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WebMD in the pink at nexus of health providers, patients and payers

Posted: Friday, November 22, 2002

ELMWOOD PARK, N.J. (AP) -- Marty Wygod's years in the health care business put him in an excellent position to treat the ills of WebMD Corp.

When he became WebMD's CEO in October 2000, the health information and transaction company was losing about $100 million a quarter, largely from misguided marketing partnerships set up during the dot-com craze to lure the public and advertisers to its Web site.

The company, run at the time run by young Internet entrepreneurs, had capped a spree of acquisitions and mergers by buying Wygod's business, Medical Manager Corp., the previous month. The deal made Wygod, an experienced and respected executive, a minority owner of WebMD Corp.

But Wygod didn't take a passive role. He ''engineered a transformation in which he became the chairman and the CEO. He was able to effectively convince the board to change the controls so the adults were running the company,'' said James Kumpel, a health care information technology analyst at Raymond James.

Wygod then set out to focus the company and stop the losses.

He brought in new managers and spent 18 months slashing costs by renegotiating dozens of costly joint promotion deals with companies from pharmacy chain CVS to drugmaker Eli Lilly and media conglomerate News Corp. He also restructured the company, formerly named Healtheon Corp., to eliminate duplication across its many businesses and dozens of offices, Kumpel said.

Two years later, WebMD Corp. has posted its first profitable quarter, reporting net income of $4.5 million earlier this month. For the first time, all three subsidiaries -- Envoy billing and data transaction services, Medical Manager practice management services for physicians and WebMD Health, the popular consumer Internet portal, -- had an operating profit. Revenues hit $200 million.

''He's really done kind of a Herculean job in overhauling what was a loose dot-com (collection) into a real, profitable, functioning, efficient organization that's poised for growth,'' Kumpel said of Wygod.

Wygod made his reputation as a pioneer in the prescription benefit management business, having founded Medco and then selling it in the early 1990s to Merck & Co. He's now using his organizational skills to reconfigure WebMD's management.

Wygod's longtime colleague Roger Holstein, who had been chief executive of WebMD Health, was promoted to president of the corporation last month. Wygod, who lives near San Diego and is in his 60s, also is searching for a full-time on-site CEO but plans to remain chairman.

He's now predicting 30 percent annual growth for the least-profitable subsidiary, WebMD Health, whose advertisers include many general merchandisers, pharmaceutical companies, medical device makers and health insurers.

One of the few commercial health Web sites to survive the dot-com crash, WebMD claims more than 16 million visitors a month. They can check out health news, information and support groups for specific diseases, and health ''management tools'' such as fertility calculators and diet and fitness journals, all for free.

One loyal visitor is Phyllis Walters, 54, a New Baltimore, Mich., customer service representative who visits once or twice a day. After she was diagnosed with breast cancer, she frequently e-mailed questions to the message board on the topic and a nurse specializing in the field always posted explanations, usually within a day, she said.

''It's just a really good, reliable source of up-to-date information ... you can trust,'' Walters said.

Dr. Robert Ashley, a solo family practitioner in Gainesville, Fla., for 27 years, has similar praise for Medical Manager's services.

Its practice management software handles everything from scheduling appointments and filing insurance claims to tracking accounts receivable, keeping electronic patient charts and filing electronic prescriptions to pharmacies, which Ashley says prevents handwriting and ''sound-alike'' errors and checks for drug allergies and interactions.

He also uses the company's Ultia wireless handheld computer during patient exams to record everything done and automatically transmit billing, prescription and other information to his office computer system.

''In the future most other physicians are going to be crossing over to doing this,'' Ashley said.

The company also operates the country's leading health care data transaction processor, WebMD Envoy.

It handles about 2.4 billion electronic transactions a year, including processing claims, determining coverage eligibility, billing patients, reimbursing providers and ordering and reporting lab tests. Envoy software links about 300,000 physicians, 42,000 pharmacies, 4,600 hospitals and 1,100 insurers and other payers.

''It automates the process of reimbursement. It cuts costs and time'' both for health-care providers and the payers, Holstein said.

Envoy should benefit substantially from federal regulations taking effect next year that require electronically processed medical claims to use uniform billing codes and data formats, Kumpel noted.

Both the Envoy and Medical Manager subsidiaries have had basically flat revenues for 10 straight quarters, partly because the company has been running behind on rolling out the newest versions of the technology, said Dave Francis, a health care information technology analyst at Jefferies & Co.

But he said WebMD Corp.'s tens of thousands of service subscribers give it a commanding lead over its biggest competitors: IDX Systems and Medic Computer for Medical Manager, and National Data Corp. and Proxy Med for Envoy. Francis said he's cautious about WebMD's near-term outlook but thinks it is ''extraordinarily well positioned'' to prosper if it can sway enough doctors already using one service to sign up for others.

That kind of leveraging, and doing his part to improve quality of health care, are among Wygod's goals.

''I think we're going to reach a point where we're going to be able to substantially reduce the cost of health care and improve patient outcomes,'' he predicted. ''We're exactly where we want to be.''

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On the Net: http://www.webmd.com



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