in the US first
- Quality of management with broad healthcare, IT, consumer branding, advertising and (later) international expertise
- How will healthcare and ehealth evolve in the coming years - it seems difficult to anticipate a definite scenario and at what speed things will happen. e. g. chnages in the way care is provided and the anticipated gradual shift from treatment to prevention
CONCLUSION
I continue to believe in the potential of this market. There are good news and bad news for WebMD. For me they still remain "more good than bad". For each one to judge. Management will make the difference, hopefully we will be lucky.
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