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Insurers Plan Online Service to File Claims

Health: MedUnite founders hope B2B site cuts administrative costs. Competitors have faltered.


Seven of the nation's largest health insurers revealed plans Tuesday for an online service that could save them billions of dollars per year in administrative costs. But the service, called MedUnite, will enter a perilous marketplace that has crippled competitors such as WebMD and its predecessor, Healtheon.

It is an arena that is increasingly crowded. On the consumer side, a new venture was announced just this week by Health Net Inc. aimed at allowing patients to check their benefits and order prescription drugs online, and portals such as and WebMD offer medical information.

Even the business-to-business, or B2B, market, which MedUnite is trying to tap, is full of companies jostling to find a way to capitalize on the massive need to streamline the way doctors file claims and request treatment authorizations for patients.

The idea is simple: Allow doctors and health plans to communicate online in real time, so that doctors can file claims easily and get paid quickly--perhaps in a matter of days instead of the typical weeks or months. Health plans would pay to have claims processed properly, and doctors would pay for an easy and fast way to send in their bills and request referrals for patients. Laboratories and pharmacies would also be able to file claims electronically.

Consumers would not be affected, and the service would not compete with advertising-driven information services or retail sites.

But unlike others trying desperately to create--and cash in on--a nexus between health care and e-commerce, MedUnite has the huge advantage of a built-in customer base: Its founders, which include Aetna Inc., Cigna Corp, PacifiCare Health Systems, Health Net and Wellpoint Health Networks, represent 61 million patients. And they've already committed to signing up for the service.

"It's been a difficult market for a lot of the Internet start-ups because they've been trying to sell to the health plans--and the health plans were all trying to start MedUnite," said Sheryl Skolnick, a health-care analyst with Banc Boston Robertson Stephens in New York.

MedUnite, which will be a privately held joint venture among the founding health plans, also does not need to post huge profit or please Wall Street investors like its competitors, said Patrick Hojla, who follows health-care and e-health companies for Banc of America Securities.

Rather, Skolnick and Hojla said the company's primary charge is to realize savings and efficiency for health plans.

Health plans currently spend more than $70 billion per year processing claims and referrals, Skolnick said. If MedUnite can reduce that burden, the plans' stocks "will go sky high," she said.

Nonetheless, MedUnite faces huge obstacles: Several competitors, including WebMD, entered the business before it--and business has proved to be brutal. Just Monday, Atlanta-based WebMD said its third-quarter loss widened to $65.8 million, or 27 cents per share, excluding several one-time charges, from $55.5 million, or 28 cents. Including the charges, the company lost $786.9 million.

MedUnite does not plan to enter the market before June, a lag some analysts said could give a further edge to its competitors, and key details have still not been worked out.

"They face incredible hurdles," said Claudine Singer, health-research director for Jupiter Research in New York. It will be difficult to encourage doctors to not only use the service but, as the company hopes, to pay for it as well. And, she said, the health plans have antiquated and incompatible computer systems that will be expensive and difficult to integrate.

WebMD, by contrast, already processes two-thirds of those medical claims that are filed electronically, and owns two of the major services used by doctors to pay bills.

"Whoever grows the fastest and gets the most [insurers] online wins," said Singer, who pointed out that most doctors have patients affiliated with 12 to 16 health plans--twice what has signed on to MedUnite.

And even some of MedUnite's health plan members may prove fickle: Already, several have developed interactive services of their own, and Aetna recently signed an agreement with competitor WebMD.

Dave Cox, MedUnite's president, said he believes the venture can overcome those obstacles.

MedUnite, he said, would be the only business of its kind to offer doctors a way to use a single form to communicate with all of its member health plans. It will also be the only such company to inform doctors in real time that they have filled in a claim form improperly, thereby eliminating months of delays and hassles as paperwork shuffles back and forth between doctors and health plans, he said.

Moreover, he said, MedUnite is insulated from the uncertain market for consumer-oriented health Web sites, because it does not intend to provide direct-to-consumer services. Since the company does not plan to go public, it is not beholden to Wall Street or venture capitalists, nor weighed down in debt from big acquisitions.

"We need to pay for ourselves and make enough money to invest in future ventures," Cox said. "We're not designed to be the next Microsoft."

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