The Wall Street Transcript
Questioning Market Leaders For Long Term Investors
August 21, 2000
HealthAxis, Inc. (HAXS)
ANDREW FELDER is Executive Vice President for Strategy and Corporate
Development at HealthAxis.com. Along with Michael Ashker and Alvin H.
Clemens, Mr. Felder founded HealthAxis.com, implemented the operational
structure, and was a key architect of the company's business strategy. Mr.
Felder retains an active role in formulating HealthAxis.com's long-term
strategy and positioning. HealthAxis.com is Mr. Felder second Internet
venture. Prior to starting the company Mr. Felder co-founded JusticeLink,
Inc., a successful Web-based document management company serving the legal
community. He also has extensive financial services experience through his
earlier work as Vice President of Strategic Planning for Wells Fargo Bank.
Mr. Felder received his Bachelor of Arts degree from Dartmouth College and
his MBA from Anderson Graduate School of Management at UCLA, with a
concentration in Finance. He also studied International Relations at the
London School of Economics. Mr. Felder has been published in national
publications, including Fortune and the NewYorkTimes and has served on the
Boards of numerous corporate and professional organizations. He is an avid
tennis player, scuba diver, and Major League Baseball fan.
SECTOR - SPECIALIZED HEALTH SERVICES
TWST: Could we start with a background summary and brief overview of
HealthAxis, Inc.?
Mr. Felder: HealthAxis is a company that is in the business of providing
Web-enabling services to healthcare payers. Our proprietary software helps
payers - insurance companies, third- party administrators, large,
self-funded employer groups, and Blue Cross/Blue Shield Organizations extend
their legacy enterprise applications to the Internet. Essentially, we are
empowering these organizations with e-business capability. As well, we
utilize our proprietary e-commerce engine, InsurWeb, to power the e-commerce
activities of the distribution intermediaries through which insurance
companies and Blue Plans distribute products. This group includes the
emerging class of Internet-based e-brokers, online insurance agencies, and
employee benefit platforms. These companies are all racing to acquire market
share and need a proven, e-commerce engine to enable them to provide their
clients with a fully automated, health benefits solution.
HealthAxis came together as a result of a merger between a company called
HealthAxis.com, which was a two and a half year old company that was focused
on providing distribution services to healthcare payers for health insurance
products, and a company called Insurdata Incorporated, a wholly owned
subsidiary of a diversified financial services company called UICI.
Insurdata has a 20-year history in building technology systems for
healthcare payers with a client list that includes Aetna, Cigna, and
numerous Blue organizations. The thought behind the merger was to combine
HealthAxis.com's experience in product distribution with the back-end
connectivity knowledge of Insurdata to offer clients a total solution. We
executed this merger in January 2000. Subsequently, we determined that we
would be better positioned to sell Internet soft- ware solutions to our
target audience if we were not competing with its sales activities as a
retail broker. Hence, we made the decision to sell our consumer-focused
online agency to Digital insurance, a transaction announced last month. In
the wake of Ns deal, we retain 130 The Wall Street Transcript the expertise
across both front-end and back solutions but can n focus on being a supplier
to industry - instead of being part supplier and part retailer. The renewed
focus is better for employees, investors, and customers.
TWST: Give us an idea of how that client population will change or evolve
over the next two to three years.
Mr. Felder: This is an enormous market into which we're selling our products
and services. You know, hundreds of billion dollars flow through our
nation's healthcare payers every sit year. This is one of the largest
segments of the economy. Yet the industry is still largely behind the curve
with respect to reorienting business systems to effectively compete on a
digital basis. We optimistic about the opportunity to help transform the way
healthcare payer industry conducts business. There are really drivers behind
the impending change. One is the emergence Internet technologies, which make
it much easier to scale up 4 cost-efficient basis, and number two is federal
legislation in form of HIPPA, which is forcing the healthcare industry to
standardize and to electronicize what it does by fixed dates. HIPPA alone,
is going to produce-scores of billions of dollars in IT spending, as payers
race to meet Federally imposed, HIPPA compliant deadlines. Though the
industry's adoption rate has been slower anticipated to date, it is
inconceivable that it can continue to remain apart from the movement towards
integrating the Internet under in every single other segment of the economy.
Do you really I people won't be checking their claims over the Internet in
the near future? Come on. This is an inevitability.
TWST. Give us an idea of the bench strength and skill sets that you have at
the top management level.
Mr. Felder. We've got a fairly experienced group. said, through the merger
with Insurdata, the company acquired legacy of 20 years of experience in the
business of building and deploying systems and providing services to
healthcare payer I think when it comes to industry experience, unlike a lot
of the more recently founded venture-backed companies, our company has a
fairly large base of customers and a fairly solid depth of experience
in the marketplace in understanding both the vertical market and the work
flows associated with it. So I think we're fairly well situated in that
area.
TWST: How could the investment community better understand HealthAxis? What
misperceptions do you encounter?
Mr. Felder: I think one of the misperceptions stems from the company's
pre-merger history, where the entity bearing the HealthAxis.com name had
been primarily involved in the distribution of insurance products to
consumers and small businesses. So oftentimes, HealthAxis is still regarded
as a consumer-focused distribution company and lumped in unfairly with
companies like Insweb, Quotesmith and so forth, when in reality, events
since the new year have remade and refocused the company in the different
space, which is really squarely focused on selling Internet software
applications to healthcare payers. As a result of the recently concluded
transaction with Digital Insurance, where we sold off the retail business to
that company in exchange for an equity stake in them as well as cash and a
technology services agreement, we are clearly and unequivocally not in the
retail distribution business. We are a business application Internet
software company targeting healthcare payers and their distribution
partners. But I think due to the company's history, there's a misperception
of that as still being our space, which it really isn't. And it's obviously
our responsibility in the wake of the Digital Insurance transaction to
effectively communicate to both the investing public and the industry
exactly what it is that we do and where we're headed and what our
positioning is. We will be busy working to resolve that misconception over
the next several months through intelligent marketing.
TWST: Is cash or capital a limitation as you look at these opportunities?
Are there any wild cards that could impact cash and capital with the
regulatory environment or with the market itself?
Mr. Felder: If you're talking about cash on our balance sheet, no, we're
fine in that department. We're not currently cash constrained in what we're
trying to do. And, in fact, one of the significant advantages of disposing
of the retail distribution business was that it was a relatively small part
of revenues, but a relatively large part of expenses. So by selling that
business to a third party, we significantly improved the financial position
of the company by removing a pretty significant chunk of expenses from the
books. So we're not really facing a capital-constrained environment as a
company right now.
TWST: What would be the summary statement that convinces or compels an
investor to buy in?
Mr. Felder: I would say that the most compelling reason why we're in the
business is because the market into which we're selling is a
multi-hundred-billion-dollar market with a very strong need to begin to
adopt technologies that will help improve company margins. The healthcare
payers have seen their margins decline over the course of the decade by
about 50% as a result of a variety of problems that have beset the
healthcare industry. You've gone from an environment where they're making 8%
to 10% margins to where they're making 2%, 3%, 4% margins. So the
low-hanging fruit through the CFO and CTO and CEO of a healthcare payer is
to be able to adopt technologies that will automate your core business
processes and, therefore, improve your profitability. By doing so, there's a
direct impact on the bottom line - and on customer satisfaction as the
American public is clearly going to be demanding Internet-based access from
all its product and service providers. Again, what appealed to us about the
business is you've got a huge market, largely untapped to date, and you've
got regulatory drivers coming out of Washington in the form of HIPPA
regulations forcing healthcare payers to adopt electronicization. We believe
that, as a company, HealthAxis has the best technology and the most
experience. I'd advise any senior executive at a healthcare payer to give us
a call and see how we can help them improve their earnings and their
customer retention. So that's what got us excited about it. Obviously,
investors will have to make up their own minds.
TWST-. Thank you.
ANDREW FELDER Executive Vice President of Strategy and Corporate Development
HealthAxis, Inc.
2500 DeKalb Pike
East Norristown, PA 19401 (610) 279-2500 (610) 279-3355 - FAX
Each Executive who is the featured subject of a TWST Interview is offered
the opportunity to include an Investors Brief or other highlight material to
be provided and sponsored by and for the company.
The Wall Street Transcript - August 21, 2000 |
