Vital Signs

By eweek  |  Posted 2001-03-19

Vital Signs

Baby boomers want to live forever — healthy, vital and buff — and that desire may soon fuel a new type of Internet boom.

Although online medical services have so far been largely a bust, e-health experts predict that in just a few years, the Internet will be so woven into the fabric of medicine that much of the $2 trillion Americans will spend annually on health care will be filtered through the public network.

Internet-savvy consumers, hungry for health information, will spark a revolution in personalized medicine that experts said will send shock waves through insurers, employers, doctors, pharmaceutical companies and the Internet itself. Individuals will become their own health-care organizations, crafting customized medical plans to protect themselves and their families from very personalized genetic risks.

Using the Internet to specifically define their priorities and care, people will also be willing to spend a lot more of their own money on the promise of living longer lives, experts at a recent e-commerce health conference sponsored by Forrester Research agreed. And they will give much of it to high-tech companies that can offer trustworthy remote monitoring, encryption software, virtual private networks (VPNs), personalized portals and firewall protection. Much of the rest will find its way to any e-business that can simplify and personalize the relationships among patients, their physicians and their pills.

"Tech companies supplying digital solutions that re-engineer the processes to be cheaper, better and faster — without losing the human element — will be the big winners," said Douglas Goldstein, author of E-Healthcare: Harness the Power of Internet e-Commerce & e-Care.

To back up their predictions of an e-health-care boom, experts pointed out that the average time a doctor spends with a patient has dwindled to just 15 minutes. Frustrated, consumers are increasingly going online for answers to their health questions. While browsing sites such as Medscape and WebMD, they are finding that they have more choices in doctors, insurers, treatments and pills.

And that opens new opportunities to make astonishing amounts of money off Web-savvy baby boomers obsession with their own immortality.

"Society is going to spend more of its money on health care," said Kenneth Conway, president of Millennium Predictive Medicine. "Were going to pay for it out of our own pockets."

Efficient Health Care


Efficient Health Care?

This year, people in the U.S. Will spend $1 trillion on health care — $1 out of every $7 spent in the U.S. economy. Estimates of the cost of waste, inefficiency and duplicate paperwork range from $150 billion to $250 billion, or 15 percent to 25 percent of all health-care spending.

In three years, the Internets efficiencies and paperwork savings can knock administrative costs down to single digits, saving more than $50 billion, said Tom Beauregard, chief strategist at Sageo, an e-health portal.

That can buy a lot of technology and Internet-based e-health. And dozens of companies are ready to sell it.

Already, billions of dollars are being made — and lost. E-health companies last year lost $4 billion, while generating revenue of $1.77 billion, according to Corporate Research Group. Revenue is expected to top $2.4 billion this year, and reach about $3 billion next year.

Medical supplies distributor Cardinal Health expects revenue from its e-business platform to climb tenfold this year, to $1.5 billion. The companys customers continue to migrate to the Internet from traditional electronic ordering systems, said James F. Millar, Cardinals executive vice president and president of distribution. Cardinal uses Internet technology to automatically replenish inventory for its business customers, and its handheld and wireless technologies scan and transmit delivery information via the Internet.

Cardinal, with a market capitalization of $29 billion, is near its 52-week high, with its stock worth $98 per share on March 12. But one of its competitors,, which has a market capitalization of $220.4 million, was trading at $1.40 per share earlier this month, down 95 percent from its 52-week high.

Dot-coms dedicated to health care will continue to tank this year, as established health plans, brick-and-mortar procurement companies and hospitals muscle them out of the way — much as the Wal-Mart Stores and Kmarts elbowed the pure-play e-commerce retailers, said Carl Mercurio, editor at E-Health Insider, a Corporate Research Group publication. "Anyone who can provide Internet-based technology that helps health-care organizations do things faster and better is going to have success."

Companies hoping to become examples of that success include Agilent Technologies, Enact Health Management Systems and LifeScan, which have products that can monitor asthma, glucose or heart problems, and zap the data to nurses or doctors across town or across the globe.

Security Is Key

Security Is Key

This brave, new, medical world can only evolve, however, if there is trust — trust between consumers and the e-commerce companies wooing them with everything from cheaper health insurance to lockbox protection of their medical records.

The Internet has a long way to go in that arena. Looming above all else is the fear that medical records will fall into the wrong hands, dooming parents and their children to a lifetime of job and insurance discrimination. That makes it Super Bowl time for the companies that can find the best way to encode medical records so that theyre easy for the right people to access, and impossible for the wrong people to see.

In February, 60 percent of 13,000 U.S. adults surveyed by the Pew Internet and American Life Project said they dont want doctors, health maintenance organizations or insurance companies using the Internet to keep track of their medical records.

"People are scared," said Harrison Rainie, the director at the Pew Internet and American Life Project. "Its the modern version of the right to be left alone."

Health records must be shielded from employers. "Were seeing the equivalent of Swiss bank accounts being established for genetic information," said Brad Bowman, founder of WellMed, a provider of online consumer health management tools, referring to projects launched by DNA Sciences and other companies that use Web sites to gather genetic information to help fight disease.

One key to the success of cyberspace medicine will be the federal Health Insurance Portability and Accountability Act (HIPPA), which requires that health plans have complex systems in place by next year to ensure the privacy of online medical records and protection against employment discrimination based on disease history. The companies working to provide that security through VPNs and next-generation firewalls are likely to get a big chunk of the e-health pie.

Catholic Healthcare West has turned to Certicom, which uses elliptic curve cryptography to provide security for handheld wireless devices and VPNs. "Were trying to hit a delicate balance, using these new modern wireless devices and still complying with the Health Insurance Portability and Accountability Act," said Jim Sanderson, systems engineer at Catholic Healthcare, which provides health care for the needy.

Catholic Healthcare is a member of the Mobile Health Care Alliance (MoHCA), which espouses standards for mobile data management to ensure patient privacy and compliance with HIPPA. Among its other founding members are AvantGo, ePocrates and Palm. The aim is to ensure the security and interoperability of medical information beamed to mobile devices.

Privacy cant be allowed to trump everything, though. If it did, people with high genetic risks could use that confidentiality to purchase gold-plated health plans from unwitting insurers. After all, if 1,000 genetically risky but savvy consumers all flock to the most generous health plan, all youll end up with is a health insurer that has gone bankrupt.

So, there has to be some flexibility in who gets to see encoded versions of genetic medical records — and incentives for companies to go after the people whose genetic markers are most risky.

Mark Tierney, chairman of eBenX, which uses the Internet to ease transactions among corporations, their employees and their health plans, said plans should specialize to help, say, the elderly, or those with certain genetic diseases — but only if more money follows the consumers with more health risk.

"You cant have all the people who know they have a propensity for coronary heart attacks go to a health plan that is specializing in it, and pay them what the average person pays. That company will go out of business," Tierney said. "Organizations that are taking the risk and creating the integrated delivery system have to have the opportunity to make money."

Although consumers would be willing to pay more for these personalized services, analysts and Internet health-care companies are convinced they will demand less waste and more efficient use of their health dollar. Any company that wants to survive in 21st-century medicine, they said, will have to deliver.

"Were wasting a third of all health-care dollars," said Mark Leavitt, chairman of Medscape, which has created clinical data and knowledge to doctors and consumers and has created digital health records for 13 million people.

Medical reports take days, record transfers take weeks, and more than a third of a doctors time is taken up finding, recording and transcribing information. According to Leavitt, medical errors kill 50,000 to 100,000 people in the U.S. per year, and lost, misread or illegible notes and medical records are to be blamed for many of those deaths.

In other words, if airline pilots were as technologically bereft as doctors, they would rely on monthly weather reports, rather than minute-by-minute updates, Leavitt said.

That should change, soon. While just 59 percent of doctors own computers — the same percentage as two years ago — most of the 15,000 medical school students who graduate each year are Net-savvy, Leavitt said. Doctors will be coaxed into the digital age, convinced that entering information once into a handheld device or an electronic tablet can save time and money and prevent errors.

"Truck drivers are on PalmPilots," Leavitt said. "Doctors cant be far behind." Some 7,000 doctors per week are adopting Medscapes mobile handheld devices that send and receive information over the Internet, he said. "Well reach critical mass in 2001 or 2002."

ParkStone Medical Information Systems, a start-up in Weston, Fla., is one of the companies that put software in handheld devices, letting doctors look up and prescribe drugs, then send the order to the patients neighborhood pharmacy. The companies make money by partnering with pharmaceutical companies to put their pills at the top of the physicians choice list, or with HMOs to put low-cost generic pills at the top of the choices.

In three years, one doctor in five will use a handheld device to make notes, order prescriptions and capture charges while talking with patients, predicted Josh Fisher, WR Hambrecht & Co.s e-health-care analyst. That will generate $2 billion in sales for the handheld device companies, and save billions of dollars more in lost billing and redundant paperwork. Some handheld devices now contain a medical dictionary and pharmaceutical tools, but soon they will hold complete medical records and best-practice treatments.

"Eighty-five percent of health-care costs — choices about labs, drugs and hospitals — start with the stroke of a physicians pen," Fisher said. "A handheld device for a physician brings powerful value."

Pharmacies Online

Pharmacies Online

Internet pharmacies are also ripe for major expansion. Although online drugstores have been among the flops of the dot-com era, Forresters health-care e-commerce team estimated that the online pharmaceutical market could be worth $22 billion by 2004.

One company holding out hope — and dollars — is Launched with great fanfare in 1999, the company reported a net loss of $28.6 million for the fourth quarter of 2000. In January, it announced 125 layoffs, hoping the costs savings will help it meet its sales and revenue goals for 2001. Chief Executive Peter Neupert said the company still has to grow about 30 percent to achieve its goals, "but thats doable." still has $130 million in cash and a market capitalization of $88.5 million, but its stock price earlier this month was at $1.25 per share, down 95 percent from its 52-week high. Neupert said that as Drugstore.coms revenue increases, the $130 million in cash will be enough to carry the company to profitability, some time in 2004.

Partnerships will be key to profitability for online drug companies such as They cant make money unless they have the approval of the insurance companys procurement manager, who decides where patients can get their prescriptions filled. Online companies have to build trust with each other to tap into the business-to-business e-health market and its potential of tens of billions of dollars of annual revenue.

Successful online drug companies will also use the Internet to target specific drugs to specific consumers. As drugs are developed for every subcategory of disease, pharmaceutical companies will make fewer blockbuster pills, the kinds that tens of millions of people take daily. To make money, theyll need to market their pills to virtually everyone with that specific disease. The Net will be the natural vehicle for reaching highly segmented markets., now in its prelaunch phase, aims to give consumers access to diagnostic testing and services such as DNA banking.

Insurance Options

Insurance Options

For insurance companies and employers, the Internet also offers new opportunities to cut costs and confusion. According to Forrester, one third of U.S. companies already use the Internet to help administer health benefits for their employees, and that figure should triple by 2005. Many would like to get out of the health insurance game altogether. Theyre good at making optical switches, soft drinks or widgets, but theyre not good at dealing with the red-tape nightmare of deductibles, exclusions and pre-existing conditions.

Employer share of health premiums has already fallen — from 80 percent in 1977 to 67 percent today. One trend that analysts predicted is the use of vouchers that give employees access to perhaps $2,000 or $3,000 in medical expenses per year. There would be provisions for catastrophic illnesses, but generally anything above the voucher limit would come out of the employees pocket.

Employers will experiment with vouchers, or "defined contributions," the next time the economy turns down, and leverage seesaws back to management, said Michael J. Barrett, senior analyst at Forrester. In other words, any time now.

Other companies offer new ways for companies to save. For example, IE-Engine has software that allows several insurers to bid for the contract to cover a companys employees. At a demonstration recently, a Fortune 500 company got about $40 per month per employee knocked off its insurance costs, as several insurers vied to underbid each other — all within a two-hour window set aside for the real-time auction.

A new breed of e-business is also emerging to help wean consumers off the employer model of health care and make them more active participants in their own medical choices.

For instance, an employee can take the $150 or $300 per month now paid by the boss and apply it to a dozen basic to premium choices offered through Web sites run by companies such as Sageo, which sets up portals so consumers can compare health plans on service, cost and quality.

Insurers are also expected to form Web sites that fashion new group risk pools, offering customized plans for consumers wielding company vouchers, said Eric Brown, research director at Forrester, who led the Transforming Health Care in the Internet Era conference in Atlanta.

Finance companies, which consumers trust with their money, may jump into the battle, combining advice about mutual funds with advice about kidney stones. The traditional health insurer or new-generation hybrid that can cobble together partnerships with trusted hospitals and doctor groups will have the advantage in bringing health-care consumers aboard the Internet.

"The engine that powers people up the staircase is trust," Medscapes Leavitt said. "If you can take your trust online, you win."

Most people dont like to see anyone make money in health care, eBenXs Tierney said. But if theyre competing feverishly for business on quality, reputation and price, they deserve to make a lot of money. "We need an environment with continuous new aggressive competition entering the marketplace to stimulate innovation and drive quality," Tierney said.

Plans today dont vary much on choices or cost. Consumers would pay more money for a plan that allows them to buy riders for specific drug types that they need, Sageos Beauregard said. For example, he said, consumers used to be afraid of 401(k) plans, until they saw how they could personalize their investments. The same will happen in health care, he said.

Inertia on the part of consumers, doctors and insurers will slow the shift to e-medicine, but nothing can stop it, Brown said.

Half of the ideas out there today are pipe dreams, but half will make it. "There will be a period of disappointment. But this is the year that people will start putting money on the table. There will be a toning down of the rhetoric and a toning up of the activity — of actually getting things done," Brown said.

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