An Internet start-up pioneering online contract negotiations hopes to smooth relationships between payers and providers. eHealthContracts plans to streamline the paper-intensive contract process by enabling customers to dicker digitally, as well as market themselves, project the profitability of potential liaisons, track and evaluate existing contracts, and clarify terms of voluminous service agreements.
The Hayward, Calif.-based company launched its patent-pending Internet platform in October and is banking on numerous doctors, physician groups, hospitals and health plans signing up by year's end, says Joseph Zebrowitz, M.D., co-founder and vice president of strategic alliances.
Busy doctors facing reams of paperwork stand to gain much, says Molly Coye, M.D., a San Francisco-based member of eHealthContracts' advisory board. "Part of the reason that physicians have been so understandably unhappy for the last decade is that the work involved in trying to understand contracts and manage them has grown out of all proportion to its real usefulness or the physician's ability to keep pace with it. So, in many cases, the physician is almost the passive victim because (he doesn't) have the time to deal with the contract and negotiating terms," says Coye.
"Contracts represent physicians' revenue," says Helen Wilmot, eHealthContracts' president, CEO and co-founder. "Yet they will sign a contract very rapidly not really understanding it, and then spend the rest of the year trying to work within it."
Wilmot cites industry estimates she says underscore the need for improved contract negotiation and management: Of the 70% of the $1 trillion healthcare industry flowing through some 800,000 healthcare service agreements negotiated annually, $14 billion is lost through inefficient negotiations, claims processing and reconciliation.
San Jose (Calif.) Medical Group, a multispecialty network of 750 providers serving 170,000 patients with $100 million in annual revenue, is one of three organizations beta testing eHealthContracts. Ernie Wallerstein, CIO and vice president of managed care, says he juggles more than 400 contracts.
"It's something I really need here. I don't know what contract has what in it anymore. It's just a big paper mess right now."
SJMG is in the process of loading existing contracts into the system, Wallerstein says, and he expects the automatic reminders of impending rate changes and renegotiation deadlines released by eHealthContracts in October will enhance payer-provider communication.
Had such a tickler been sent notifying him in advance of a Sept. 1 rate increase in cardiology capitation, he would have avoided receiving a demand for additional payment on Sept. 6.
"The relationships get hurt when you miss those kind of details," Wallerstein says. "And relationships are too fragile in this business to risk damaging them."
San Francisco attorney Susan Butler, author of The eBusiness Legal Kit for Dummies, is a firm believer in e-contracting.
"Ninety-eight percent of the contracts I deal with come as e-mail attachments," Butler says. "It has streamlined my practice exponentially."
Zebrowitz says eHealthContracts is still solidifying its pricing structure for subscription, transaction and support service fees, but charges will be based on size of practice, complexity and number of contracts, and degree of use. Prices are expected to run well under $100 per physician per month. Buoyed by $3.5 million of venture capital, it intends to ultimately rely on a customer-generated revenue stream.
eHealthContracts' business plan warranted initial financial backing despite a volatile dot-com market, says Barbara Lubash, managing director of Menlo Park, Calif.-based Versant Ventures. The healthcare venture capital firm was the start-up's lead investor in March.
"This company is distinguished from other e-health enterprises in that it brings immediate value to the people who use it," she says.
eHealthContracts uses an application service provider model, wherein software applications are hosted by online servers, rather than loaded individually into the customers' computers.
Linda Boone Hunt is a Prescott, Ariz.-based investigative reporter and feature writer.