Letter from the President & CEO James W. McLane
As the Chief Executive Officer of one of the nation's largest health plans, the President of a large healthcare provider organization, and as a leading participant in helping to shape our government's healthcare policy in the mid-'90s, I have been intimately involved with the evolution of healthcare delivery for many years. Over the past decade, healthcare services, and the administrative processes around paying for them, have been virtually reinvented. Healthcare information technology has been racing to catch up and is just now beginning to come into its own. The Internet provides a way to inexpensively connect a very fragmented industry. Healthcare IT has become a critical resource in improving operating effectiveness, accelerating payment flows, revolutionizing service to customers, and creating new generations of products and services for health plan members, patients, employees, and individual consumers.
The progress is significant, but much remains to be done. Most of the 30 billion healthcare transactions each year still require paper, or some sort of human intervention, to complete at least one phase of the treatment and payment process. These paper-handling, data entry, re-keying, or inquiry interventions create enormous costs. For example, it is estimated that healthcare companies spend as much as $20 to process a paper invoice. By contrast, electronic claims cost less than $5 now, and will cost even less in the future. The automation and reduction of paperwork will continue to afford employers the opportunity to decrease health plan administration costs by up to 60%.
Current industry processes and administration are tremendously inefficient, creating enormous expenses and a continuous rise in the cost of healthcare premiums. The underlying technology to alleviate this problem is still extremely fragmented. Even today, the purchasing, delivery, and financing of healthcare requires the successful interaction of numerous independent systems. The last sharp rise in premiums brought us managed care. The current rise in premiums will make web-based healthcare administration a reality. The web is moving towards becoming the foundation for a new healthcare industry infrastructure -- an infrastructure that can support complex, multiple transactions among empowered consumers, wired practitioners, service-conscious payers, and employers seeking to shift more benefit-related activities to their employees. The implementation standards required by HIPAA (the Health Insurance Portability and Accountability Act) will accelerate the growth of this foundation.
Healthaxis has repositioned itself to focus and capitalize on these opportunities. During the year 2000, the company transformed itself. It began the year as a dot com business-to-consumer Internet retailer. It is now a business-to-business software solutions provider marketing to healthcare benefit distributors, payers, and administrators. This transformation was accomplished through the merger with Insurdata early in 2000, and the divestiture of the retail insurance operations to Digital Insurance later that year. In addition to licensing our web-based retail technology toolset to Digital Insurance, Healthaxis retained an 11% equity ownership interest in them to ensure that both parties were tied to the success of this divestiture. In January 2001, HealthAxis.com and HealthAxis, Inc. completed their merger, capping a year-long transition period.
In addition, the corporate structure of Healthaxis has been streamlined. We have trimmed where appropriate to achieve our strategy, closing some satellite locations and reducing headcount. We have created a customer-focused services group. The UICI partnership has been strengthened. The software solutions delivery group has been restructured under new and experienced leadership. The software solution sets currently offered by the company have been regrouped into four core market-driven categories. This restructuring was designed to bring together the skill sets required to develop and deliver advanced web-based solutions and the professional services that accompany them. The new solutions groupings are:
Distribution Solutions - Insur-Retail, Insur-Broker, Insur-Rate
Eligibility Management - Insur-Enroll, Web Self-Service, Insur-Admin
Claims Administration - Insur-Claims, Insur-Image
Connectivity Solutions - Insur-Web, HIPAA-Axis
The management team has been strengthened by the addition of two seasoned executives -- Rich Grehalva as head of Marketing & Sales, and John Carradine, our new Chief Financial Officer. I stepped from the board into the management team on February 1, 2001 as President and Chief Executive Officer. Michael Ashker moved up to Chairman, where he can assist with business development and strategic alliance initiatives.
We have established a new Leadership Incentive Program that provides additional compensation to the mid-level and senior management team for results-oriented achievement of our goals. I am now confident that we have the operating team, the structure, the proper incentives, and the technology solution sets in place to address our challenges and move forward aggressively in our markets.
Our vision is aimed at the market's needs: To enhance customer experiences through ePowering healthcare connections. We are in business to facilitate seamless customer interactions, improve productivity, and create competitive advantages for our customers by leveraging XML with Microsoft® .net® and BizTalk® technologies.
Our mission has been clarified and focused. It is: To become a financially sound, growing, innovative, go-to market-leading supplier of advanced web-based connectivity solutions for benefit distribution and administration that helps payers, intermediaries, and employers strengthen their customer and employee relationships.
To achieve this mission, the company has adopted five specific goals for 2001, with supporting objectives to make sure those goals are met
Meet our financial commitments:
Improve top line growth
Manage expenses down
Achieve positive cash flow
Generate operating profit
Strengthen Marketing & Sales:
Create customer acquisition and go-to-market processes
Build an experienced sales force
Increase visibility with target markets
Broaden and deepen relationships
Sustain Product Leadership:
Install product management principles
Expand existing performance boundaries Consistently improve value
Focus on Process & Productivity:
Establish clear lines of accountability
Align sales and delivery
Manage core processes (delivery of quality solutions, revenue generation, cash collection, development of great people)
Adopt on time/on budget/exceed expectation metrics
Grow to Scale:
Build our base organically
Create alliances and partnerships
Grow business leaders
All of us at Healthaxis have also adopted a fundamental value set. The first, and most significant, is that we deliver what we promise - to our customers, to our employees or teammates, and to our shareholders. The second, closely related to the first, is that each one of us takes ownership and accountability for our actions and results all the time. The third is that we are honest with ourselves, our customers, our partners, and everyone else involved with us. Our integrity is never questioned. The fourth is that relationships determine results, meaning that each one of us has relationships that can help us do our job better and develop further opportunities with others. And the fifth is that we will run to win. We are not in this race just to participate, but to run with a well considered strategy and at a pace that will ensure we win in our markets.
I am confident that Healthaxis is now poised to lift off. I am encouraged by the increasing awareness of the market to Healthaxis' capabilities. I am excited about having the opportunity to help this company realize its potential and build a reputation for quality, reliability, and creativity. We all recognize that now is the time for us to focus, communicate, and execute. Now is the time for us to deliver what we promise.
I am gratified by the confidence demonstrated by our customers. I am gratified by the commitment, creativity, and flexibility demonstrated by Healthaxis' employees. And, I am gratified by, and appreciative of, our shareholders who understand and believe in our potential.
James W. McLane
President and Chief Executive Officer |
