WebMD: A Chance to Succeed?
By Tom Jacobs
biz.yahoo.com
Tuesday December 26, 11:31 am Eastern Time
MotleyFool.com - Fool News
One casualty of the Internet mania has been Healtheon/WebMD, now WebMD (Nasdaq: HLTH - news). Hailed as the answer to the medical industry logistics nightmare -- paper, insurance claims, communications between doctors -- Healtheon rose on the excitement of Net mogul James Clark's name and zoomed on its merger with 30-year-old wunderkind Jeffrey Arnold's WebMD. More vision than business plan, the company floundered and its stock tanked. Today the company's stock sputters around $6, down 92% from its 52-week high of $75.18. But after acquisitions of profitable medical practice management software and transaction processing companies, WebMD may yet succeed.
Investors big and small hurt in fall
Individual investors, myself included, haven't been the only ones hurt by the WebMD boom and bust. The New York Times recently reported the sad fate of News Corp.'s (NYSE: NWS - news) Dec. 1999 investment in the online healthcare company. A year ago, Rupert Murdoch's media conglomerate swapped $1 billion in assets for 10.8% of WebMD, with a promise of $700 million in advertising on News Corp.'s media properties. WebMD also snared 50% of News Corp.-owned Health Channel. Today, News Corp.'s WebMD holdings -- convertible preferred shares -- are worth about $122 million in underlying shares. Poor Rupert, but misery loves company.
Clark and Arnold out
All is not lost. Clark and Arnold's baby may actually be on the mend. Clark left the board, leaving another quasi-wreck in his wake to join equally disappointing Netscape and Silicon Graphics (NYSE: SGI - news). Arnold resigned. Despite its collapsing stock price, WebMD managed to close mergers with medical software company Medical Manager and its subsidiary CareInsite, electronic data interchange company Envoy, and health care media company OnHealth. Then it announced a restructuring beginning with 1,100 job cuts. A good start.
Sober heads at top
Today, the bought run the buyer. WebMD's CEO Marty Wygod and President Marvin Rich are, respectively, Medical Manager and CareInsite alumni. WebMD now can leverage Medical Manager's market-leading practice management software and 17 years of relationships to increase the 200,000 doctors it serves and 2 billion transactions it processes.
The people in charge know the work involved to change the slow-to-move health care sector, squeezed by changed economics. Next up? Managing medical records securely online and working with electronic transaction requirements mandated by the federal government in the Health Insurance Portability and Accountability Act of 1996 (HIPAA). These will move yet more doctors and transactions to WebMD's platforms.
Inept competition?
Even WebMD's competition has faded. In March, large insurers Aetna (NYSE: AET - news), U.S. Healthcare, Anthem, Cigna (NYSE: CI - news), Health Net (NYSE: HNT - news), Oxford (Nasdaq: OXHP - news), Pacificare (Nadsaq: PHSY), and Wellpoint Health Networks (NYSE: WLP - news) founded MedUnite, to compete with WebMD and streamline medical claims and billing. But the September launch never came, and now the group promises something by June 2001. In the meantime, WebMD plans to be cash flow positive by the end of 2001 -- and sitting on $1 billion in cash after selling Medical Manager's Porex medical plastics operation.
Now that the visionaries and the kids have "adult supervision," the company may have everything the doctor ordered to make money moving the health care establishment to an efficient cost-saving future.
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