McKesson HBOC is betting that its mammoth sales force and years of experience in healthcare will propel a new Internet unit unveiled last week.
The relatively late entry into an emerging market could make it more difficult for the once-stalwart information systems company to lead the healthcare industry's migration to the Internet, some observers said.
But McKesson officials said they're not too late to the party, because healthcare organizations are just beginning to execute Internet-technology strategies.
And when they do, an important consideration will be the extent to which Internet services can mesh with and improve on existing computer system investments. McKesson's information technology unit is a leading supplier and caretaker of those systems.
The newly formed unit, called iMcKesson, comprises both payer- and provider-focused products and services that were previously housed under the umbrella of Atlanta-based HBO & Co., which was acquired by San Francisco-based drug distributor McKesson Corp. in January 1999. The unit also will include a Web-based electronic medical record from Abaton.com, a Bloomington, Minn.-based company McKesson acquired last November.
The products and services generated $300 million in revenue last year, about 25% of the total revenue reported by McKesson's Atlanta-based information technology business.
The company hopes to use iMcKesson to enable providers to share clinical knowledge that improves care and slashes costs, said David Mahoney,
iMcKesson's chief executive officer.
"The market is in a very good place right now," he said. "We think we're well-positioned with our clinical focus and the power and reach of HBOC behind us."
Not everyone agrees.
"(McKesson HBOC) is late coming out of the gate, and in the meantime a lot of other alliances and partnerships have been built throughout the industry," said Steve Rushing, president of the e-health division of Southfield, Mich.-based Superior Consultant Co. healthcare consulting firm.
Mahoney said the flurry of e-health activity during the past year has allowed McKesson's information systems customers to start asking the right questions.
Health systems seeking to harness the efficiencies of the Internet are not going to scrap their investments in information systems to build Web-based alternatives, Mahoney argued. Instead they want to use the Internet more effectively to distribute information stored in existing systems. "We're betting the company that physicians and providers understand that they don't have to (render) obsolete everything they've done," Mahoney said.
But some industry analysts are uncertain that healthcare providers are even ready to take iMcKesson up on its strategy.
"There are no hospitals buying Internet anything," said Charles Trafton, who heads the healthcare information technology research practice at Adams, Harkness and Hill investment bank in Boston. Although McKesson is doing the right thing by focusing on Internet connectivity, "it's premature to say this (new venture) is exciting," Trafton said.
"Most providers are not buying
e-health applications today," said Mark Anderson, CEO of ARC Consulting Group in Bellevue, Wash., and healthcare chief of Meta Group, a research firm based in Stamford, Conn.
Nevertheless, he said, iMcKesson is "good for the industry" as physicians increasingly look for solutions that deliver useful, timely knowledge and not just reams of data.
Mahoney said iMcKesson will capitalize on just that. "Doctors aren't averse to technology, just to technology that doesn't work--and they've seen a lot of it," he said.
Momentum in e-health will inevitably accelerate, Superior's Rushing said. When it does, he said, vendors might be left out if they haven't forged productive partnerships.
"(Information technology) customers want to know which payers you are connected to, which suppliers, which pharmacies, which reference labs. A lot of those relationships are already locked down," Rushing said.
With $24 billion in 1999 purchases between them, the two largest hospital buying groups, Premier and Novation, have aligned themselves with Medibuy.com and Neoforma.com, respectively, to create e-commerce portals for medical supply buyers.
In addition, six major health insurers announced in March that they were forming a claims-processing Web site to cut out middlemen (April 3, p. 14).
With many of these online relationships sewn up, iMcKesson is going to endure a "wild ride" that the parent company's huge customer base may not be able to stabilize, according
Based in San Francisco, iMcKesson initially will employ about 2,000 people full time. The company will continue to work closely with HBOC's existing information technology business unit, under the direction of President Graham King.