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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2004 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period
from to |
Commission file number: 0-24975
WebMD Corporation
(Exact name of registrant as specified in its charter)
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Delaware |
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94-3236644 |
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(State of incorporation) |
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(I.R.S. employer identification no.) |
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669 River Drive, Center 2
Elmwood Park, New Jersey
(Address of principal executive office) |
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07407-1361
(Zip code) |
(Registrant’s telephone number including area code):
(201) 703-3400
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.0001 per share
(Title of each class)
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 (the “Exchange
Act”) during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing
requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information
statements incorporated by reference into Part III of this
Form 10-K or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange
Act). Yes þ No o
As of June 30, 2004, the aggregate market value of the
registrant’s common stock held by non-affiliates was
approximately $2,742,954,120 (based on the closing price of the
common stock of $9.32 per share on that date, as reported on the
Nasdaq Stock Market’s National Market and, for purposes of
this computation only, the assumption that all of the
registrant’s directors and executive officers are
affiliates). As of March 1, 2005, there were 314,783,047
shares of WebMD common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information in the registrant’s definitive proxy
statement to be filed with the Commission relating to the
registrant’s 2005 Annual Meeting of Stockholders is
incorporated by reference into Part III.
TABLE OF CONTENTS
WebMD®, WebMD Health®, dakota
imagingtm,
Digital Office Manager®, DIMDX®,
Envoy®, ExpressBill®, Image
Directorsm,
Intergy®, Medifax®, Medifax-EDI®, Medscape®,
MEDPOR®, Physician
Flowsm,
POREX®, Publishers’ Circle® The Little Blue
Booktm,
The Medical Manager® and
ViPSsm
are trademarks of WebMD Corporation or its subsidiaries.
1
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains both historical
and forward-looking statements. All statements other than
statements of historical fact are, or may be deemed to be,
forward-looking statements. These forward-looking statements are
not based on historical facts, but rather reflect
management’s current expectations concerning future results
and events. These forward-looking statements generally can be
identified by use of expressions such as “believe,”
“expect,” “anticipate,” “intend,”
“plan,” “foresee,” “likely,”
“will” or other similar words or phrases. Similarly,
statements that describe our objectives, plans or goals are or
may be forward-looking statements. These forward-looking
statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, performance or
achievements to be different from any future results,
performance and achievements expressed or implied by these
statements. In addition to the risk factors described in
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Factors That May
Affect Our Future Financial Condition or Results of
Operations” beginning on page 73, the following
important risks and uncertainties could affect future results,
causing those results to differ materially from those expressed
in our forward-looking statements:
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the failure to achieve sufficient levels of customer utilization
and market acceptance of new or updated products and services, |
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the inability to successfully deploy new or updated applications, |
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difficulties in forming and maintaining relationships with
customers and strategic partners, |
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the anticipated benefits from acquisitions not being fully
realized or not being realized within the expected time frames; |
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the inability to attract and retain qualified personnel, and |
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general economic, business or regulatory conditions affecting
the healthcare, information technology, Internet and plastic
industries being less favorable than expected. |
These factors and the risk factors described in
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Factors That May
Affect Our Future Financial Condition or Results of
Operations” beginning on page 73 are not necessarily
all of the important factors that could cause actual results to
differ materially from those expressed in any of our
forward-looking statements. Other unknown or unpredictable
factors also could have material adverse effects on our future
results. The forward-looking statements included in this Annual
Report on Form 10-K are made only as of the date of this
Annual Report. We expressly disclaim any intent or obligation to
update any forward-looking statements to reflect subsequent
events or circumstances.
2
PART I
INTRODUCTION
General Information
WebMD Corporation is a Delaware corporation that was
incorporated in December 1995 and commenced operations in
January 1996 as Healtheon Corporation. Our common stock has
traded on the Nasdaq National Market under the symbol
“HLTH” since February 11, 1999.
Our principal executive offices are located at 669 River
Drive, Center 2, Elmwood Park, New Jersey 07407-1361
and our telephone number is (201) 703-3400.
We make available free of charge at www.webmd.com (in the
“About WebMD” section) copies of materials we file
with, or furnish to, the Securities and Exchange Commission,
including our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, and
amendments to those reports, as soon as reasonably practicable
after we electronically file such materials with, or furnish
them to, the SEC.
Overview of Our Businesses
Our business is comprised of four segments. Three of our
business segments, WebMD Business Services, WebMD Practice
Services and WebMD Health, provide various types of healthcare
information services and technology solutions. Our fourth
business segment is Porex, which designs and manufactures porous
plastic products. The following overview describes our key
products, services and markets:
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WebMD Business Services. WebMD Business Services
provides healthcare reimbursement cycle management services for
healthcare providers and transaction-related administrative
services for healthcare payers, together with related technology
solutions. We transmit transactions electronically between
healthcare payers and providers and provide healthcare payers
with transaction processing technology, decision support and
data warehousing solutions, consulting services and outsourcing
services. Our services for payers include conversion of paper
claims to electronic ones and related document management
services, as well as print-and-mail services for the
distribution of checks, remittance advice and explanation of
benefits. We also provide automated patient billing services to
healthcare providers, including statement printing and mailing
services. We are focused on continuing to increase the
percentage of healthcare transactions that are handled
electronically and on providing electronic solutions that can be
used by payers and providers to automate the entire
reimbursement process. |
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WebMD Business Services generates revenues by selling our
transaction services to healthcare payers and providers,
generally on either a per transaction basis or, in the case of
some providers, on a monthly fixed fee basis. We also generate
revenue by selling our patient statement and paid-claims
communication services, typically on a per statement or per
communication basis. Finally, we generate revenue by licensing
software and providing information technology consulting
services to payers, including governmental payers. We charge
healthcare payers annual license fees, which are based on the
number of covered members, for use of our software and provide
business and information technology consulting services to them
on a time and materials basis. The consulting services we
provide to certain governmental agencies are typically billed on
a cost-plus fee structure. WebMD Business Services revenue was
$686.6 million in 2004 and $505.7 million in 2003. |
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WebMD Practice Services. WebMD Practice Services
develops and markets information technology systems for
healthcare providers, primarily under The Medical Manager,
Intergy and WebMD Network Services brands. Our systems include: |
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administrative and financial applications that enable healthcare
providers and their administrative personnel to manage their
practices more efficiently, and |
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electronic medical record and other clinical applications that
assist them in delivering quality patient care. |
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Our systems and services are used by physician offices to
automate their scheduling, billing and other administrative
tasks, to transmit transactions electronically, to maintain
electronic medical records and to automate documentation of
patient encounters. In addition, through WebMD Network Services,
we provide integrated access to our WebMD Business Services
transaction services for our WebMD Practice Services customers. |
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We generate revenues from: one-time fees for licenses to our
software modules, for system hardware and for implementation
services; and recurring fees for the maintenance and support of
our software and system hardware. Pricing depends on the number
and type of software modules to be licensed, the number of
users, the complexity of the installation and other factors. Our
WebMD Network Services and some of our WebMD Practice Services
products and services are priced on a monthly fee per provider
basis or a per transaction basis. WebMD Practice Services
revenue was $296.1 million in 2004 and $302.6 million
in 2003. |
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WebMD Health. WebMD Health provides health
information, health and benefit decision-support tools,
continuing medical education services, and interactive
communications services through its public online portals for
consumers and physicians, through syndication and distribution
relationships, through customized private portals for employers
and payers, and, to a lesser extent, through offline publishing
services. Our offerings for consumers help them become more
informed about healthcare choices and assist them in playing an
active role in managing their own health. Our offerings for
healthcare professionals help them improve their clinical
knowledge, as well as their communication with patients
regarding treatment options for specific health conditions. |
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We reach over 20 million unique users per month (based on
the average during 2004) through www.webmd.com,
www.medscape.com and our other public portals, as well as
other Web sites with which we have relationships. We believe
that Medscape from WebMD, our portal for healthcare
professionals, reaches more physicians than any other
physician-targeted Web site. Our private portals provide online
health and benefit management services for employer and payer
sponsors. These services assist the sponsors’ employees and
members to make informed benefit, provider and treatment choices
that help reduce healthcare costs while improving quality of
care. We integrate the sponsor’s unique health and benefits
content with our content and technology platform, to create
private portals specific to the eligibility, coverage and health
profile of each plan member. We generate revenue by providing
healthcare and consumer products companies with opportunities to
reach our public portals audience through a variety of content
sponsorship formats and advertising products. In addition, we
create and distribute accredited online continuing medical
education programs funded by grants from a variety of sponsors.
We also generate revenues by licensing private portals to
employers and payers for use by their employees and members. |
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We publish specialized physician directories, used by
physicians, pharmacists and other healthcare professionals, and
professional medical reference textbooks. We generate revenue
from sales of subscriptions to our medical reference
publications, from sales of physician directories, and from
sales of advertisements in those directories. |
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WebMD Health revenue was $134.3 million in 2004 and
$110.7 million in 2003. |
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Porex. Porex develops, manufactures and
distributes proprietary porous plastic products and components
used in healthcare, industrial and consumer applications. Our
Porex customers include both end-users of our finished products,
as well as manufacturers that include our components in their
products for the medical device, life science, research and
clinical laboratory, surgical and other markets. Porex is an
international business with manufacturing operations in North
America, Europe and Asia and customers in more than 65
countries. Porex revenue from continuing operations was
$77.1 million in 2004 and $71.9 million in 2003. |
During 2004, our revenues were divided among our segments as
follows: 59.2% from WebMD Business Services, 25.5% from WebMD
Practice Services, 11.6% from WebMD Health and 6.6% from Porex.
The sum of these percentages equals 102.9% of our total revenues
of $1,160 million because $33.8 million of our
revenues are from inter-segment transactions and are eliminated
when we consolidate our results.
A more complete description of the products and services of each
of our segments begins on page 6. Some of our products and
services have been developed internally and some have been
acquired. For a description of the companies that we acquired in
2004, 2003 and 2002, see Note 2 to the Consolidated
Financial Statements included in this Annual Report. For
additional information regarding the results of operations of
each of our segments, see “Management’s Discussion and
Analysis of Financial Condition and Results of
Operations — Results of Operations by Operating
Segment” in Item 7 of this Annual Report and
Note 8 to the Consolidated Financial Statements included in
this Annual Report.
For a discussion of key trends in the healthcare marketplace and
the strategies we have developed in response, see
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Key Trends
Affecting our Businesses and Our Healthcare Customers” in
Item 7.
Recent Developments
Evaluation of WebMD Health Transaction Alternatives.
WebMD is continuing to pursue its previously announced plan to
establish WebMD Health as a separate publicly traded company.
WebMD’s Board of Directors continues to evaluate the two
previously announced alternatives it has been
considering — a one-step split-off of WebMD Health
equity through an exchange offer transaction with WebMD’s
stockholders or an initial public offering of a minority
interest in WebMD Health. In the case of a one-step split-off,
all holders of WebMD common stock would have the right, on a pro
rata basis, to exchange shares of WebMD common stock for
newly-issued shares of WebMD Health common stock at an exchange
ratio that would be set by the Board of Directors of WebMD.
While the evaluation process is complex, considerable progress
has been made in refining the tax analysis of these alternative
transactions, preparing the necessary financial statements and
Securities and Exchange Commission filings, planning the
necessary corporate infrastructure separation and completing the
analysis of employee, corporate, third-party contractual and
other considerations relevant to these two alternatives. As each
alternative offers certain potential advantages for WebMD’s
stockholders, some of which are dependant on market conditions,
the Board will not make a decision as to which alternative to
pursue until shortly before WebMD is in a position to make the
required registration statement filing with the SEC. WebMD
anticipates being in a position to make this SEC filing in April
2005.
Acquisition of HealthShare Technologies. On
March 14, 2005, WebMD acquired HealthShare Technologies.
The purchase price paid at closing was $31 million in cash.
In addition, WebMD has agreed to pay up to an additional
$5 million if certain financial milestones are achieved for
calendar year 2005. HealthShare provides health plans and
employers, and their members and employees, with online decision
support tools that evaluate both hospital care cost and quality
to enable users to make more informed decisions. HealthShare
also provides professional decision support tools used by health
plan executives to develop provider networks, identify centers
of excellence, and evaluate comparative hospital quality.
HealthShare tools are also used by hospitals to provide online
decision support to help enhance quality of care, manage costs
and profitability, and better understand market position. The
results of operations of HealthShare will be included in our
WebMD Health segment.
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HEALTHCARE INFORMATION SERVICES AND TECHNOLOGY SOLUTIONS
We provide services that help consumers, physicians and other
healthcare providers and health plans navigate the complexities
of the healthcare system. Our products and services promote more
informed decision-making, streamline administrative and clinical
processes, increase efficiency and reduce costs by facilitating
information exchange, communication and electronic transactions
between healthcare participants.
WebMD Business Services
Overview
WebMD Business Services provides healthcare reimbursement cycle
management services for healthcare providers and
transaction-related administrative services for healthcare
payers, together with related technology solutions. In addition,
we provide information technology, decision support solutions
and consulting services to governmental and commercial
healthcare payers through ViPS, which we acquired in August 2004.
To ensure timely reimbursement and comply with managed care
requirements, healthcare providers must interact effectively
with healthcare payers from the first point of patient contact
until final payment has been received. Our services allow
providers and payers to replace manual processes, phone calls
and faxes with electronic transactions and, by doing so, to save
time and money. We provide our payer and provider customers
connectivity through an integrated electronic transaction
processing system. We refer to these connectivity services as
electronic data interchange, or EDI. Customers access our
connectivity services through the Internet, through dedicated
high speed communications lines and by modem over standard
telephone lines. After we receive transactions from providers,
they are edited and translated in accordance with payer
specifications and sent to the payer’s system.
Although these EDI services are an important part of what we do,
we have substantially expanded our WebMD Business Services
product line in recent years through both acquisitions and
internal efforts. We now provide healthcare payers with
transaction processing technology, decision support solutions,
consulting services and outsourcing services. Our services for
payers also include conversion of paper claims to electronic
ones and related document management services, as well as
print-and-mail services for the distribution of checks,
remittance advice and explanation of benefits. Our services for
providers also include automated patient billing services, with
statement printing and mailing services available. We are
focused on continuing to increase the percentage of healthcare
transactions that are handled electronically and on providing
enhanced capabilities and additional solutions that can be used
by payers and providers to automate the entire reimbursement
process.
Healthcare payers and providers pay fees to us for our services,
generally on a per transaction basis or, in the case of some
providers, as a flat rate per month. Transaction fees vary
according to the type of transaction and other factors, such as
volume level commitments. We may also charge one-time
implementation fees to providers and payers. ViPS charges
healthcare payers annual license fees, which are based on the
number of covered members, for use of its software. ViPS also
provides business and information technology consulting services
to its customers on a time and materials basis. ViPS’
contracts with the federal government are typically on a
cost-plus award fee structure.
Customer and Vendor Relationships
Customers. WebMD Business Services’ customers
consist of: healthcare providers, such as physician offices,
dental offices, billing services, national laboratories,
pharmacies, hospitals; and healthcare payers, including Medicare
and Medicaid agencies, Blue Cross and Blue Shield organizations,
pharmacy benefit management companies, commercial health
insurance companies and managed care organizations.
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Healthcare Providers. For providers, WebMD Business
Services can help them automate every step of the reimbursement
cycle, including: checking patient coverage eligibility
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seeking pre-authorization from a payer for services; submitting
and tracking claims; and automated payment posting, credit card
billing and patient statement processing. Our EDI connectivity
services reduce paperwork and the need for communication by
mail, telephone and fax, resulting in cost savings for payers
and providers. These services also expedite the reimbursement
process, which can result in a lower average number of
outstanding accounts receivable days for providers. In addition,
the use of EDI for eligibility and other coverage-related
transactions can save hospital, physician and dentist office
staff significant amounts of time compared to phone or other
individual verification methods and allow them to provide faster
answers to patient questions regarding coverage. |
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Healthcare Payers. For a healthcare payer, the
administrative cost of supporting patient medical encounters
includes eligibility and benefit information distribution,
intake of paper and electronic claims, claim adjudication,
payment and explanation of benefits (or EOB) distribution, as
well as a wide variety of member and provider service and
communication activities. WebMD Business Services provides
services that help automate and reduce the cost and improve the
accuracy of these processes. Specifically, our electronic
transaction services automate the data exchange between
healthcare providers and payers for patient eligibility and
benefits information, claims transactions, remittance
information, referrals, claim status information and other
processes. Payers using us as their managed EDI gateway for
inbound transactions benefit from improved reliability and
improved auto-adjudication rates. Our systems can apply
customized payer-specific business rules to these transaction
processes to further improve payer auto-adjudication rates
(which means the percentage of claims that are adjudicated by
the payer’s computer systems, without review by payer
personnel), which provides additional cost savings to our
clients. These automation tools, in conjunction with our imaging
and scanning services for inbound transactions and print and
mail services for remittances and other outbound communications,
allow payers to better focus on their core activities: provider
network management, employer marketing and contracting, benefit
plan design, and member service. In addition, by outsourcing
inbound and outbound transaction processes to us, payers can
reduce their capital expenses and operating costs. Our
acquisitions of Advanced Business Fulfillment in 2003 and Dakota
Imaging in 2004 support our ability to provider more
comprehensive business process outsourcing services. For a
description of other services that WebMD Business Services
provides to healthcare payers, see “— ViPS”
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Information System Vendors. We work with numerous medical
and dental practice management system vendors, hospital
information system vendors and other service providers to
provide integrated transaction processing between their systems
and ours. Most practice management and hospital information
systems support, and can be integrated with, our connectivity
services. Many practice management system vendors, including
WebMD Practice Services, market a private label brand of our
transaction services that they have integrated with their
systems. We pay sales commissions to some of these vendors as an
inducement to use WebMD Business Services. We work together with
these vendors to increase the percentage of healthcare
transactions that are handled electronically.
Clearinghouses. Some healthcare transaction
clearinghouses also use our services to transmit transactions to
payers that they have received from healthcare providers. We pay
sales commissions to some of these clearinghouses as an
inducement to use WebMD Business Services to complete the
transactions submitted through their systems.
Our Connectivity Services
Administrative Solutions. WebMD Business Services began
as a clearinghouse for electronic healthcare claims transactions
between physician offices and commercial healthcare payers and
continues to be a leader in those services. WebMD Business
Services connectivity services have grown to include additional
transactions for additional types of providers and payers and
other types of transaction-related
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services. WebMD Business Services now provides connectivity
throughout the healthcare reimbursement cycle:
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beginning with insurance eligibility verification, |
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continuing through the claim submission process, |
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followed by tracking the reimbursement through claim status
inquiries, and |
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concluding with electronic remittance information and payment
posting. |
Providers can also use our services to obtain authorization from
payers, at the point of care, for services and referrals to
other providers.
Our “all-payer” services includes the capture,
validation and routing of claims transactions on behalf of not
just commercial payers, but also Blue Cross Blue Shield payers,
Medicare and Medicaid. The goal is to provide a single source
reimbursement cycle management solution for providers and
practice management system vendors. A single solution reduces
administrative burdens on the provider office in sending claims
transactions and receiving electronic remittance advice
transactions and, more importantly, allows us to provide a
single report back to the provider office regarding those
transactions. That, in turn, allows the provider office to
determine more easily whether it has been paid on a particular
claim and how much. Provider offices without such a solution
typically receive five or more different reports that they then
have to reconcile in order to manage their accounts receivable.
Clinical Solutions. WebMD Clinician is an Internet-based
solution that streamlines the flow of information between
providers, pharmacies, payers and labs. This product supports:
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electronic ordering of clinical tests and the reporting of test
results between healthcare providers and labs, and |
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electronic prescribing that references medication histories,
payer formularies, and drug usage reports at the point of care. |
The WebMD Clinician suite of solutions is designed to integrate
with most physician practice management systems and electronic
medical record systems through virtually any web-enabled device.
The result is secure delivery of accurate electronic medical
record information into the workflow of the physician when
needed for making care decisions. WebMD Clinician reduces costs
and improves the quality of patient care by improving order
entry accuracy and expediting the delivery of lab results, while
enhancing the ability to share those results with multiple
physicians.
Accessing Our Connectivity. Healthcare providers access
our transaction services both directly and through their
relationships with integrated delivery networks, clinics,
physician and dental practice management system vendors,
hospital information management system vendors, and retail
pharmacy chains. Providers initiate transactions using our
proprietary applications, their practice management systems or
other computer systems or networks. Providers submit
transactions to our clearinghouse by modem connections using
regular telephone lines, using dedicated high speed
telecommunications services and over the Internet. At our
clearinghouse, the transaction is formatted and translated in
accordance with the payer’s specifications and sent to the
payer’s claims adjudication and/or real-time database
systems.
We provide various products designed to assist healthcare
providers in managing their claims processes and utilizing our
services, including:
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Claim Master. Through our Claim Master service, providers
can securely access our transaction services through the
Internet. Claim Master can be used as a stand-alone system or as
a complement to a practice management system or hospital
information system. Claims are captured from the source
healthcare information system and incorporated into the Claim
Master relational database to be tracked through event-driven
updates. The Claim Master database serves as the repository for
all claim management functions including viewing, editing (in
real time), correcting, submitting and managing payer responses.
During validation, claims are separated into “clean” |
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claims and those needing additional information. Clean claims
are passed on to our clearinghouse in a HIPAA-compliant format
and then submitted to the appropriate payers. Claims needing
additional information are edited, corrected, and then
submitted. With Claim Master’s wide array of reporting and
display options, providers can clearly understand the location
and status of any claim or batch of claims at any given time,
including the status of all claims in the system, types of claim
errors and list of claims sorted by dollar amount, work queue
and payer. |
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WebMD Office. Through our WebMD Office Internet-based
service, providers can securely access our transaction services
through either a standard dial-up or high speed DSL or cable
modem. WebMD Office can be used as a stand-alone system or as a
complement to a practice management system through an import and
data management function that allows transactions to be
generated from the practice management system and submitted
through WebMD Office. In addition, our practice management
system vendor partners may elect to market a private-label brand
version of WebMD Office. |
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WebMD Assistant. WebMD Assistant integrates with hospital
information systems to automate various registration activities
such as insurance eligibility verification, credit checking and
address verification. WebMD Assistant can be configured to
automatically perform real-time tasks during patient
registration. This saves the registration staff time by
eliminating the need to use separate systems for registration
and for eligibility verification. The eligibility response can
be automatically stored within the patient record as a permanent
reference. |
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WebMD Receivable Analysis. WebMD Receivable Analysis is
an electronic screening service designed to verify Medicaid and
other forms of insurance eligibility in an electronic batch
format. The healthcare provider submits a file electronically
and the file is processed against the WebMD payer databases to
determine eligibility. WebMD customers use this service to
identify Medicaid and other forms of eligibility that may apply
to patients who have been classified as not having coverage. The
resulting reclassification often results in significant
reimbursements. |
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WebMD Accupost. WebMD Accupost automates the posting of
payments received from governmental and commercial payers that
provide an electronic remittance advice into the providers’
financial accounting system. Automated posting is completed in a
fraction of the time it takes to perform these same tasks
manually and is more accurate. |
ViPS
ViPS provides information technology, decision support solutions
and consulting services to government, Blue Cross Blue Shield
(BCBS) and commercial healthcare payers. ViPS has been a
long-time leader in helping the government and healthcare
industry manage large data volumes and repositories through
information technology. We acquired ViPS, Inc. in August 2004.
Government Solutions. ViPS’ Government Solutions
Group provides technology services and project personnel to
federal and state agencies, such as the Centers for Medicare and
Medicaid Services (CMS) as well as to key information
services contractors for those agencies. ViPS’ personnel
provide systems support for data warehousing, claims processing,
decision support, and fraud detection. In addition, ViPS’
consultants assess workflow, design complex database
architectures, perform data analysis and analytic reporting
functions for agencies and contractors in the public sector. For
CMS, ViPS’ products and services support Medicare
Part A, Part B and Durable Medical Equipment claims
processing.
Working with Northrop Grumman’s Mission Systems Group, ViPS
designed and is implementing CMS’s Medicare Beneficiary
Database, which serves as the foundation for administering the
new Medicare prescription drug benefit under the Medicare
Prescription Drug, Improvement and Modernization Act, referred
to as the MMA. The MMA, signed into law on December 8,
2003, is the most significant change to Medicare since the
program’s founding in 1965 and is the largest budget
increase in a government entitlement program in the past forty
years. The new drug benefit will give beneficiaries access to
coverage under prescription drug insurance policies in return
for a premium of approximately $35 per month and, as
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temporary measure until 2006, beneficiaries will have access to
drug discount cards. ViPS is currently working on three projects
relating to the MMA, including:
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Centralized Medicare Beneficiary Eligibility Transaction
System. This system will be used by healthcare providers and
other submitters, network service providers and clearinghouses.
ViPS is providing overall program management for this system.
For this project, ViPS is working with other WebMD Business
Services units and benefiting from their EDI subject matter
expertise and is also working with Northrop Grumman Mission
Systems. |
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System to Support the Retiree Drug Subsidy Provisions of the
MMA. Under the MMA, employers are eligible for a financial
subsidy from Medicare if they keep retiree beneficiaries on
their prescription drug plan rather than have them move to the
new Medicare prescription drug benefit. ViPS is working with
Group Health, Inc., Arkansas Blue Cross Blue Shield and Northrop
Grumman Mission Systems on this project, which includes
responsibility for processing enrollment applications and
payment requests, issuing payments and remittance advices to
eligible employers, providing a call center, conducting outreach
activities, performing fraud analysis and providing related
training. |
We believe ViPS is well-positioned to play a key role in the
implementation of the MMA and to compete for additional related
projects.
Healthpayer Solutions. ViPS’ Healthpayer Solutions
Group develops and markets software, data warehouses and tools
for disease management, predictive modeling, provider
performance, HEDIS® quality improvement, healthcare fraud
detection and financial management. The products include:
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MCSource. MCSource is a medical management decision
support system that consists of an integrated suite of
analytical and Web-based applications designed to give health
plans the ability to address critical issues such as medical
cost and utilization, provider profiling, disease management,
quality improvement and medical review. MCSource’s
foundation is a high-performance data warehouse that can store
all types of administrative healthcare information. MCSource is
designed to support the complexities and usage volumes of large,
information-driven health plans and has been deployed to more
than 20 customers, including the BCBS Federal Employee
Program, where it is used to manage a data warehouse covering
approximately four million lives and five years of longitudinal
member data. |
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STARSentinel. STARSentinel is an early-warning detection
system that looks at health plan data and evaluates claims
against providers’ claims histories, specialty profiles and
common, documented fraud schemes. By calling early attention to
questionable patterns, STARSentinel helps prioritize cases and
helps health plans use their resources with maximum productivity. |
ViPS Healthpayer Solutions also provides consulting expertise
and outsourcing services to help its customers, including
commercial health plans and over 65% of the nation’s BCBS
plans, monitor clinical and financial results in order to
predict risk, determine the most effective treatments and
evaluate provider networks.
Print-and-Mail Services
ABF. Advanced Business Fulfillment, Inc., which we refer
to as ABF, provides healthcare paid-claims communication
services for healthcare payers. We acquired ABF in July 2003.
ABF’s operations are supported by proprietary software and
systems that allow healthcare payers to outsource print-and-mail
activities by sending an electronic feed to ABF. By outsourcing
these services to ABF, its clients can reduce operating costs
and capital expenditures. ABF’s systems include a Web-based
suite of management tools to facilitate the printing and mailing
of checks and remittance advice to providers and explanation of
benefits to plan members. These management tools allow clients
to control the processes they have outsourced to ABF and to
access archived data from their desktops. ABF has worked closely
with leading claims processing system vendors to allow its
software to interface with their
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systems. In return for marketing ABF’s post-adjudication
services and for the creation and maintenance of an ABF-specific
data extract, ABF makes periodic payments to vendor partners.
Healthpayers USA is ABF’s proprietary program to
cross-consolidate provider mail in order to create savings in
postal costs for its clients. Healthpayers USA screens, sorts
and consolidates mail from any number of its clients destined
for a single provider into one package and automatically
produces a recipient cover sheet that itemizes the contents. ABF
and its clients share the resulting postal savings.
WebMD ExpressBill. Through WebMD ExpressBill, we provide
print-and-mail services to healthcare practitioners, hospitals
and high volume commercial customers throughout the United
States. WebMD ExpressBill accepts client data via modem or the
Internet, generates printed materials and prepares them for
mailing. Our WebMD ExpressBill services include:
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Patient Mailings. On behalf of healthcare provider
customers, we print invoices, account statements, collection
letters, recall notices and other communications and mail them
to patients. |
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Paper Claims. Claims that cannot be sent electronically
to payers can be sent by healthcare providers electronically to
WebMD ExpressBill, where we print and mail them on their behalf. |
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Payment Processing. We process payments on behalf of
providers and other customers, receiving and depositing checks,
posting payments and transmitting funds in accordance with
customer instructions. |
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Electronic Presentment and Payment Services. Our
electronic presentment and payment services offer healthcare
providers the ability to present statement and invoice images to
patients electronically and to receive payment via the Internet. |
Sales and Marketing
Our WebMD Business Services sales and marketing efforts are
conducted by sales, marketing and account management personnel
located throughout the United States. We participate in trade
shows and use direct mail and various advertising media to
promote our services.
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We promote our EDI and print-and-mail services for providers to
organizations that have relationships with or access to a large
number of providers, such as practice management systems
vendors, hospital information systems vendors, practice
management companies and other clearinghouses. In certain cases,
we agree to pay a sales commission to these organizations as an
inducement to use WebMD Business Services as the clearinghouse
for the transactions made through their systems or by providers
with which they have relationships. We also market our EDI and
print-and-mail services directly to small and large physician
practices, dentists, hospitals and other healthcare providers.
We offer our payer customers the opportunity to work with us in
targeted programs to educate physicians and dentists to increase
the utilization of electronic services. When a payer agrees to
participate in such a program, WebMD utilizes information
supplied by the payer to target providers that may not be
sending claims electronically. |
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A team of sales, marketing and account management personnel
market our EDI services and other pre- and post-adjudication
transaction services directly to healthcare payers. In addition,
in the post-adjudication services area, we have established
relationships with vendors of claims processing software. |
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In the pharmacy EDI area, WebMD Business Services has
established relationships with large retail pharmacy chains and
pharmacy software vendors. |
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A team of account management personnel, supported by
professional services representatives, markets our ViPS
Government Solutions Group products and services. The Government
Solutions Group extends its government sales capabilities
through key relationships with leading government contractors,
including Computer Sciences Corp., SAIC, BearingPoint and
Northrop Grumman. |
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ViPS often bids on government projects together with one or more
of these companies. ViPS is seeking to extend its government
services reach into additional government agencies. |
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ViPS’ Healthpayer Solutions Group markets its products and
services nationally through a direct sales organization. Because
of ViPS’ long-standing industry relationships, particularly
with BCBS plan organizations and other large commercial payers,
ViPS is often invited to bid on contracts to be awarded based on
competitive bidding procedures. |
HIPAA
Under the Healthcare Insurance Portability and Accountability
Act of 1996, or HIPAA, Congress mandated a package of
interlocking administrative simplification rules, including
rules to establish standards and requirements for the electronic
transmission of certain healthcare transactions, which we refer
to as the Transaction Standards. For a full discussion of HIPAA
and the risks and challenges it presents to our businesses, see
“— Government Regulation — Health
Insurance Portability and Accountability Act of 1996.”
WebMD Practice Services
Overview
WebMD Practice Services develops and markets information
technology systems for healthcare providers and related
services, primarily under The Medical Manager, Intergy, and
WebMD Network Services brands. Our systems include
administrative and financial applications that enable healthcare
providers and their administrative personnel to manage their
practices more efficiently and clinical applications that assist
them in delivering quality patient care. These applications and
related services:
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automate scheduling, billing, receivables management and other
administrative and financial management tasks, |
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enable providers to maintain electronic medical records and to
automate the documentation of patient encounters, and |
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facilitate the use of electronic data interchange for
administrative and clinical healthcare transactions. |
We expect that most of our future sales of practice management
systems will be Intergy Practice systems. However, we intend to
continue to develop and support The Medical Manager system. We
offer our Intergy EHR clinical systems, which can be fully
integrated with our Intergy Practice systems and which can also
interface with The Medical Manager systems. We are developing
additional interfaces to allow our Intergy EHR software to work
with other practice management systems.
Healthcare providers pay us a one-time fee for the purchase of a
license to our software or to additional software modules. They
also pay us a one-time purchase price for system hardware. Many
customers also pay us recurring fees for the maintenance and
support of our software and for providing hardware support and
maintenance. Pricing depends on several factors, including the
number and type of modules to be licensed, the number of users
per site, the number of practices, the operating system, the
hardware to be supported and the complexity of the installation.
Healthcare providers also pay us fees for:
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our WebMD Network Services administrative transactions services,
generally on a per provider per month subscription basis or a
per transaction basis; and |
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our clinical transaction services, on a per provider per month
subscription basis. |
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Practice Management Systems
Intergy Practice. We introduced Intergy Practice in 2003.
Since that time, most of our new installations of practice
management systems have been Intergy Practice systems. Intergy
Practice packages complex medical practice functions into
easy-to-navigate windows with consistent point-and-click drop
down menus and buttons. The Intergy Practice software operates
on Windows and UNIX based servers, together with Windows based
workstations. The Intergy Practice base package allows an office
to automate appointment scheduling and recalls, registration,
encounter form management, billing, collections and other
administrative and financial functions. Intergy Practice also
has a customizable security system, with access to functions and
features that can be defined for each user based on practice
policies and procedures. Intergy Practice systems are scalable
to meet the needs of a wide variety of healthcare provider
settings, from small physician groups to large clinics, and
across various medical specialties. Customers can purchase a
base system and then add additional modules and services over
time to expand their use of technology as needed.
We license the Intergy Practice software through several
different license models to meet the varying business needs of
our customer base. The most common model is the standard
practice license, which provides a license to use the Intergy
software for the internal business needs of a medical practice
or clinic. The Management Service Organization model provides a
license to use the Intergy software under one license
arrangement that enables a management service organization to
manage the financial or billing aspects of its owned and managed
practices, while allowing such practices to use our software to
manage the administrative and clinical aspects of their offices.
The Physician Billing Service model provides an Intergy Practice
license to billing service companies enabling them to provide
billing services to multiple doctor practices, while also giving
them an option (at an additional cost) to allow such practices
to use our software to manage the administrative aspects of
their offices.
One of our optional Intergy Practice administrative and
financial modules is the managed care system, which provides
functions required to track incoming and outgoing referrals to
facilities and specialists and to provide risk management
capabilities. The managed care system assists providers in
automating referral management, capitation payment posting, and
contract management and profitability tracking. The system is
designed to work in all managed care scenarios, including
primary and specialty care. Intergy Practice software users can
also elect to implement some or all of the products and services
described below under “— Intergy EHR” and
“— Additional Features and Modules” below
and our administrative and clinical transactions services
described below under “— Transaction
Services.”
We provide radiology practices with practice management and
clinical solutions designed to meet their specific requirements.
WebMD Intergy RIS (which means Radiology Information System)
offers specialized workflow and administrative tools to manage
practice resources, including equipment, technologists,
radiologists and examination rooms. We also offer Intergy PACS,
a picture archiving and communications solution, as part of our
suite of radiology solutions. See “— Clinical
Solutions — IntergyPACS” below.
The Medical Manager. The Medical Manager system provides
physician practices with a broad range of patient care and
practice management features. Although most of our current sales
are of Intergy Practice systems, we offer The Medical Manager
system with modules that meet the functionality needs of public
health and community health markets and family planning clinics
and intend to continue to market The Medical Manager system in
these formats. The Medical Manager software’s base package
serves as the foundation of the system and includes an
appointment scheduler, billing system, financial management
system and other features. Additional modules containing
advanced administrative and financial features are also
available, including automated collections, advanced billing and
multiple resource scheduling and managed care modules. For The
Medical Manager system customers who wish to purchase an
electronic medical record product, we are offering an interfaced
version of Intergy EHR. See “— EMR and Imaging
Systems” below. The Medical Manager software users can also
elect to implement some or all of the integrated products and
services described below under “— Additional
Features and Modules” and our administrative and clinical
transactions services described below under
“— Transaction Services.”
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Medware. Through our acquisition of Medifax in December
2003, we have obtained ownership of Medware, a practice
management software package used primarily by small physician
practices. Medware has its own programming, sales and support
operations that continue to develop, sell and support Medware
software.
Other Practice Management Systems. Through our
acquisitions of various businesses, we have also obtained
ownership of other practice management systems. We currently
support these other systems and may provide periodic updates to
the users of some of these systems. We are developing interfaces
between some of these systems and Intergy EHR.
Clinical Solutions
Healthcare providers record, use and share various types of
clinical data about their patients, including patient histories,
examination notes, lab results, medication orders and referrals.
Much of this data is currently recorded in handwritten or
printed form on paper records, often referred to as patient
charts. As the amount of patient information maintained by a
practice increases, so do the logistical challenges of moving
paper charts from site to site and physician to physician. Many
healthcare organizations are finding that the most promising
solution to this challenge is the use of electronic medical
record systems. These systems allow providers to share patient
charts and other medical records, access them simultaneously and
view them from remote locations. Electronic medical record
systems not only help healthcare providers enhance clinical
processes and patient safety, they also assist them in sharing
information appropriately and efficiently and in collecting and
managing the data necessary to meet the requirements of
third-party billing procedures and contractual requirements.
Intergy EHR. Intergy EHR is a suite of software modules
that provides physicians with access to patient information,
clinical systems, encounter documentation and outcomes
reporting. Intergy EHR fully integrates with Intergy Practice.
Intergy EHR software creates an electronic patient chart
containing detailed current and historical information regarding
the patient. In addition, Intergy EHR offers:
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PhysicianFlow technology that enables physicians to access
information from a variety of sources — including the
patient chart, imaging systems, practice management systems, and
laboratory systems — all from one screen. |
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clinical encounter forms that guide the creation of
documentation and capture structured data to facilitate correct
coding and outcomes reporting. Physicians can review and approve
coding as they create the encounter note so that billed
procedures are appropriately documented. Intergy EHR provides a
forms library for major medical specialties, including primary
care, pediatrics, obstetrics/gynecology, cardiology, orthopedics
and others. |
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a clinical workflow manager, integrated with the electronic
chart, that allows the physician to communicate with staff
members and that automatically generates tasks list items for
the physician when, for example, a lab report is ready, a
transcription needs to be signed or a prescription needs
approval. |
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KnowledgeLink technology to enable physicians to access
information from Medscape and other drug and medical reference
information. This enables the physician to share education with
the patient at the time of care, and document the event in the
encounter notes. |
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a selection of various input devices for physicians, including
desktop, laptop and tablet PCs, and handheld personal digital
assistant (PDA) devices. Handheld systems can be used for
offline charge capture, schedule review and dictation, and
tablet PCs for full mobile functionality. Physicians also can
assign tasks and access clinical information from Intergy EHR
systems connected to the practice over the Internet or over a
wireless network. |
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a prescription module that automates the process of writing and
tracking prescriptions, providing improved efficiency with both
the clinical and administrative aspects of the prescription
process and can be linked to our optional clinical transaction
services (see “— Transaction Services”
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a Laboratory System module that allows providers to access,
review and maintain all lab results from within the Intergy EHR
system. Practices may also arrange to place orders and receive
accurate and timely lab test results via a direct,
bi-directional link with the laboratory. Test results are
received electronically from the laboratory and are stored
directly in the patient’s file for viewing, printing and
analysis. |
Intergy EHR is designed to enable different physicians in the
same practice to use the system in different ways, to suit
different work styles. For example, a physician’s encounter
notes can become part of the electronic record whether created
by computer, dictation or handwritten notes. We provide
technical assistance and support that helps medical practices
transition from paper charts to electronic medical records.
Intergy EHR Imaging. We offer a document image management
(DIM) system that allows a practice to scan, store, catalog and
retrieve documents, images and sound files in electronic form,
which then becomes part of the patient’s medical record and
can be accessed from multiple workstations simultaneously.
Image Director. Image Director combines bar-coding
technology with imaging processes and simplifies moving from
paper charts to electronic ones. It also enables additional
paper flow from outside the practice to be added as an image
into the patient chart without disrupting workflow. Bar codes
can be assigned to paper documents using standard printers which
eliminate the need for expensive scanners at each workstation.
Bar-coded documents can be batch-scanned into patient charts at
any time, by any staff member. The bar code assists the practice
in inserting each image in the right place, in the right patient
chart.
Intergy PACS. We market a third party solution, Dynamic
Imaging’s IntegradWeb PACS, as Intergy PACS, a part of our
radiology solutions product offering. Intergy PACS is a picture
archiving and communications systems (or PACS) that allows a
practice to input, display, archive and transmit X-rays and
other diagnostic images electronically. Using a secure,
encrypted Web protocol, all users, whether local or remote, can
access all of a patient’s images and reports, which are
always available online. In addition, WebMD is working on a
unified desktop application called the WebMD Radiology Navigator
that will integrate Dynamic Imaging’s IntegradWeb PACS with
WebMD Intergy RIS.
Intergy EHR PDA. Healthcare providers are becoming
increasingly aware of the benefits of using wireless handheld
computers in their practices. Intergy EHR PDA, our handheld
point-of-care solution for users of Intergy EHR, combines the
power of our clinical and administrative systems with the
convenience of mobile handheld connectivity. Intergy EHR PDA
runs on a handheld device, such as a Compaq® iPaq®.
From anywhere in the office, the handheld device can be used
with a wireless local area network, or LAN, to access
information stored within, or to enter data into, the Intergy or
The Medical Manager system, giving them access at the
point-of-care to:
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appointment schedules, hospital rounds information and clinical
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a user-friendly electronic prescription writer, with integrated
drug utilization review, or DUR, and formulary checking, which
electronically submits prescriptions to the patient’s
chosen pharmacy and, at the same time, adds prescription
information directly to the patient’s electronic medical
record in the Intergy EHR system; |
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electronic lab ordering and reporting of results that can be
viewed using the handheld device; |
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their patients’ electronic medical records, including
demographic data, progress notes, medications, lab results,
procedure histories and other information and transcribed
patient documentation; and |
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a fully customized encounter form for capturing patient charges,
which displays procedure and diagnosis codes in customized
checklists and automatically posts charge information to the
practice management system. |
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Physicians can also use Intergy EHR PDA to digitally record
dictation and then send the voice file electronically for
transcription, reducing the number of devices the physician has
to carry and reducing turn-around time.
In addition, Intergy EHR PDA provides a range of offsite
functionality that can be used at hospitals and other remote
locations. Using the wireless LAN connection, up to ten days of
hospital rounds and patient data can be downloaded to the
handheld device. This information is then accessible to the
provider when he or she is working at another location. The
provider can enter new data and capture patient charges, all of
which are then uploaded to The Medical Manager or Intergy system
when the provider returns to the office.
Maintenance and Support Services
We separately sell hardware and software support and maintenance
services to our customers. Through our software support and
maintenance services, we:
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provide customers with access to our telephone help desk,
typically advising customers in the use and operation of our
software and services and remotely accessing customers’
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in most cases, provide customers with periodic releases updating
our software. |
Through our hardware maintenance services, we typically provide
customers with on-site hardware technical service and, if
necessary, the replacement of hardware components that fail to
function properly. Our contracts for maintenance and support
services are generally up to one year in duration. Our customers
may decide whether or not to purchase maintenance and support
services from us. In addition, some of these services are also
available from third party providers. See
“— Competition for Our Healthcare Information
Services and Technology Solutions” below. We cannot provide
assurance regarding the levels at which our customers will
continue to purchase maintenance and support services after the
expiration of existing contracts.
Transaction Services
WebMD Network Services. Both Intergy and The Medical
Manager systems support integrated use of our WebMD Business
Services’ EDI services through WebMD Network Services. For
a description of these EDI services, see “WebMD Business
Services” above. The administrative transactions supported
include electronic claims, claims status inquiry, eligibility
verification, electronic referral authorization/ status, patient
statements and remittances. Using Intergy or The Medical Manager
systems with WebMD Network Services, providers have access to
EDI functionality that is integrated into their practice
management workflow and recordkeeping systems. Integrated EDI
allows providers and their staff to send and receive EDI
transactions from within the practice management system and to
generate reports regarding these transactions, including whether
submitted claims have been accepted or rejected. These
capabilities can be combined with our “all-payer”
suite of transaction services to provide a single-source
electronic reimbursement management solution. See “WebMD
Business Services” above. In addition, our systems perform
automated eligibility verification by contacting payers
electronically overnight so that the practice can start the day
with pre-checked eligibility and benefits for each scheduled
patient. This information is stored as part of the
patient’s record. In addition, eligibility checking for
unscheduled patients can be performed in real time.
WebMD Network Services also provides integrated access to our
WebMD ExpressBill print-and-mail services for patient
statements, collection notices and recall notices. Practices
transmit the required data from Intergy or The Medical Manager
systems to our processing center. From there, customized
statements, letters and inserts and complete mailing services
are provided. Customization options include logos and patient
education inserts.
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Clinical Transaction Services. We provide clinical
transaction services that allow practices to perform DUR
screenings, transmit prescriptions electronically to connected
pharmacies, and verify formulary compliance with the
patient’s health plan.
Additional Features and Modules
Online Access. Physicians whose offices use the Intergy
or The Medical Manager practice management systems can remotely
access, via an encrypted Internet connection through our
Medscape portal, information contained in their office’s
practice management system, including daily schedules, patient
records and clinical items that need their attention. This
enables physicians to view, in a secure manner, information
residing on their office-based computer system from any personal
or handheld computer with a connection to the Internet. The
physician can use this connection to send and receive secure
email messages, to write and send electronic prescriptions, or
to create laboratory orders and view test results.
Remote Monitoring System. Our Remote Monitoring
System, or RMS, allows for a pro-active approach to system
support and maintenance. Real-time connections allow us to
monitor installations of our Intergy systems for problems that
need immediate attention or for potential problems that are
likely to need attention in the near future or that are
adversely affecting system performance.
Analytics Reporting. We also provide a business
intelligence and reporting application, designed to provide
timely access to practice data for informed managerial
decision-making and to automate the process of generating
reports using data from The Medical Manager and Intergy systems.
Our Analytics Reporting solution also provides access to tools
to analyze that data and to export it to other applications.
Sales and Marketing
We market and distribute our WebMD Practice Services systems and
related services nationally through a direct sales organization,
who are also supported by field technicians and training and
support personnel. We also participate in trade shows and use
direct mail and various advertising media to promote our systems
and services.
WebMD Health
Overview
WebMD Health provides healthcare information, health and benefit
decision-support tools, continuing medical education services,
and interactive communications services through its public
online portals for consumers and physicians, through syndication
and distribution relationships, through customized private
portals for employers and payers, and, to a lesser extent,
through offline publishing services.
Until recently, quality healthcare information has not been
easily accessible. Most consumers relied upon their physicians,
conversations with family and friends, their neighborhood
library, and magazines when they needed answers to healthcare
questions. Physicians relied upon other physicians, medical
societies, journals and other publications, reference textbooks,
conferences, and industry meetings to keep informed. The
Internet has transformed how consumers and physicians find and
utilize healthcare information and WebMD Health has been a
leader in making this happen.
The healthcare information, decision support and communications
services that we provide on our portals:
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enable consumers to check symptoms, assess risks, understand
disease |