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January 05, 2003 11:00 PM

Health insurers to sell MedUnite

Laura B. Benko
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    Less than three years after teaming up to standardize electronic processing of medical claims across the healthcare industry, a consortium of leading health insurers called it quits.

    The group agreed to sell the joint venture, MedUnite, San Diego, to rival ProxyMed, Fort Lauderdale, Fla., for $10 million in cash and $13.4 million in 4% convertible debt. Industry observers said the insurers decided to cut their losses at a time when MedUnite has been struggling to attract new customers.

    "It was becoming a financial sinkhole," said Patrick Kennedy, founder of P.J. Consulting, Rockville, Md., which has worked closely with several of MedUnite's seven founding partners. "Each of the insurers had invested $11 million, and they probably would have had to invest $11 million more before ever turning a corner."

    The insurers-Aetna, Anthem, Cigna Corp., Health Net, Oxford Health Plans, PacifiCare Health Systems and WellPoint Health Networks-founded MedUnite in 2000 to create a single, Internet-based claims-processing system for all health plans and doctors. The goal was to save billions of dollars in administrative costs while thwarting the growth of claims-processing giant WebMD Corp., Elmwood Park, N.J.

    MedUnite officials have insisted the company's operations remain strong, but there have been signs that MedUnite is struggling. The company recently waived its $150 installation fee to jump-start physician enrollment. And over the past year, five of MedUnite's owners have written off all or most of their investments in the joint venture, citing disappointing results.

    MedUnite remains a blip beside WebMD, which processes more than 2 billion claims per year and serves 300,000 doctors, or about 60% of the market.

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