December 13, 1999

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E-Transformation
Health-Care Companies Target Services
Though lagging a bit, industry is trying to catch up

By Marianne Kolbasuk McGee

ost health-care companies don't have products that can be purchased over the Internet and delivered to their customers' doorsteps. So when it comes to E-business, these businesses are concentrating on providing services, to clients, partners, and suppliers.

Health-care companies ranked below other vertical industries surveyed by InformationWeek Research in deploying E-commerce Web sites--only one-third have done so. But these companies are applying a variety of strategies to make up lost ground. About three in five health-care managers say their companies will eventually deploy E-business in a majority of their business units. There's also strong interest--among two-thirds of health-care companies--in initiating technology or business partnerships with Web-only companies in the next year, and two in five say their companies will create a Web-only business division.

Health-care services provider UnitedHealth Group in Minneapolis will spend more than $20 million on E-business development this year. The company's Web efforts, dubbed "E-health," aren't driven by a standalone business unit. Rather, "E-health is permeating every part of the company," says the company's CIO, Paul LeFort.

The initiatives include a self-service offering that lets employees of other companies who are covered by UnitedHealth Group's offerings get questions answered and problems addressed over the Web. The potential savings for the company are substantial, LeFort says, because self-service on the Net can be done for a fraction of what it costs to handle phone calls: 8 cents per query vs. $8 per call. The company handles 40 million phone calls a year.

The company has linked up with partners to launch other initiatives. When it comes to handling medical claims, health-care companies have traditionally relied on paperwork and electronic data interchange for their billing and payment processing. But now, UnitedHealth Group and other health-care providers are processing claims via third-party Internet clearinghouses, including Healtheon Corp., which routes bills for medical appointments and other claims to the appropriate health-care plan provider.

UnitedHealth Group also has an alliance with ChannelPoint Inc., a Web services company that helps UnitedHealth sell its plans to businesses with fewer than 50 employees. Here's how it works: A small business sends a proposal to buy health coverage--from UnitedHealth Group or another provider--via ChannelPoint. If the proposal is accepted, ChannelPoint processes the information that's needed to get the business signed on to the appropriate health-care plan.

The approach results in better service to UnitedHealth Group's customers. The proposal process has been cut from three days to about 25 minutes, LeFort says. Meanwhile, the time required to begin coverage has been reduced from 30 days to about seven. "Because we can turn around quotes more quickly, we get more business," LeFort says. "And that means more revenue."

Besides helping patients gain access to health care and other related information, some companies, including UnitedHeath Group, are giving patients the ability to schedule appointments, choose physicians, and get directions to doctors' offices or other medical facilities.

The greatest impediment to E-business initiatives in the health- care industry may be privacy concerns. Federal rules regarding confidentiality and security in accessing patient records over the Internet are still being ironed out. "The federal government will require us to add more security measures to electronic patient records, so some Internet-related medical-records work and processes has to be on-hold," says John Peterson, director of IS at Torrance Memorial Medical Center in Torrance, Calif.

In fact, one health-care company IT director expects that the federal privacy rules of the Healthcare Insurance Portability and Accountability Act will create a compliance issue "that's like another Y2K." His fear is that IT resources that could be dedicated to Internet-related projects will, in the near term at least, be allocated to government compliance instead.

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