The Digital Pharmacy: Walgreens’ Emerging Strategy

The Walgreens PR team has been busy of late, announcing a spate ofDIGITAL RX partnerships that aim to transform them from a brick-and-mortar retail pharmacy into a digital one-stop shop for health care consumers. Specifically, three press releases in recent weeks have revealed a strategy that aims to leverage the 82 million “Balance Rewards” members by trading them store loyalty points for using various features from an expanding in-app menu.

First, Walgreens and WebMD have been collaborating for months on a partnership that brings WebMD tools (namely an online goal-setting/care coaching program) to the Walgreens website, and introduces Balance Rewards-based incentives for users of the WebMD app who are tracking fitness, nutrition, or other health data. It also introduces a refill feature to the WebMD app, so that users can order a refill or change pickup location after scanning the bar code on their empty Rx.

Second, Walgreens is working with Qualcomm in a similar fashion to link the usage of a specific set of devices (so far, two blood pressure cuffs and a blood glucose monitor) to members’ Balance Rewards account. This partnership was unveiled at the Health2.0 conference last fall – It will be housed in the Walgreens app at some point in “early 2015.”

Finally, late last year, Walgreens announced they will partner with MDLive, a leading virtual visit supplier, to give patients round-the-clock access to doctors through a smartphone camera-driven visit. This is available to customers in two states today (California and Michigan). Functionality-wise, this represents an expansion of a “pharmacist chat” feature that came out in the Walgreens app last year.

It’s a no-brainer that Walgreens is looking to incent people into coming to their stores. But their strategy to leverage wearables, at-home biometrics, virtual visits, and in-app tools is worth a closer look. The first two announcements above essentially provide people with coupons that they must earn – by monitoring a chronic disease, making progress against a weight loss plan, and so on. The MDLive partnership will likely route any prescriptions through Walgreens pharmacies, while building loyalty to the app and establishing brand credibility in the eyes of the time-pressed, convenience-seeking healthcare consumer.

These deals all appear to be win-wins for the companies involved at first, but real success for the healthcare system will hinge on consumers actually participating. And if we’ve seen one thing in digital health, it’s that if you build it, they’re not guaranteed to come.

More importantly, “success” needs to be defined here. Is more business and brand glad-handing by three publicly traded companies worth celebrating? Measuring outcomes and quantifying the public health impact of an undertaking of this scale will not be easy – nor do any of these three entities really have an obligation or incentive to do so publicly. Will rewards points lure people in to buy discounted soda and candy, or will this function as more of a health savings account (HSA) that only applies to healthcare items in-store?

And speaking of HSA, how will other stakeholders such as employer groups and payers get involved – is there a bigger role that WebMD can/will bring to the table? Walgreens embarked upon a handful of ACO partnerships in the last 18 months – will they be able to use these new mobile tools to add in a new layer of data about consumer preferences and behaviors (and take advantage of a new set of between-visit reimbursements by CMS)? Is there a strategic role for their partnership with Theranos in all of this? Will their partnership with Qualcomm just be another corporate co-branding PR play, as it appears to be today, or will they take a more device-agnostic approach moving forward that really enables their pharmacists to monitor populations, regardless of which device a patient is using?

All in all, while these partnerships need to play out and mature over the next couple of years, Walgreens is taking a bold, app-first step into the age of the digital pharmacy. This comes at an interesting time for the company, as they recently completed their acquisition of Alliance Boots, the European pharmaceutical wholesaler. As a result, Walgreens faces some questions about leadership of the new global corporation, and is in earnest cost-cutting mode. It remains to be seen if these recent announcements are aimed solely at ensuring their investors of a long-term strategy during this merger process. Perhaps their shift to digital-first entry points is aimed at reducing in-store overhead and improving overall operational efficiency for the long-term.

Either way, our take is that Walgreens has obtained a diverse set of pieces to enable them for long term success – but it remains up to them to execute. It’s too early to predict what will happen, but if these pieces align properly, Walgreens will be able to take advantage of the emerging age of the new healthcare consumer, for whom convenience, access, and cost are dominant drivers of utilization and spending.

One thing is for sure – their main competitor, CVS, is taking a no-holds barred approach to the same opportunity – albeit with a slightly different strategy involving deeper clinical services, delivery system partnerships, and of course more investments in their digital presence. For CAS subscribers, this month’s domain monitor explores this emerging consumer trend through a deeper dive on two key forces shaping the new landscape: virtual care and retail care, including a deeper look at what the other 900-lb gorilla of pharmacies, CVS Health, has got planned for the next few years.

Stay up to the minute.

A Digital Dose of Magic Medicine

snake oilCardiovascular disease is the leading cause of death in America. One out of four adults has two or more chronic diseases. One in three children is overweight or obese. Projections are that by 2050, one third of Americans will have diabetes. These are America’s proverbial ball and chain: lifestyle-driven afflictions that are driving our healthcare spending through the roof, but which can be treated early, mitigated, and in some cases prevented altogether.

Well, what if there was a platform that could help millions to become healthier by encouraging them to take charge of their own health? It could empower people to start living healthier lives through self-driven, day-to-day improvements. Imagine this platform had the following advantages:

  • A high profile, endorsed by celebrities and beloved by households
  • A captive audience that is eager to engage
  • A delivery medium that most of us have in our own homes
  • An information-driven approach to get people to change their lifestyles

The Internet has been abuzz about Apple Healthkit, and Samsung SAMI, and Google Fit.  But more on those in a minute – I was talking about Doctor Oz.

With a TV audience estimated to be nearly 4 million and growing, and a realm of influence that stretches across the web, print media, and television, The Dr. Oz show has made the eponymous physician into a one-man empire with outsize influence over the hearts and minds of middle America. But not all has been healthy in the land of Oz.

As many in our professional circles cheered and jeered, Senator Claire McCaskill called out Dr. Oz as somewhat of a charlatan in front of the country during a testimony on Capitol Hill a few weeks back. Sen. McCaskill is chairwoman of the Subcommittee on Consumer Protection, Product Safety and Insurance, and has taken offense to Dr. Oz’s repeated soft-selling of “magic” pills for weight loss. Across the Internet, opinions abound about the ethical and professional boundaries Oz has breached by pushing products that, as a trained physician, he must know don’t have any scientifically proven benefits.

To be fair, the show and the content are not otherwise awful.The website is fueled by content from Sharecare, the website/startup run by WebMD founder Jeff Arnold and branded by Oz since 2009. Sharecare is a legitimate health IT play – they even hosted a #bluebutton Twitter chat recently, though like Oz, they can overdo the marketing hype at times. And of course, Mehmet Oz himself is a respected cardiologist with appointments at Columbia University and New York Presbyterian Hospital.

The issue isn’t that Oz is a dud – in fact, it’s that he’s far from it, but he still behaves like one when he’s in front of the cameras, either selling the next miracle cure or getting grilled by a former prosecutor now Congresswoman. As health IT’s own celebrity Doc, Eric Topol puts it in a 2013 New Yorker profile:

“He is keenly intelligent and charismatic. Mehmet was always unique, but now he has morphed into a mega-brand…The problem is that he is eloquent and talented, and some of what he says clearly provides a service we need. But how are consumers to know what is real and what is magic? Because Mehmet offers both as if they were one. It all seems to be in the service of putting on a show. And, when you add it up, that seems like something other than medicine. It’s more like medutainment.”

Some have framed the issue in terms of opportunity cost. With such a valuable platform at his disposal, what might be the public health impact be if Dr. Oz was a stronger advocate for judicious diet, steady exercise, and a more balanced lifestyle rather than miracle pills?

The sad truth is, people probably wouldn’t watch his show. In fact, he probably wouldn’t even have a show in the first place. Oz’s style-over-substance delivery is shaped by his studio audience, not the other way around. He has become so popular because the people watching his show crave shortcuts and quick fixes the same way they crave fast food. To give credit where it’s due, Oz understands the American people better than most of us in healthcare. Now if only he would lead some meaningful patient engagement on our behalf.

As much as we complain about silos in health IT, ignoring what’s going on on daytime TV reinforces our separation from the broader challenges we face in healthcare. We keep ourselves busy dissecting new smartphone platforms like Healthkit and hyping up their allure within our white-collar circles, even as we lose sight of the real competitors. Taco Bell too has been innovating for the masses. Think of five people you know – are they more likely to make sure their labs and meds are up to date for their next doctor’s appointment, or buy a 99-cent Quesarito? Automating data entry on these new platforms might possibly get us past the wall that the PHR industry collided with a few short years ago. But no amount of app automation will let us swipe past our own human nature.

In our innovation-addled culture, it’s understandable when people get excited about unproven promises sold to us by corporate wizards, whether in the form of a “magical” diet pill or a “transformative” ride sharing service or a “revolutionary” smartphone app. Dr. Oz’s recent episode serves as a reminder that in healthcare, there are a different set of standards when it comes to the believing the unproven. As healthcare professionals, we too can be tempted to take a seat in the studio audience and add to the chorus of oohs and aahs about new technology.

Let’s just remember that our industry may be part art and part science, but there’s no magic involved.

Has Avado Acquisition Awakened the WebMD Giant

gaint2WebMD, the once-darling of consumer health who seemingly lost its way following pharma dollars, may at last be coming back to its roots. Last week, WebMD made headlines by announcing it had purchased the young patient engagement start-up, Avado, for an undisclosed sum.

, based in Seattle is a product of a healthcare accelerator, Start-up Health. Their core focus is Patient Relationship Management (PRM), which honestly, is just another term for patient engagement via a patient portal or traditional Personal Health Record (PHR). Like its top competitors MEDSEEK, RelayHealth, Medfusion, who was recently spun-out from Intuit and NoMoreClipboard, these solutions are EHR agnostic and typically deployed at enterprise sites where there are numerous legacy systems in place across the enterprise (e.g., EHRs, radiology, labs, etc.). Providing a patient with a single longitudinal view of their record along with an the ability to conduct some transactional processes. PRM solutions seek to accomplish two objectives – meet regulatory requirements and drive loyalty.

Within the healthcare sector patient engagement is becoming an increasingly hot topic. While we at Chilmark Research have been following this sector since our founding, only in the last 6-12 months have we seen interest significantly accelerate. Healthcare organizations (HCOs) of all sizes are now looking to deploy a patient engagement/PRM strategy, partly in response to stage two meaningful use requirements and increasingly, an understanding among HCOs that value-based reimbursement will necessitate a more engaged and loyal patient – can PRM facilitate.

But this acquisition is less about Avado than it is about WebMD, who has signaled their intent to diversify the business by adding some teeth to their own consumer portal offering in the near term. In the longer term, WebMD’s strategy will hinge on execution of their B2B platforms and their ability to turn informed consumers into engaged patients.

Short Term: An Investment in Diversification
WebMD has led the online consumer health information market since 1999, growing steadily into a publicly traded company (market cap: just under $1.6B) and a household name. Unsurprisingly, advertising and site sponsorship comprise 84 percent of their revenue; they enjoy over 138M unique monthly Web visitors and 22M mobile views. Remaining revenue comes from a provider-geared information network (Medscape being the best-known brand), and a private portal service, through which they create and manage customized health portals for self-insured employers and health plans.

WebMD has been milking these revenue streams for years, bringing little innovation to market. Frankly, they didn’t have to as the pharmaceutical industry with their fat marketing coffers kept WebMD fat and happy, for awhile.

That all changed when the pharmaceutical industry started hitting the wall with fewer new blockbuster drugs in the pipeline, while their breadwinners start coming off patents and succumbing to inevitable, low-cost generic competition. Marketing budgets crashed and with them, WebMD’s once highly profitable model. Of course it didn’t help that WebMD began seeing increasing competition from the likes of Everyday Health, Patient Conversation Media, and Demand Media (who runs

After six quarters of being unprofitable from 2011-2013, WebMD is beginning to come out of its drug-induced stupor finally posted profits in Q2 and Q3 of this year. Consequently, it appears that WebMD has also come to realize that it will need to diversify. Hence, the Avado deal.

Avado has no strong brand, and fewer than a dozen customers, but it does have a vision that WebMD sees strong potential in. Coupling WebMD’s massive scale with a compelling PRM vision and platform could open new, untapped markets for WebMD, particularly among smaller ambulatory provider networks where Avado has gained traction and WebMD has strong presence. There is a huge opportunity here.

This is not to take anything away from Avado, who had not-so-quietly emerged over the last couple of years as a flag bearer for patient engagement through health IT. Dave Chase, Avado’s co-founder and CEO, has been one of the most vocal proponents of a business case for patient engagement, rooted in the growing realization that getting serious about between-visit care will be pivotal in bending the cost curve by managing the health care needs of an aging, and increasingly chronically ill population.

WebMD’s extant portal was/is somewhat rudimentary, with an HRA tool, access to some claims data, education/information features, and some health coaching functionality. They will likely fold these capabilities in with the Avado platform, which consists of the usual spate of tech features bundled into a PRM platform: secure messaging with Direct, a dashboard and visualization tools, administrative support (scheduling and billing), integration with existing practice management/EHR systems, and Blue Button+ compatibility.

Rather than going after a more established vendor, such as a MEDSEEK, this move allows, for relatively little money, an opportunity for WebMD to augment their portal offering with more sophisticated functionality without breaking the bank (some reports put deal value at $20-30M range, though our guess is closer to $8-10M). By choosing Avado, WebMD has opted to get a batter on base rather than swing for the fences.

More Than a Website…Or Are They?
It is unlikely that this deal vaults WebMD to the top of the patient engagement market – they will continue to be an information website above all else. However, they have steadily matured their platform over the last few years with improved, diversified content, a flagship mobile app (over 20M downloads), and a more personal, customized user experience.

More recently, they have incorporated a provider search function and begun integrating with their MedScape network so clinicians can push specific information (e.g. discharge instructions or care plans) directly to patients. At HIMSS they announced a partnership with Qualcomm Life’s device ecosystem so consumers could manage device-generated data directly through their WebMD accounts.

Yet with all these developments, some of which have been little more than announcements, the proof is in the pudding, which in this case isn’t out of the kitchen yet. Many questions remain: There hasn’t been a peep about the Qualcomm deal since March. How well do/will the provider tools work, and how many patients will use them? How is this going to integrate into clinicians’ workflow, and/or broader population health management solutions? And with any such offering, how will it be packaged and delivered to market?

Looking Ahead: Has the Giant Awakend
This is likely just the start for WebMD, which has a tradition of being a highly acquisitive company. Providing PRM solutions to ambulatory providers through their existing network is an easy first step, though success will be defined by execution and rationalization across the multitude of WebMD B2B offerings. Design, usability, and functionality will be crucial.

Next will be layering in additional functionality that is of high interest to consumers and physicians alike. Expect to see such features as pricing transparency, quality scores, and enabling additional transactional processes that simplify a consumer/patient’s interaction with the healthcare system. For the physician practice, WebMD may develop or acquire solutions that facilitate referrals, care coordination and possibly even administrative functions such as eligibility checking. Look for future acquisitions here as WebMD still has many gaps to fill.

The biggest implication of this acquisition is, however, that a sleeping giant may have awoken and has decided that too many mice have been eating from its plate. The market is awash in small companies who are all looking to tackle some aspect of consumer/patient engagement. Some of these, like Avado, may ultimately be acquired, but many, many others may be squashed underfoot. The next 6-12 months will show whether or not the giant has truly awakened, or simply was walking in its sleep.

2013 – A Year of Surprises

In the blink of an eye, a New Year has appeared and with it the need to look into our crystal ball (or is it a magic 8 ball) to make our annual predictions for the healthcare IT sector. Personally, I find this to be one of the more interesting and seriously fun parts of being an analyst.

Be forewarned, we’ve seen enough mealy-mouth, water-downed predictions as of late that simply state the obvious to last a lifetime. So let’s crack a few eggs and make some stretch predictions shall we. (Note: each analyst has contributed a prediction or two, which is noted).

1) Structured Data will Remain Gold Standard in 2013 – Cora
Despite Watson and all the buzz about mining unstructured data, the only data that will be analyzed in volume in 2013 will remain structured data. Forget about the 80% of health data that is unstructured. Simple key-value matching will continue but robust, rigorous pattern matching, NLP, etc, will have to wait.

2) The Need to Address Data Quality Moves to Forefront – Cora
Data quality issues (DQ) will become increasingly visible as more providers wonder why their clinical data is such garbage. Providers will be shocked they need to invest in DQ specialists/departments/processes (along with the security to support them).

3) Many ACOs Come to an “OMG, What Have We Done” Moment – Rob
For the first half of the year healthcare organizations (HCOs) will be all buzzy implementing, on paper, gain-sharing ACOs. By Independence Day these same HCOs will begin figuring out it is hard and expensive to set up an ACO and that their back office financial management tools are inadequate. By the end of 2013, just two years away from Risk Assumption ACOs (RAACOs) HCOs will take one of three paths: 1) realize ACOs carry all the risk and more of HMOs and bow-out; or 2) scramble to purchase and implement complex financial management software; or 3) cash-out and sell themselves to a payer.

4) Several HIE Vendors Pack Bags & Leave – John
Virtually all of the federal funds distributed to States to stand-up their statewide HIEs has been allocated. Without that federal largess we will begin seeing some vendors exit the HIE market. Who will they be? Think large companies with lots of brand equity and close ties to lobbyists but with only modest healthcare experience. Those vendors that remain must now contend with upping their value proposition beyond simple information  exchange (Direct Secure Messaging will take over that task). Some of the weaker HIE players with limited resources will be looking for a buyer.

5) HIE Market Growth Begins to Slow -John
Over the last several years the HIE market has been growing at a blistering pace well in excess of 30%. That growth will begin to taper off ever so slightly in 2013, say 18-22% CAGR as all who have adopted a solution continue down the arduous path deployment and on-ramping ambulatory providers to extract value from their HIE platform.

6) Despite Strong Growth in Direct Secure Messaging (DSM), Fax Isn’t Dead Yet – Brian
Volume growth in use of DSM sent via health information service providers (HISPs) in 2013 will exceed 100% driven primarily by integrated delivery networks (IDNs) seeking efficiencies and referrals. Despite this impressive sounding growth, far less than 5% of all care transitions will use DSM by end of 2013. And don’t forget, numbers lie. Much will be reported in 2013 on the growth in absolute number of secure email IDs issued by HISPs, but the majority of those accounts will remain inactive.

7) EHR Source Code Subpoenaed –Rob
We will see our first EHR software source code subpoenaed in a malpractice lawsuit this year – the developer will be named as a co-defendant.

8) Chorus Grows Louder, Politicians Weigh-in and MU Program is Put in Stasis – John
HITECH & meaningful use (MU) have done their job, by and large as EHR adoption and use has swelled dramatically throughout the healthcare sector. But there is also a dark-side. Deploying software so that it is effectively used takes time. Unfortunately, the provisions of ARRA do not allow for time to be taken, which is leading to a rapid cram-down of EHRs and associated MU requirements on clinicians. Early signs of a backlash began appearing in 2012. That backlash will come into full bloom in 2013 leading to Congressional hearings and ultimately someone in the White House being forced to hit the pause button on MU requirements.

9) Quantified Self (QS) Crosses Over into Healthcare – Naveen
The peripheral, biometric, consumer market is starting to bloom. In addition to completely new products and companies, we will see development of more flexible platforms driven by a focus on open APIs. Employers will start to incentivize the QS movement as part of their benefits programs. There will also be a shift from wellness-only into light medical use of these devices for such things as physical therapy/rehabilitation programs, mood tracking, sleep tracking and simple pain reporting.

10) Providers Take Interest in Health & Wellness Solutions – John 3
Payers and employers are the traditional markets for health and wellness solutions. But in 2013, those healthcare organizations (HCOs) that are moving towards capitated care models will markedly step up their interest in and adoption of these solutions. This will also result in new hires (health coaches, nutritionists, etc.) as clinicians balk at taking on added responsibility.

11) Emerging Conflicts Over Patient Generated Health Data – Cora
Conflicts will emerge between EHR data and user-generated health data.  Early adopting QS-type patients (see prediction 10) will be bringing in their mobile-app-generated data to their doctors. Majority of doctor(s) will declare that the data doesn’t match up to their records and will not accept it. Resulting conflicts over how/if to get this data into the medical record will ensue.

12) Patient Experience Begins Being Factored In to Treatment – John 3
With increasing attention on patient/customer satisfaction and need to improve adherence to treatment plans, innovative HCOs will begin adopting mHealth solutions that enable patients to track, in real-time, their treatment experience. Treatment plans will be modified “on-the-fly” based on these “experiences” to improve adherence.

Of course there were many other predictions that we mulled over that ultimately landed on the cutting room floor. What remains are predictions that we felt will create the greatest disturbances or ripples in the industry. Predictions that are generally not all that obvious or maybe it is just that there are not many who wish to state such in writing (we’re not shy).

Whatever the case may be, these are our predictions. we’ll stick by them unless someone has some incredibly brilliant argument as to why we have it completely wrong (that’s what comments are for).

So have at it everyone, are we on target, or will we completely miss the mark in 2013?



Re-entry into Healthcare

As with the last shuttle mission making its re-entry into the Earth’s atmosphere yesterday, I am re-entering the world of healthcare IT after an extended family vacation in the wilds of Alaska. No, I did not see John Halamka up there, it is after all a VERY BIG state, but I did get the chance to go completely off-the-grid, a blessed reprise and observe what is one of the more beautiful and still untouched landscapes in the northern hemisphere. Upon finally arriving in Vancouver I made the vow to return, but next time it will be to spend more time in the small coastal towns of the Alaskan peninsula, likely via an expedition kayak, to get up close and personal with the people and environs of this small corner of the world.

After being away for nearly two weeks, it is a challenge to pick up where one left off. Cruising through the reams of email (please excuse any delays in getting back to you I’ll get to your email yet, I promise), trying to catch up on my reading of the various industry rags and tapping twitter I feel pretty comfortable in stating the more things change, the more they stay the same (not exactly the best quote for an analyst to say as we thrive on turmoil…).  That being said, following are a few items that did catch my attention and may look into further:

FDA Releases Proposed mHealth App Regulations
On Tuesday, the FDA finally released guidance on how it intends to regulate mHealth Apps. Having taken a cursory review of these proposed regs, have to say I’m quite impressed as the FDA has struck a careful balance of  applying regulatory review where warranted while allowing plenty of room for innovation in this very young and still immature industry sector.  MobihealthNews has a fine write-up on this story.

WebMD Provides Abysmal Guidance and Tanks
WebMD, which has been seemingly immune to the recession, provided Q2’11 guidance that sent its stock into a tailspin and leading to a very rapid (next day) letter to investors from the Chairman to quell fears. Why is this significant? First, pharma is feeling the effects of the recession and is pulling advertising dollars off the table. Over the last few years, WebMD has been putting virtually all of its “eggs in one basket” – pharma. It appears that the golden goose of pharma is no longer laying golden eggs which will likely have a ripple effect on the multitude of other smaller Health 2.0 like companies whose business models are advertising based. Secondly, once again WebMD is projecting contraction in its “private portal” business. This is, or at least was, the 800lb gorilla in the PHR market for employers and payers. WebMD has milked this cow for about all its worth and do not be surprised if others start aggressively moving in. Cerner is one and we’ll talk about another tomorrow.

Stage 2 Meaningful Use Likely Delayed till 2014
Can’t say we didn’t see this coming as ONC’s advisory board basically recommended such but it does complicate the schedule for incentive payments which, as part of ARRA were meant to create jobs and create those jobs quickly. As the recession continues to drag on, there appears to be an acceptance that getting back to near full employment in this country will not occur quickly. Such acceptance has appeared to bring some rationality as to the rollo-out of EHRs. Choosing, installing, mapping workflow, testing, training and going live with an EHR, let alone meet the various requirements of meaningful use (MU) is no small task and this delay will bring a sigh of relief among many a CIO and eligible professional. But now one has to wonder: What does this mean for Stage Three?  Don’t be surprised if Stage Three gets the ax.

I’m sure there are other bits of news that I missed and welcome your input to help educate this off-the-grid analyst on all the wonderful things he missed as he was trudging through the temperate rain forests of Alaska or battling grizzlies for a share of their salmon (note, grizzlies don’t share).  BTW, this last picture is of one of the “deep forest creatures” you’ll find in that rain forest.

What do WebMD’s Q3 Numbers Tell Us?

Yesterday, the big 800lb gorilla in the PHR market, WebMD announced 3rd quarter earnings that were quite mixed. While its public portal business continues to see strong growth in uniques (now over 83M visitors/month) and advertising revenues that grew 26%, its private portal business continues to produce lackluster results, with flat revenue and holding steady with 124 clients. Even worse for the private portal business, WebMD is projecting a net decline of some 8% for this division in the 4th quarter.

Strong growth for the public portal reflects what other studies and recent surveys have shown: Consumers continue to turn to Dr. Net for a second opinion, self-triage, or simply advice on how to deal with a specific condition.  What is interesting in the case of WebMD is that despite the increasing power and sophistication of search engine technology from Google and the more recently introduced Microsoft Bing, consumers still look to a site like WebMD’s to provide more structured content that is easy to search, review and assist them in managing their health or the health of a loved one.

Zero growth and projected contraction in Q4 for the private portal operations of WebMD is a different story. The private portal business serves both the employer and payer markets wherein WebMD hosts a member or employee PHR for a client. Since late 2007, Chilmark Research has been tracking WebMD’s private portal business as a barometer for sponsored PHR adoption by employers and payers. Now one might easily assume that the downturn in the economy and the lay-offs of hundreds of thousands of employees may have something to do with WebMD’s Q3 results for its private portal business. Problem is: WebMD has been reporting lagging results for this line of business for as long as we have been tracking it so something else must be at play.

Late last year I had a discussion with a senior executive at BCBS-MA. During that conversation I asked what motivated them to take the bold move (at least it was at the time) to allow members to export their claims data to Google Health (BCBS-MA was one of the first payers, if not the first, to allow claims data to be exported by the consumer to a site outside of the payer’s control, in this case to Google Health). The answer, it was a simple business decision. BCBS-MA was spending a lot for WebMD’s private portal and few members were using it. So instead of spending that money on WebMD, the decision was made to turn over the data to the member/consumer allowing them to export it to Google Health and let the member decide how they wished to use their data. Thus, like BCBS-MA, other payers are likely not seeing tremendous adoption and use of their WebMD-hosted PHRs and are not increasing their investments in the service.

On the employer side there may be some contraction in use due to employee lay-offs and a tightening of the belt by employers, but this is likely a very small factor in why WebMD has failed to grown this line of business. Other factors at play are:

Employees still remain reluctant to participate in an employer-sponsored PHR due to concerns of privacy of their health data and how that data may be used against them e.g., deny a promotion.

The efficacy of employer-sponsored PHRs in lowering MLRs (medical loss ratios) and subsequently health insurance costs is far from proven, thus employer ROI is in question.

WebMD has a reputation of being expensive and difficult to work with. Chilmark has also heard some rumors that WebMD is putting very little into improving the capabilities of the private portal platform,- its on life-support. This last point should not come as a surprise considering the results of this business line.

So what does this mean to the broader market?

First, consumers are increasingly turning to sites such as WebMD’s to gather information to assist them in their health and wellness decisions. The WebMD property is a very strong brand, remains one the top go to sites for health information, their iPhone app has consistently ranked as one of the top health apps and thus WebMd can command a premium from advertisers. Unlike most Health 2.0 companies who also seek to leverage the all too common internet advertising model to drive business with little success, WebMD is actually doing it quite successfully.

But WebMD has a major problem in its private portal business and rather then make a concerted effort to put this business back on the right track, the company seems perfectly content to milk this cow for all its worth. That strategy provides an opening for other companies to step in.

The challenge for new entrants, however, will be their ability to provide a comprehensive health and wellness solution that is comparable, if not improves upon the WebMD offering. Today, while there are plenty of products and services in the market that attempt to address various health and wellness needs of employers, there are virtually no solutions that provide as comprehensive a portfolio of services that WebMD currently provides. Employers and payers are looking for options (this was part of the justification for some employers who came together to create Dossia and the separate efforts of Aetna and United Health Group), there is demand, but few options exist outside of creating your own.

Ideally, through acquisition(s), partnership(s) and merger(s) such a solution can emerge to serve the employer and payer markets. Now the question is: Who will step up to the plate and make it happen.

WebMD’s Private Portal Business Continues Slide

WebMD announced first quarter earnings today that showed continued lackluster results for their “Private Portal” division, slipping roughly 5% year over year from $23M to $21.8M.

Now one could argue that the overall decline in employment due to the recession is to blame for the drop in clients from 134 to 131 in Q1-2010, but we see something else at play: high pricing for low value delivered.

Having spoken to a number of existing and former customers of WebMD, one gets the clear sense that the private portal business is no longer core to WebMD’s corporate strategy and frankly why should they as they reported overall growth of an impressive 20%.

Its pretty clear to us that the private portal business of WebMD is a business they intend to milk for all it’s worth. This may create opportunities for newer companies to capitalize on. The challenge for them will be to provide a full suite of solution capabilities as few employers or payers today are seeking niche solutions.

WebMD + Social Media, NOT!

Today, WebMD announced the launch of its new social media initiative, WebMD Exchange.  It’s a dud.

Being WebMD, the leading online consumer health, it is a bit surprising that they are so late to the party as there are now quite a number of health-related social media sites such as one of Chilmark’s favorites, the focused Patients Like Me or the more broad ranging site MedHelp.  Thus, with this announcement one would think that WebMD would have studied the other sites, learned what works and what does not and provide a compelling site.

So much for assuming.

Went to the site today to check it out, here are the quick pluses and minuses:

In the plus column the site has…

1) A number of exchanges to address a wide range of conditions.

2) Some of these exchanges focus on care giver issues, such as parents of children with depression.

3) Registered members can create their own exchanges.

4) For diseases with medications, a list is automatically generated of the relative popularity and use of various medications with member reviews (e.g. side effects, overall effectiveness, etc.).

In the minus column the site…

1) Is cluttered and noisy, hard to determine what to read that is pertinent and what is fluff.  Seems to be an amalgamation of everything not to do in a social community site, let alone one addressing health & wellness.

2) Has far too much noise coming from ads. Now ads are not a bad thing if they pertain to the disease/condition within that exchange.  Finding a postmenopausal ad in a section on cancer or a Charmin toilet paper ad in childhood depression?  Please, WebMD, the technology is there to do a better job than this for your members.

3) Takes to long to navigate due to all of the click-thrus to see pretty much everything.  Since online ad pricing algorithms often have a site retention/click metric, WebMD is purposely making it more difficult to get at content to maintain its ad pricing power – not nice WebMD.

4) Has very little if any policing seems to be occurring leading to the creation of many communities (exchanges in WebMD parlance) that are of little value or just plan silly.  A favorite in the Anxiety-Panic category was the Exchange, OMG Zombies.

5) For some conditions there can be several exchanges. Fine, nice to have choice but which one is truly a vibrant exchange.  Well, that answer is not apparent until you click-thru (more clicks, more ads) to determine if an exchange is vibrant.  Royal pain in the a**.


WebMD’s attempt at using social media within the context of these exchanges is late to market and one of the poorest executions of such that we have seen.  Granted, maybe we had high expectations for WebMD as it truly is the 800lb gorilla in this market. Sadly, those expectations were not even close to being met.

Hey WebMD, why not take a smidgen of that $800M in cash and investments you have hoarded up and actually do this right.  It will be an extremely modest investment that could pay off handsomely rather than this half-baked attempt which is frankly embarrassing and will likely fail.