WebMD accounting practices come under SEC scrutiny

Some physicians are worried that the outcome of a federal investigation could further delay HIPAA-compliant claims processing.

By Tyler Chin, AMNews staff. March 1, 2004.

Analysts aren't sure that an announcement earlier this month that the Securities and Exchange Commission is investigating WebMD Corp. will have an impact on physicians, but doctors are concerned that it may affect them in the future.

In a document filed Feb. 6 with the SEC, WebMD disclosed that the securities agency has joined the U.S. Justice Dept. in investigating the Elmwood Park, N.J.-based firm. WebMD is the market leader in the physician practice-management software market and dominates the medical transaction processing services market.

On Sept. 3, 2003, federal agents raided three offices of WebMD in connection with a probe by the U.S. Attorney for the District of South Carolina. WebMD thinks that investigation is related to revenue recognition practices and a $5.5 million financial restatement in 1999 by Medical Manager, which it acquired in 2000.

The SEC investigation is related to the existing investigation of those accounting issues, WebMD said. "The SEC's involvement in these investigations is customary, and we do not view their involvement as an expansion of the initial investigation in any way," said WebMD CEO Roger C. Holstein in a statement.

Some industry analysts also believe that the SEC's involvement is routine and will not impact physicians. "It doesn't appear that the investigation has become any wider in terms of its scope," said David Francis, managing director at Jefferies & Co., a brokerage in Nashville, Tenn. "It's simply that the SEC has joined the Justice Dept. in looking at these revenue recognition issues from five years ago."