Healtheon

Healtheon was an American dot-com-era health-care technology company founded by James H. Clark and Pavan Nigam. Its stated ambition was to apply computing and the Internet to the fragmented health-care system, reducing administrative inefficiency and improving connections among insurers, physicians, employers, and other participants. The company originated in an idea Clark developed in the mid-1990s, after his role in founding Netscape had made him a prominent figure in the Internet industry. He established the business as Healthscape in early 1996 with financing from Kleiner Perkins Caufield & Byers. The name was later changed to Healtheon to avoid confusion with Netscape. Healtheon's original concept focused on creating a technology system that would link insurance companies with corporate human-resources departments. That proposal did not gain sufficient support: insurers considered the system too expensive, while human-resources departments showed limited interest. The company subsequently moved toward more concrete transaction and information infrastructure for doctors and insurers. In 1997, Mike Long became chief executive officer. Soon afterward, Healtheon entered a research-and-development partnership with Brown & Toland, a San Francisco physician network of approximately 1,600 doctors. The partnership gave Healtheon a way to develop and test services in an operating health-care environment. A major strategic turning point came in February 1998, when Healtheon announced the acquisition of ActaMed, a medical-records clearinghouse serving doctors and insurers. The transaction provided Healtheon with an operating business and a revenue-generating base, moving it beyond a largely conceptual Internet-health-care proposition. Healtheon also pursued public-market financing. It filed for an initial public offering in August 1998, but withdrew the offering in October after the 1998 Russian financial crisis contributed to a sharp deterioration in stock-market conditions. The company returned to the public markets in February 1999. Its shares reportedly rose sharply on the first day of trading, reflecting the strong investor enthusiasm then surrounding Internet companies and the prospect of digitizing health-care administration. Healtheon used its public-company currency to expand further. In April 1999 it announced the acquisition of MedE America in a stock transaction valued at approximately $478 million. In May 1999, it announced a merger with WebMD, another prominent Internet health-care company. The WebMD transaction ended Healtheon's independent corporate existence and placed its technology and operations within the broader WebMD business. Healtheon's importance lies less in a lasting consumer product brand than in its early attempt to build digital infrastructure for health-care administration. Its trajectory illustrates several defining features of the period: ambitious Internet-era plans, difficulty persuading incumbent health-care organizations to adopt new systems, a shift from broad platform claims toward transaction-processing assets, volatile public-market conditions, and rapid consolidation through acquisitions and mergers. After the merger with WebMD, Healtheon no longer operated as an independent company.

Healtheon emerged from James H. Clark's mid-1990s effort to modernize the health-care industry through networked computing. Clark established Healthscape in early 1996 with backing from Kleiner Perkins Caufield & Byers. The company changed its name to Healtheon to prevent confusion with Netscape, the Internet company with which Clark was associated. The initial business plan sought to connect insurance companies and corporate human-resources departments. The proposal failed to attract sufficient interest because insurers regarded the service as too expensive and human-resources departments were not persuaded of its value. Healtheon then redirected its efforts toward practical information and transaction systems used by physicians and insurers. Mike Long became chief executive officer in 1997. Within months, the company formed a research-and-development partnership with Brown & Toland, a San Francisco physician network representing about 1,600 doctors. Healtheon's most important early expansion was its February 1998 agreement to acquire ActaMed for $150 million. ActaMed operated a medical-records clearinghouse for doctors and insurers, giving Healtheon a functioning business and a source of revenue. The deal also aligned the company more closely with the administrative infrastructure it sought to digitize. Healtheon attempted to enter the public markets in 1998. It filed for an IPO in August, but cancelled the offering in October as the 1998 Russian financial crisis contributed to a decline in stock prices and a less favorable environment for new technology issues. The company revived the plan and completed its IPO in February 1999. Its shares experienced a dramatic first-day increase, reflecting the period's enthusiasm for Internet companies and the perceived opportunity to transform health-care administration. After the IPO, Healtheon expanded through acquisitions. On April 21, 1999, it announced the purchase of MedE America in a stock transaction valued at approximately $478 million. On May 20, 1999, it announced a merger with WebMD. The merger absorbed Healtheon into WebMD and ended Healtheon's independent corporate history. The company's short life therefore followed a pattern common to the late-1990s Internet economy: an ambitious technology thesis, difficulty securing adoption in a complex regulated industry, acquisition of a more concrete operating asset, a delayed IPO, rapid post-IPO expansion, and consolidation with a better-known sector participant.

• 1999

  Healtheon completes IPO

  [1]Healtheonen.wikipedia.org

  The company completed its initial public offering and became publicly traded.

• 1999

  MedE America acquisition announced

  [1]Healtheonen.wikipedia.org

  Healtheon announced an approximately $478 million stock acquisition of MedE America.

• 1999

  Merger with WebMD announced

  [1]Healtheonen.wikipedia.org

  Healtheon announced its merger with WebMD, ending its independent corporate existence.

• 1998

  ActaMed acquisition announced

  [1]Healtheonen.wikipedia.org

  Healtheon announced its acquisition of ActaMed, a medical-records clearinghouse for doctors and insurers.

• 1998

  Planned IPO cancelled

  [1]Healtheonen.wikipedia.org

  Healtheon withdrew its planned IPO after market conditions worsened during the 1998 Russian financial crisis.

• 1997

  Mike Long becomes chief executive

  [1]Healtheonen.wikipedia.org

  Mike Long became Healtheon's chief executive officer as the company developed a more operational health-care technology strategy.

• 1997

  Brown & Toland development partnership

  [1]Healtheonen.wikipedia.org

  Healtheon formed a research-and-development partnership with Brown & Toland, a San Francisco physician network of about 1,600 doctors.

• 1996

  Healthscape is founded

  [1]Healtheonen.wikipedia.org

  James H. Clark established Healthscape with Pavan Nigam and financing from Kleiner Perkins Caufield & Byers to pursue Internet-based modernization of health-care systems.

• Healthscape changes its name to Healtheon

  [1]Healtheonen.wikipedia.org

  The company adopted the Healtheon name to avoid confusion with Netscape.

Healtheon positioned itself as an Internet infrastructure company for the health-care industry, aiming to streamline administrative exchanges and reduce fragmentation among insurers, physicians, employers, and medical-record systems.

• Healthcare information technology

  Healtheon health-care connectivity platform

  Healtheon's core proposition was an Internet-based infrastructure layer for connecting participants in health-care administration. The company aimed to facilitate exchanges among insurers, physicians, employers, and related systems, with the broader objective of reducing paperwork, fragmentation, and inefficiency. The original employer-insurer concept did not gain traction, so the business moved toward more practical transaction and information services.

• Medical records and claims infrastructure

  ActaMed clearinghouse services

  ActaMed was a medical-records clearinghouse serving doctors and insurers. Healtheon's acquisition of the business supplied an established operating capability and revenue source, strengthening the company's position in health-care information exchange and administrative processing.

• 1999

  Acquire MedE AmericaM&A

  Background

  Following its IPO, Healtheon pursued expansion within Internet-based health-care services.

  Action taken

  Healtheon announced the acquisition of MedE America in a stock transaction valued at approximately $478 million.

  Aftermath

  The acquisition expanded Healtheon's holdings before the company announced its merger with WebMD later that year.

  Transaction value. Approximately $478 million in stock (April 21, 1999)

  Source

• 1999

  Merge with WebMDM&A

  Background

  Healtheon and WebMD were both pursuing Internet-based health-care businesses during the late-1990s technology boom.

  Action taken

  Healtheon announced a merger with WebMD on May 20, 1999.

  Aftermath

  The merger ended Healtheon's independent corporate existence and placed its business within WebMD.

  Source

• 1998

  Acquire ActaMedM&A

  Background

  Healtheon's initial plan to connect insurers with human-resources departments had not attracted sufficient interest. The company needed a more concrete operating base in health-care administration.

  Action taken

  Healtheon announced the acquisition of ActaMed, a medical-records clearinghouse for doctors and insurers, for $150 million.

  Aftermath

  The transaction gave Healtheon an established source of revenue and moved its strategy toward practical information and transaction infrastructure.

  Acquisition value. $150 million (February 1998)

  Source

• 1998

  Cancel planned IPOStrategy

  Background

  Healtheon had filed for an IPO in August 1998, but market conditions deteriorated following the 1998 Russian financial crisis.

  Action taken

  The company cancelled its planned offering in October 1998.

  Aftermath

  Healtheon later returned to the public markets and completed an IPO in February 1999.

  Source

1. 1Healtheonen.wikipedia.org