Internet healthcare information company Healtheon/WebMD can see the picture it hopes to create with its puzzle pieces, but it hasn't yet put it together.
It may still take some time.
With its stock battered by Wall Street's reassessment of anything dot-com, Healtheon announced last week it would up the ante on what was originally a $5.2 billion bid to acquire Medical Manager Corp., an Elmwood Park, N.J.-based provider of physician practice management systems, and its publicly traded Internet subsidiary, CareInsite.
With the new agreement, Healtheon will pay for each share of Medical Manager with 2.5 of its own shares, up from the 1.65 shares initially offered Feb. 14.
The original agreement to pay 1.3 Healtheon shares for each share of CareInsite not owned by Medicare Manager has not been changed.
At last week's stock prices, the deal was valued at about $1.7 billion.
In May, federal regulators issued a second request for information regarding the Medical Manager transaction, signaling their intent to conduct a complete investigation into the merger's possible anti-competitive effects.
Last week's revision in purchase terms included the elevation of Medical Manager's top executive, Martin Wygod, 60, to equal status with Healtheon's chief executive officer, Jeffrey Arnold, 30.
Wygod has 23 years' experience leading healthcare companies, including Medco Containment Services, a pharmacy benefits manager purchased by Merck & Co. in 1993. "(Wygod) is probably better known to Wall Street than to Main Street," said Conan Laughlin, vice president and senior research analyst with Deutsche Banc Alex.Brown, Boston. "He is perceived as a guy with a track record of delivering shareholder value."
On completing the acquisition, the new company will drop the Healtheon name and be called WebMD. The deal could close in September but may be delayed by the antitrust investigation (June 5, p. 12).
The move distances the company from being a brainchild of James Clark, whose reputation as founder of Netscape Corp. was supposed to add cache to the Healtheon name.
And Wygod's stepped-up role reflects the importance of Medical Manager, whose software is used by some 185,000 physicians and represents a new opportunity for Healtheon to reach what it perceives to be the center of healthcare transactions--the physician office.
By reaching about 40% of U.S. physicians, Medical Manager's office applications are in the physician practices that generate the most transaction activity, Arnold said.
Arnold readily acknowledged that Healtheon's suite of services is still a work in progress. "Patience is important here," Arnold said. "Everyone is looking for that ultimate solution and that's our goal--but first you have to get the assets."
A multibillion-dollar string of acquisitions Healtheon has announced or completed in recent months aims to add the Internet companies and transaction hubs that provide the capability to accomplish such tasks as claims processing, eligibility verification and practice management. By integrating these acquisitions with its existing World Wide Web services and payer relationships, Healtheon seeks to be the place on the Web where healthcare business gets done.
But despite marketing promises laying out a raft of transaction services to healthcare providers, the execution of those promises is not at hand.
"The vision is to move all traditional business to the Internet. In reality that will take awhile," said Daren Marhula, a healthcare research analyst with the investment firm of U.S. Bancorp Piper Jaffray, Minneapolis.
With Healtheon's stock down about 84% from a 52-week high of $90, the company needs to use more of that stock--its primary acquisition currency--to gather up the players who will help the company carry out its Internet plan for healthcare.
"(Healtheon) needed Medical Manager, which is a real business with a large installed base," Marhula said. "They needed the management team and wanted to take a competitor out of the market."