Investors say $70 million in MedUnite is now worth zero

Even though the insurers say that on paper the electronic claims clearinghouse is worthless, they're going to continue to invest in the company.

By Tyler Chin, AMNews staff. Sept. 23/30, 2002.

Two years ago several large insurers invested $70 million to create an Internet-based company to process administrative health care transactions for physicians.

Now, three of the insurers are writing off all or most of their substantial investments in MedUnite and saying the company faces dim business prospects.

In August, two of MedUnite's original founders -- PacifiCare Health Systems Inc. and Oxford Health Plans Inc. -- disclosed in filings with the Securities and Exchange Commission that they had written down to zero the $11 million each had invested.

"MedUnite has been unsuccessful in generating significant month-over-month revenue increases consistent with a development-stage enterprise that will reach profitability or cash-flow neutrality in the near term," Oxford said in its SEC filing. "The company believes that the value of the ... enterprise has substantially declined as compared with valuation levels utilized in [its] convertible debt financing during the first quarter of 2002."

"We determined that the MedUnite investment had a decline in value that was other than temporary," according to PacifiCare's SEC filing.

Anthem Inc. also said it took a charge on its investment in MedUnite but declined to quantify it.

Despite the write-downs, the three insurers said they remain committed to and may invest additional funds in MedUnite. Along with Aetna U.S. Healthcare, Health Net Inc., CIGNA HealthCare and WellPoint Health Network, they created MedUnite in late 2000 largely to counter a threat from WebMD Corp., which at the time looked like it was on the verge of dominating the market for medical transaction processing services and controlling access to physicians. [...]