Ian Morrison

E-Health, Baby. If Austin Powers was in the healthcare forecasting business, that would have been his clarion cry as the millennium dawned. The IPOs came fast and furious, anythinghealth.com was hot in the market, and the Industry Standard-the dot.com establishment trade magazine-declared breathlessly that “Net entrepreneurs are drooling over the prospect of fixing the nation’s healthcare system”. Watch out healthcare, you are about to be transformed.

Well, E-Health stocks are down an average of 70% this year (down an average of 90% from their all time highs) according to the leading investment analysts. Dr. Koop is on life support. Healtheon/WebMD is no longer the new, new thing. And disintermediators like Neoforma, who were going to change the rules of purchasing medical supplies are like whimpering puppies called to heel by the big old boys that run the medical supply game.

What happened? At a meeting in San Francisco in late 2000, a number of observers (myself included) gave their two cents worth on what happened. Larry Leisure, managing partner of Andersen Consulting’s dot.com Launch centers, and a 20 year healthcare industry veteran, points to the fact that many dot.com upstarts did not pay enough attention to the core questions: who is the customer and what will they pay you for? Leisure also points to the lack of industrial strength information technology and business systems, and a failure of the upstarts to cement meaningful strategic alliances with key industry players.

Chris Hester, a Principal with healthcare venture capital leader Acacia Venture Partners, points to four factors for the financial collapse:

1. The strength of the legacy companies
2. Technologies in search of a business model (companies focused more on new fangled products than on serving customer needs)
3. Cheap capital created in the broader dot.com market euphoria leading to stupid decisions by entrepreneurs and fee-obsessed investment bankers
4. Lack of true innovation in business models

Dr. Ed Fotsch, the CEO of Medem, the healthcare web-hosting company that is sponsored and owned by the leading medical specialty societies, points to the arrogance and naivete of dot.com opportunists who parachute into the industry without the vaguest clue of how healthcare is actually delivered.

They are all right. The new guys (the Second Curve) did not respect the legacy players in the industry (the First Curve). Think about it for one second. The American healthcare system is over a trillion dollars. That’s larger than the economy of a country like Italy. To argue you are going to reform Italy in one fell swoop is preposterous. The Pope, the mafia, Fiat, and the Italian government all might want a wee say in the matter.

The old players (health plans, doctors, hospitals, PBMs, GPOs, pharma companies and medical suppliers) simply didn’t trust the arrogant, new players and refused to just roll over. For example, health plans formed MedUnite to counter the threat of Healtheon. Group Purchasing Organizations like VHA and Premier and supply companies like Abbott, Baxter and J&J, each formed industry internet exchanges to challenge the new entrants like Neoforma.

Many of the E-health plays only worked on powerpoint. Few had any real paying customers, let alone any meaningful scale. Lots of us have gone on-line for healthcare information to be sure. Indeed my partners at Harris Interactive and Harvard in a recent survey conducted for our clients found that in 2000, 98 million Americans have been on-line for healthcare information up from 70 million in 1999. There is lots of use of the Internet for healthcare, but is it a business, and has it changed healthcare delivery? E-Health today is like Encyclopedia Brittanica in the 1950s: a nice place to look up information. We have become cyberchondriacs driving ourselves to distraction in the middle of the night, but we are not really getting what we want from e-health.

Consumers are more sophisticated. In other dimensions of e-commerce; buying a book, ordering theatre tickets, reserving tea at the Ritz in London, you can go on-line and do it. (Trust me I’ve done them all). Consumers expect that from e-commerce. Can you make an appointment with your doctor on-line, can you renew a prescription, e-mail your doctor, get a wheelchair? While there are businesses doing all of these they are not mainstream. And the reason is the new health economy has to connect to the old health economy. The future of e-health is not some cyber-doctor in Newfoundland delivering disembodied medical advice and dispensing pills. No, the consumer wants the services connected to local doctors and hospitals. Consumers want e-health delivered locally. And they are not getting it.

Indeed, the Harris/Harvard surveys show a significant (approximately 20%) decline in satisfaction amongst consumers with regard to various dimensions of e-health as the table below shows. (In fairness this is a declining share of a rising base of consumers which has moved from 70 million to 98 million). But, the conclusion is important. E-health has been hyped to the point that consumers (not unreasonably) expect it to deliver meaningful e-commerce services.

Table 1: Consumers use of E Health: Is The Bloom Off the Rose?

	1999	2000	Change
The Internet helped in:	%	%	%
Understanding of own health problems	73	56	-17
Managing personal health care overall	60	41	-19
Communications with doctor	51	29	-22
Compliance with treatments recommended by doctor	46	31	-15
Source: Strategic Health Perspectives, Harris Interactive/Harvard University, 2000

But, this is not to say that e-health is dead and over, quite the contrary. Rather, it is a classic case of what I called in my book “the Second Curve” Amara’s Law (named after my old boss Roy Amara who ran the Institute for the Future for more than 20 years). Amara’s law in a nutshell is that there is a natural human tendency to overestimate the impact of phenomenon in the short run and underestimate the impact in the long run.

E-health can be the platform for redesign of American healthcare delivery. It can be the new chassis as Kaiser CEO, Dr. David Lawrence says. But, it will require leadership, trust building and real innovation to bring the old health economy and the new health economy together.

Who will win? Perverse as it may seem, the best positioned of all are the group and staff model HMOs. Both Group Health and Kaiser are months away from very significant roll-outs of e-health capabilities that will allow consumers not only to make appointments and renew prescriptions but to interact with physicians electronically through clinical messaging systems. Similarly, Blue Shield of California (again a stalwart of the non-profit health plan world) has demonstrated capability for mass customization in the interaction with their enrollees, through mylifepath.com. (Although in surveys consumers are much less interested in the interaction with health plans compared to interaction with their providers). Similarly, web companies like Medem and Medscape/Medical Logic are run by doctors for doctors and they show promise in being able to provide practical tools that will allow doctors to communicate more effectively with patients.

The next round of e-health is about to begin. Doctors are starting to e-mail patients in significant numbers (we estimate about 10% of all doctors have some e-mail contact with patients today). A third of all doctors have websites and that number could exceed 50% very quickly if Medem and other are successful in their roll out over the next few months.

We must seize the e-health opportunity, not to make money for dot.commers and venture capitalists, but to change health care delivery. Forever.

Ian Morrison is an author, consultant and futurist based in Menlo Park, California. This essay was published in the January/February 2001 Issue of the Health Forum Journal.