RealTime IT News

CareInsite: Building a Medical B2B Network

This year, we've seen a myriad of online healthcare companies go public, like Medscape, drkoop.com, Healtheon and so on.

Most of these companies have limited operating histories and minimal revenues. Thus, it is very difficult to sort out the prospective winners from the losers.

One company that looks particularly strong is CareInsite (CARI).

Yes, CareInsite also has a small revenue base. In its latest financial report, the company had $1.2 million in revenues, with much of this deriving from one customer, The Health Information Network Connection. As for losses? $7.3 million.

But revenues should start to ramp soon. How? Recently, CareInsite signed a four-year, $30 million deal with AOL (AOL, of course, also got warrants in CareInsite).

However, this is not an advertising deal, but one based on transactional income -- paid primarily from clients.

But at this point, revenue growth is not the key metric. Rather, it is building a huge network of physicians, payers, pharmacies and labs.

CareInsite has been a master at this, as the company has signed agreements with such heavyweights as Caremark, Prudential Healthcare and National Prescription Administrators. In all, CareInsite has access to 30 million customers so far.

CareInsite has also built a massive database of physicians, numbering over 180,000.

Such moves will act as a powerful barrier to entry -- to a market, as everyone knows, is in excess of $1 trillion. In fact, some estimates show that 25% of healthcare spending is wasteful. There has also been problems in quality of care. In fact, there is a likelihood that the next big wave of litigation will be against HMOs.

Think of CareInsite as the B2B hub for healthcare. The company, in essense, is a secure, scalable platform that allows for transactions between payers, pharmacies, clinical labs, patients. Basically, with this network, physicians can make informed decisions about their patients.

There are three components to the technology: a) physician desktop application (this provides physicians with patient clinical histories, best practices and payer guidelines); b) CareChannel (this provides for secure transmission of information across the CareInsite network of payer, patients and physicians); CareExchange (this system integrates disparate sources of information, to allow better analysis from physicians).

How will the company make money off this? By providing value added services, such as claim processing, prescription drug ordering, and administrative services.

Also, the company has top-notch management. For example, the CEO was the founder of Medco Containment. This helps explain how the company has been able to build its network so quickly. After all, the medical industry is conservative. But CareInsite knows how to deal with this.

No doubt, management will surely build on its network. And as the value of it increases more and more, CareInsite will be a standout in the crowded online medical space.