E-health firms fail to fulfill promise

Many e-health companies, once on an express track, have derailed. Future success hinges on their ability to deliver on pledges to simplify life for physicians.

By Tyler Chin, amednews staff. Aug. 21, 2000.

Steven J. Thorson, MD, e-mails friends from home. He submits claims electronically to insurers and would love to get paid directly by computer for his medical services, access laboratory results online, transmit orders to pharmacies and learn in real time whether what he prescribes is covered by an insurer's drug formulary.

Several e-health companies offer Web-based technologies that can do most of those tasks. But the family physician at a nine-doctor medical group in Fort Collins, Colo., doesn't use them -- or the Internet -- in his practice because the tasks he wants are scattered across multiple information systems, making the technology too costly and hard to use.

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"I have a sense that these companies don't have much appreciation for the real world of day-to-day practice," Dr. Thorson said. "I see 25 patients a day; I'm chronically running behind; some patients need six prescriptions faxed to a pharmacy ... and to put together all these elements [and use computers at the same time would be] very difficult.

"I don't think most of these companies have a feel for the logistical complexity of getting things done in our current environment, in dealing with clinical issues, managed care issues, coding complexities and all the regulations we're under."

Formerly high-flying Internet health companies have to win over physicians like Dr. Thorson if they are going to make a financial killing, and turn the promise the Internet holds to revolutionize health care into reality.

A year ago, the e-health hype was so huge that investors assigned multibillion-dollar valuations to firms on their first publicly traded day, even though they hadn't recorded a penny in profit. Today, the stocks of such companies as drkoop.com, Healtheon/WebMD Corp. and PlanetRx.com have gotten whacked for reasons both within and beyond their control. Many of the companies are overhauling flawed business plans, running out of cash or hoping to be acquired by stronger competitors.

"Too many of these companies went public at a very early stage. They were based on an idea, not a business," said Josh Fisher, analyst at WR Hambrecht & Co.

"The companies that will make it will be companies that have real customers, revenues and businesses," he said.

But notwithstanding the financial bloodbath in the e-health sector, the technology eventually will be implemented in physician offices because the pressures to improve care, lower costs and increase efficiencies are too great, observers say.

And patients also will put pressure on physicians to use the Internet in their practices.

About 14.8 million adults would switch to doctors who have Web sites and 11.9 million adults would switch to doctors who use e-mail, according to Cyber Dialogue, an Internet market research firm. These two separate groups represent about $76.6 billion and $61.7 billion, respectively, in health care services purchasing power, said Mark Bard, the firm's director of health practice.

"This demand for connectivity is growing year by year and it's not going to slow down," he said. "You can either ignore, resist or embrace online health. If you're in the camp that embraces it, there is a large population that wants to connect to the provider but can't."

Searching for answers

As Internet companies struggle to recapture their glory days, they need look no further than Dr. Thorson for answers. He helped shove them off the cliff and he can help them return to the top if they can get it right.

"Most of us are waiting for the entire package," Dr. Thorson said. "I think one of the biggest single barriers for physicians using computers is that folks haven't perfected voice-recognition technology. When you get me a system where I can do everything just by talking into a microphone ... then you got me. I'll pay."

E-health companies will also have to produce what they promise.

"We've been promised things and they haven't been delivered on," said Dr. Thorson, 53, who's been practicing for 28 years. "Most of us are in our second and third generation of computer systems. We've all heard from companies how their systems will make our lives easier and save us money, and it ends up costing us more and is more complex" than touted.

So, Dr. Thorson says, if an Internet company wants his business, it'll have to prove that its product is easy to use and saves time and money.

How? "I'd tell them, 'If this fancy system will do all the things you say, let me try it with no obligation. Come in, hook this sucker up and give me a human being I can call for help and get him to come to the office today.' Make it so that I won't have to sink $50,000 in capital costs [up front]. If I like it, then I'll use it and pay for it." Nevertheless, the high cost of technology, the broken promises and the failure of companies to develop a breakthrough product don't entirely explain the slow rate of physician use of the Internet in their offices.

"The barriers to physician adoption of this technology are more cultural than technical," said David B. Nash, MD, associate dean for health policy at Jefferson Medical College in Philadelphia. "In five years, we won't be having this conversation because the current generation of interns and medical students are very computer savvy. We call them the Nintendo generation; this Nintendo generation assumes computers will be an everyday part of practice and they look at their colleagues, particularly those over 45, and wonder what's taking so long."

But companies will have to do their part if they are going to successfully sell Web-based systems to doctors, said Dr. Nash, an internist and lead editor of Connecting with the New Healthcare Consumer (McGraw-Hill Healthcare Education Group, 2000).

"What is relevant is lowering the barrier to entry and making it easier for early adopters to grab the technology," Dr. Nash said. "So, how do they do that? They link the dictation systems to the lab systems to the inpatient cost accounting system and seamlessly deliver all the merged information that physicians need over the Internet."

Unlike Dr. Thorson, some doctors are willing to use the Internet in their offices now, but don't yet have the resources ready. For example, David G. Hollifield, MD, wants to submit claims, obtain precertification and handle other business transactions online. But the Atlanta-based physiatrist who has been practicing for five years -- striking out on his own 18 months ago -- first wants to get a network and technical support in place.

"I plan to do it within a year," Dr. Hollifield said. "I'm anxious to do it because I think [the Internet] will allow me to do more, be more efficient and have less overhead."

ADDITIONAL INFORMATION:

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Recent rises and falls of Internet health care companies:

                                         Aug 7
                       IPO    52-week    closing
                      price    high      price
                      -----   ------     ------
CareInsite Inc.        $18    $88.00     $16.31
Drkoop.com              $9    $24.50      $0.91
Drugstore.com          $18    $67.50      $5.72
HealthCentral.com      $11    $14.37      $3.44
Healtheon Corp.         $8    $75.18     $12.69
MedicaLogic Inc.       $17    $54.00      $5.75
MotherNature.com Inc.  $13    $14.56      $0.78
Neoforma.com Inc.      $13    $78.75      $3.56
PlanetRx.com Inc.      $16    $36.50      $0.88
Trizetto Group Inc.     $9    $91.25     $12.69

Sources: Wit Capital, cnnfn.com