How health information on the Internet is evolving

Four components exist: content, commerce, connectivity, and care

By Stan Bernard, MD, MBA

More than a quarter of a billion Internet users worldwide send an average of 8 billion e-mail messages each day to 253 million e-mail boxes. Of those Internet users, 110 million are Americans, 70 million of whom have searched the Web during the past year for health information.

Those ìhealthmed retrievers' are more likely to be female, more affluent, better educated, and in their 40s. They typically search the Web for information on diseases, nutrition, pharmaceuticals, and related topics. Even when using the top search engines, healthmed retrievers will find, on average, only about 17% of the relevant information on the Web.

Increasingly, they are turning to health-care portals and other content sites for health-care information. They have more than 20,000 health-care sites to choose from; 1,500 more come online every month.

The growth of "eHealthî" has paralleled, and in many ways helped drive, the growth of the Internet. eHealth refers to sites or entities using the Internet to provide health-care information, products, technologies, or services. Those four offerings, in turn, form the basis for segmenting the eHealth space into four markets: content, commerce, connectivity, and an emerging segment that I have termed the "care space" (Figure 1).

This article defines and describes the evolution of each eHealth space, highlighting the key subsegments, players, strategies, metrics, challenges, and future trends.

Content counts

The content space includes sites that offer health and disease information, online communities, and, in some cases, simple self-care tools. The most popular content sites are portals. Portals include two major categories: consumer and health-care professional. Consumer portals consist of commercial portals and organizational portals. Leading commercial portals include DrKoop.com and OnHealth.

Various types of health-care organizations also have developed consumer portals, including managed-care organizations such as Kaiser Permanente's KPOnline.org, hospital systems such as MayoHealth.org, government agencies such as FDA.gov, and advocacy groups such as AmericanHeart.org. Professional portals include Medscape and WebMD.

Increasingly, the portal space is converging: the professional sites are creating associated consumer portals such as Medscape, and the consumer portals are licensing their content or co-branding their sites with organization portals. Licensing content, e-commerce transaction fees, and advertising for example, banner ads or site sponsorship are primary revenue sources for portals.

Because advertising revenue is so important, portals usually are measured in number of visitors to the site, or "eyeballs." Specific viewer metrics include unique and total visits to the site, time on site, unique and total page views, and ad impressions. Other performance metrics for portals are advertising/sponsorship revenues and licensing fees; Internet exposure or "footprint," measured in syndication or links to other sites; and the "buzz" surrounding a particular site, usually gauged by media coverage.

Portals use a variety of strategies to attract eyeballs and create buzz. Originally called "Empower Health," DrKoop.com used a "key man strategy," changing its name to take advantage of its celebrated co-founder and former U.S. surgeon general. DrKoop.com built on its namesake's reputation to position itself as the "trusted source" among eHealth portals.

Other sites have used the "halo strategy" by affiliating with respected medical institutions, such as The Mayo Clinic (MayoHealth.org) and Johns Hopkins Medical Center (Intelihealth.com).

Health-care portals also have used more traditional Internet strategies, including "first mover" advantage, public relations and advertising campaigns, and strategic partnerships with online and offline players. Several portals have forged high-profile strategic alliances with major media players (CBS-Medscape, WebMD-News Corp.) and leading portals or Internet service providers (American Online-DrKoop.com).

Some portals have received criticism for bias and inaccuracy in their healthcare content offerings. As a result, a number of other internal and external initiatives are under way to ensure objectivity and quality of content, particularly in light of studies revealing that a significant percentage of Web-based health-care content is incorrect or out-of-date.

A second major challenge for eHealth portals is having a sustainable revenue model. Advertising dollars are harder to come by as health-care content becomes a free and ubiquitous commodity. Competition is high and pharmaceutical companies and other advertisers question the effectiveness of banner ads and site sponsorships.

There will likely be a significant "e-shakeout" among portals as they consolidate to build share and acquire complementary content offerings. Commercial consumer and physician portals will partner with and license content to hospital and physician sites to reach patients locally.

Portals also will move to personalize and customize their offerings to retain viewers, perhaps by partnering with care management sites that offer patient-specific information, instructions, and professional expertise.

The commerce space refers to those sites or companies that offer Web-based abilities to research, compare, and buy health-care products. There are two models of commerce companies: business-to-consumer (B2C) and business-to-business (B2B).

To date, the B2C space has been dominated by the high-profile activities of the online drugstores, or "e-tailers."

In fact, no eHealth space has consolidated as quickly as the online pharmacy space. In the first half of 1999, there were three "hot ramp" online drugstores launched: Soma.com, Drugstore.com, and PlanetRx.com. At that time, the offline pharmacy space was led by three bricks and mortar pharmacy chains (CVS, Rite Aid, and Walgreens) and three pharmacy benefit management (PBM) companies (Merck-Medco, PCS, and Express Scripts).

The online drugstores soon realized they needed the support of PBMs to obtain insurance reimbursement for online prescription pharmaceutical purchases. Simultaneously, players recognized the potential efficiencies and consumer appeal of Internet-based pharmacy sales.

Within 6 months, those three distinct segments converged, resulting in the formation of three "clicks, bricks, and claims" coalitions: CVS/Soma/ Merck-Medco; Rite Aid/Drugstore.com/PCS; and PlanetRx/Express Scripts.

Those three coalitions and other smaller players are vying for the approximately $150 billion in potential sales from the pharmacy, over-the-counter, and health and beauty product categories.

Other B2C plays have targeted health-care insurance products (HealthAxis.com) or physician products, including medical books or "doctor's bag" equipment (Medsite.com). B2C sites measure performance by site traffic, purchase rate trends (for example, buy-to-browse conversion rates), average order size and price, total revenues, and margins.

In contrast to the B2C space, the eHealth B2B space has evolved more slowly and used different business models.

However, the "B2B Boom" is coming: Forester Research predicts that within 5 years, online B2B sales will soar to $348 billion. New B2B business models, called electronic hubs or market makers, are catalyzing that sales surge.

There are two types of electronic hubs. Vertical hubs focus on sales of products in a particular industry segment or subsegment. SciQuest.com is a vertical hub that sells laboratory supplies to companies conducting life sciences research.

Functional hubs mediate business transactions that are common across industries, such as employee benefits management like Employease.com.

There are several models of vertical and functional hubs. Catalog models such as MedicalBuyer.com sell large volumes of smaller-ticket items like medical supplies. Auction models such as Neoforma.com typically offer nonstandard, used, or decommissioned products like medical equipment. Exchange models such as Promedix.com are used for near-commodity or hard-to-find specialty items.

Increasingly, traditional offline health-care intermediaries, such as group purchasing organizations, for-profit hospital chains, and distributors are jumping into the B2B space. Bergen Brunswig, a large distributor, has announced plans to create an online auction for blood products and other items. To stay ahead, Internet-based B2B hubs will converge to offer diverse business models and product offerings. Neoforma now offers medical product catalogs in addition to its used medical equipment auction. Chemdex, a life sciences vertical hub, recently acquired Promedix.com, a health-care products hub.

B2C players will also be diversifying their product offerings and abilities to maintain market leadership. Drugstore.com recently acquired Beauty.com, a seller of high-end cosmetics. However, the biggest challenge for online drugstores is going to be government regulation. Concerns about the legitimacy and legality of some online pharmacies will spur increasing government oversight. That high-profile regulatory activity will actually legitimize and enhance the leadership positions of the major online pharmacies, including CVS.com, Drugstore. com, and Planet Rx.

Connectivity links

The connectivity space refers to Web-based transaction processing, communications, and networking. Connectivity companies have the potential to be an affordable, ubiquitous, and practical solution to the enormous challenge of managing health-care data transactions and communications.

In fact, one-seventh of all data transmissions in the United States are related to healthcare. Annually, there are 30 billion eligibility, claim, laboratory, and referral transactions in healthcare.

The goal of connectivity companies is to link parts or all of the major health-care stakeholder segments electronically payers, providers, and patients to share and communicate pertinent administrative, financial, and clinical information. Some of the major eHealth connectivity players include CareInsite, Healtheon/WebMD, and Pointshare. They are competing with the traditional, offline technology vendors such as MdKesson/HBOC and IDX that are moving their products to the Web.

The new connectivity companies are using different strategies to penetrate the market and build the critical mass necessary to create an online community of health-care stakeholders.

First-mover advantage and rapid customer adoption are critical success factors because the value of connectivity increases exponentially with the number of users. Some of these companies are taking a build-the-field" approach: create an information infrastructure and encourage providers and others to adopt it. Others are using a "work-the-field" approach: enter a partnership or merge with an offline technology vendor that has an installed base of users, particularly physicians.

CareInsite is 72% owned by Medical Manager, which has 120,000 physicians using its practice management systems. Connectivity players are also targeting different geographic demographics: some, like Healtheon, are taking a national approach while others are pursuing regional (CareInside) or local (for example, PointShare) markets.

Currently, the primary revenue streams for these companies are transaction costs, licensing and service fees, and commissions. However, a subscription revenue model will likely emerge over time. The key performance metrics for assessing connectivity companies include total revenues; the total number and costs of transactions; and the number, types, and concentration of electronic partners (physicians, hospitals, labs, etc.).

Local health-care delivery

High concentrations of electronic partners in a particular locale are more valuable because health-care delivery remains a local phenomenon.

The connectivity companies face many challenges in trying to link health-care stakeholders, including physician resistance to computerization, concerns regarding patient confidentiality, the fragmentation of health-care data, and difficulty in the transition from legacy systems. Consequently, most of the connectivity companies have focused on a limited number of processes, such as connecting payers and providers for claims processing.

However, even Web-based claims processing has proven to be so elusive that Healtheon recently bought Envoy, a large offline electronic claims processing company, to catalyze its efforts in that area. Although Internet connectivity shows great promise, it will take significant time before the industry sees systemwide real-time claims processing and remittance, widespread use of computerized health records, and extensive communication and care integration among health-care professionals.

There is an emerging fourth segment, the care space, which includes those entities or sites that are leveraging the Internet to record, measure, monitor, manage, and deliver care. The care space market potential is projected to be $700 billion, 10 times the potential market size of the content space (Figure 2 on Page 11).

The care space differs from the content space in several important ways (Figure 3). The most important differences are that the information in the care space is patient- and condition- specific and comes from a patient's own health-care provider. Also, care sites deliver health services, not just information.

The care space is divided into two categories. Care management companies provide comprehensive patient care services by leveraging the Internet. Those companies typically offer disease-specific training, clinical tools, and assistance from health-care professionals. The companies may be clicks and mortar models that provide online and offline services, for example Accordant.com or "clicks only" companies such as DiabetesWell.com.

Care tools companies provide clinical interventions to support health-care delivery services. They usually have recording, monitoring, or measurement capabilities. WellMed.com provides an online, patient-generated health record. Impact Health offers a variety of Internet-delivered health risk assessments, point-of-care home tests such as colon cancer screening, and monitoring devices such as Web-based glucose monitoring instruments.

Care sites generate revenue primarily from third-payment insurance reimbursement or consumer out-of-pocket subscriptions. Other potential sources of revenue include e-commerce transaction fees such as online drug purchases and licensing fees. Key metrics used to analyze care sites include the number of enrolled patients; length of time managed; clinical, economic, and quality-of-life outcomes; and patient satisfaction measures.

Legal and regulatory issues are the biggest challenges for care sites. Patient care services delivered through the Internet must be provided by clinicians licensed in the patient's state. In the future, it is likely that the government will take legislative action to facilitate Web-based care services delivered by a patient's own providers.

Other future trends include the substitution of telemedicine services with Internet-delivered services, particularly as broadband technologies become more developed. For example, Image Medical enables radiologists to obtain and receive radiographs via the Internet that are comparable to those delivered through telemedicine installations.

These second-generation care sites will increasingly form partnerships with first-generation health-care portals that are looking to add highly "sticky" applications. In fact, convergence across eHealth spaces will dramatically change the virtual landscape to the point where the industry will no longer be able to distinguish sites as members of the content, commerce, connectivity, or care spaces.

That reshaping of the eHealth space will likely happen in Internet time.

Editor's note: This article originally appeared in Pharmaceutical Executive's eHealth supplement.

Stan Bernard, MD, MBA, is president of Bernard Associates, an eHealth business consulting firm based in Neshanic Station, NJ. He teaches eHealth at the Wharton School of Business. He can be reached via email at SBernardMD@aol.com.