SAN FRANCISCO (01/26/2000) - When healthcentral's stock tanked on its debut in the public markets last month, Wall Street's ardor for Internet medical information companies seemed to have cooled.
Emeryville, Calif.-based HealthCentral ended the day 10 percent below its offering price. In contrast, just six months ago Drkoop.com's stock closed 83 percent over its initial price. "You just can't get by on advertising alone anymore," says Caren Taylor, a health care analyst at E-Offering. "There's so many content sites out there, there's not enough advertising to support them all."
In fact, the major health content sites, including HealthCentral, are swiftly reducing their dependence on advertising by adding online pharmacies, medical claims processing and other services. The goal is to become online consumers' medical managers. That means providing a range of so-called disease-management services, from overseeing individuals' prescriptions to reminding them to take their medicine to monitoring their blood-sugar levels online.
Internet health companies expect that employers and managed-care providers will underwrite such services in the hope that online monitoring will detect health problems before they become serious - and costly.
Consumer medical information company OnHealth, for instance, recently acquired Health Decisions International, which provides disease-management services to corporate employees. The Seattle-based company intends to create an Internet version of Health Decisions' program for consumers.
Medscape, which began as a medical information site for physicians, is developing a managed-care strategy, according to CEO Paul Sheils. "All of the so-called content sites are evolving into so-called e-health care portals," he says. "Once you gather eyeballs with content, you sell goods and services."
Medscape also is moving into transactions. This month the company launched MedOffice, a site that allows physicians' staff to verify patient insurance and file claims online. Net health information company Mediconsult's Physicians' Online subsidiary has added claims processing for its doctor subscribers.
Mediconsult also builds Web sites for drug companies, health care companies and local pharmacies.
HealthCentral, best known for its spokesman, TV's Dr. Dean Edell, also has developed an application service provider division, building and maintaining sites for hospitals and other health care institutions. To move beyond its original focus on health information, HealthCentral late last year opened an online pharmacy tied to an extensive drug interaction database.
"Our business model has changed dramatically since we began in September '98," says Albert Greene, HealthCentral's chief executive. "We had the problem [with the IPO] where the market didn't know what we were. Are we content? Are we commerce? Are we an application service provider?"
HealthCentral's stock has rebounded since its IPO. The next step, says Greene, is to offer disease-management services.
Drkoop CEO Donald Hackett told analysts and investment bankers at a recent Chase H&Q health care conference that "content is not the key." Drkoop, he said, will evolve into a disease-management company. He expects that shift to lessen the company's dependence on advertising and sponsorship revenue, which accounted for 78 percent of its income in the first nine months of 1999.
Drkoop and other health information sites will face plenty of competition in their new incarnations. Large companies like Healtheon/WebMD aim to capture the loyalty of consumers by connecting them to their doctors, health plans and pharmacies. Online medical monitoring companies such as LifeMasters and Health Hero already provide disease-management services.
Getting consumers to trust a health site for medical information is one thing; persuading them to entrust their health care to an online company is another.
Success may depend on creating a set of services just as compelling to the managed-care companies that pay for consumers' medical care.