Vaporware.Com: Why the Internet Will Be the Next Thing Not to Fix the U.S. Health Care System

Archibald Warnock, III, Astronomer and Internet entrepreneur since 1991

Health Affairs. 2000;19(6) 

In This Article

Introduction

--- Those of us actually building the Internet know that it allows inefficient processes to be inefficient on a scale previously unimaginable.

This week, using the Internet, I verified a dozen credit card transactions, found and purchased an out-of-print book, checked on the balance of my retirement account, tracked a FedEx package on its way to Chile, ordered a custom-built laptop computer from Dell, calculated various refinancing options for my mortgage, and booked a stay at a wilderness adventure lodge in Alaska. Elapsed time for all of these transactions: 49 minutes.

To refill a prescription for Claritin, an allergy drug I have been taking for five years, I had to call the pharmacy, they had to call my doctor, and my doctor had to call them back to authorize a new prescription. When I drove to the pharmacy, the prescription had not been filled because my health insurer recently started switching Claritin prescriptions to Zyrtec and thought it best to check with me first before they called my doctor again to authorize the change or let me pay the extra for my doctor's original drug choice. Elasped time to refill one routine prescription: four and a half hours.

Since the advent of PC-based computing in the mid-1980s, successive generations of information technology (IT) have been promoted as the panacea for what ails the US health care system. Better health care information systems, few would disagree, mean a better health care system: less fragmentation of medical delivery across geographic space and time; an infrastructure to identify and reduce variations in care; robust datasets to better predict and manage costs; and the list goes on. Our pursuit of these goals as an industry has generated a long and wearying list of IT's boldest promises and most spectacular failures: the smart card, Community Health Information Networks (CHINs), telemedicine, the Electronic Medical Record (EMR), client-server "enterprise-wide" systems and, in the mid-1990s, the clinical data warehouse. (Starr, 1997; Kleinke 1998.)

And then came the Internet, billed as nothing less than the next panacea for what ails the US health care system. The health care Internet company presentations that have dominated the major health care investment conferences since the late-1990s are a colorful blur of PowerPoint graphics for products and services that, for the most part, do not exist and probably never will. Suspend your disbelief, and you will quickly discover from these presentations that, because of the ubiquitousness of the Internet, health insurers are hungry to install Web-based systems allowing them, finally, to accelerate their processing of provider payments; physicians and hospitals will soon be readily sharing patient information; and patients with chronic diseases will be so well managed remotely by computer-savvy doctors that they will never again darken the doors of an emergency room.

Feel like you have seen this movie before? I have, and I do not like the way it turns out. In the early 1990s, the largest hospital information systems vendor, HBO & Company (HBOC), went on an acquisition binge, purchasing a far-flung constellation of niche vendors that provided software running in the back offices of hospitals, physician practices, labs, and health plans. The company convinced Wall Street that demand for these products would continue to grow under managed care-driven rationalization of the typical US health care organization. HBOC further convinced Wall Street that these separate products - when controlled by one consolidating software vendor - could be successfully integrated, co-marketed, and inter-operated, positioning the company as the future Microsoft of a consolidating, integrating health care industry.

In 1998, HBOC sold itself to drug distributor McKesson a few short months before its sprawling business imploded, driving McKesson's stock from an historic high of 95 at the time of the acquisition, to a 52-week low of 19, before the damage was fully written off by Wall Street. (King, 1999.) The company's underlying problem was a fundamental disconnect between what works in a PowerPoint presentation for investors, and what actually works in the typical US health care organization. Like all those predecessor vendors of smart cards, CHINs, EMRs, etc., HBOC's strategy to interconnect health care organizations did not fail because its information technologies did not work. HBOC's strategy failed because both its business growth plans and its IT product strategy collided with the labyrinthine complexity and economic conflicts that are the essence of today's health care system.

Is the Internet different? The largest player to emerge in the frenzy of health care Internet fantasies was WebMD, a company created from the merging of Internet start-ups WebMD, Healtheon, OnHealth, Medcast, and CareInsite, established software vendors and transaction processing companies Actamed, Envoy, MedEAmerica, Kinetra and Medical Manager, and equity stakes in nearly a dozen other companies. At the height of that frenzy in early 2000, Wall Street valued this colossus of high concept - complete with its three chief executives and three corporate headquarters in different regions of the US - at $2.5 billion. This valuation was based on 1999 revenues of a scant $102 million, almost all of which was derived from sales of non-Internet software and transaction processing services acquired with WebMD's inflated stock.

WebMD's insane market valuation was driven by a steady parade of "strategic alliance" press releases, the sum total of which were more conflicting and self-contradictory than the wildest rationalizations for HBOC's acquisitions in the mid-1990s. Like numerous other health care Internet companies that have raised vast sums of money based on ideas for products they might one day build and install, WebMD has been promising to use the Internet to connect all of health care's far-flung constituencies: physicians, hospitals, labs, pharmacies, employers, health plans, and of course, patients. How the company would ever actually consummate this grandiose strategy grew more problematic with each new press release. Throughout this chapter, which argues that the Internet's promises will inevitably collide with the US health care system's realities, WebMD will be held out as an example for much of what has been attempted - and much of what is most doomed - about the Web-enabling of the US health care system. At the height of the madness, WebMD represented 30% of all publicly traded investment capital in the Internet; for this reason, most health care IT companies for years were unable to raise investment capital without a WebMD strategy. WebMD also provided a razor-edged example of the phrase "vaporware." Among IT purchasers in the HMO, hospital, and physician group practice communities, vaporware is defined best by a classic understatement from a hospital Chief Information Officer to a Modern Healthcare reporter, "The sales side and the deliverables side are not always identical." (Unsigned, Modern Healthcare, 2000.)

Why the mismatch? Because WebMD and the other well-funded health care Internet companies with the same business plan have all been racing to create ubiquitous connectivity among health care organizations that, unfortunately for those companies, compete for patients and dollars. For an example of the problems with attaining true connectivity across a health care system of competing organizations, we need look no further than the "strategic alliance" announced in January 2000. WebMD entered into a five-year deal with the CVS chain of drugstores for "exclusive" use of the chain's online pharmacy by physician and patient users of the WebMD Web sites. (Healtheon/WebMD press release, 2000.) What did this mean for the 38.5 million Americans and Canadians whose pharmacy benefits were managed by Express Scripts, which requires its members to fulfill their online prescriptions through its own competing Web-based pharmacy? (Company web sites, 2000.) Or the 50 million Americans whose pharmacy benefits were managed by PCS, which is owned by Rite-Aid, arch-competitor to CVS, and whose members were required at the time to use Drugstore.com for their online prescriptions? (Company web site, 2000.) It meant that any physician group that accepted a free Web site from WebMD (funded by investor Microsoft) for the purpose of routing prescriptions electronically for all its patients had an onerous, paper-based administrative task made still more administratively complex by its Internet provider, not less so.

Business deals like its exclusive agreement with CVS indicate that Internet "connectivity" companies like WebMD are even more confused and/or self-deluded than pre-Internet IT connectivity companies like HBOC. By the end of 2000, as WebMD inevitably started to collapse under the weight of its own contradictions and broken promises - after successfully gobbling up some of the Web's best start-up companies - a sad fact about web-enabling the US health care system was emerging: the Internet would solve none of health care's underlying organizational problems, merely distract its IT-hungry customers one more time with vaporware.

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