December 8, 1999

B2B eDM: REVOLUTIONARY OPPORTUNITIES!

"What's B2B eDM?" you ask. It stands for business-to-business Internet disease management.

The Internet is receiving great attention for its potential to improve disease management processes. However, almost all the attention has been paid to business-to-consumer (B2C) applications, rather than business-to-business (B2B) applications.

This parallels the attention that all B2C Internet companies have received over the past several years. The explosive potential of the B2B Internet market is just emerging!

This article highlights some of the strategic opportunities relating to B2B eDM. In particular we offer a unique angle for existing disease management outsourcing companies, which are being challenged to reinvent themselves as Internet health companies.

B2B INTERNET BACKGROUND (NOT SPECIFIC TO HEALTH CARE)

Here are a few highlights about the overall B2B Internet market:

And...as you might expect these days, there's a web site specifically dedicated to B2B issues. You can find EXTENSIVE analyses of B2B topics at Net Market Makers (if you only have time for one, take a look at the presentation by Morgan Stanley Dean Witter).

B2C eDM -- SIGNIFICANT, INCREMENTAL BENEFITS

B2C Internet disease management opportunities revolve around getting information to and from patients using the Internet (often referred to as FRONT END applications). B2C disease management applications include web sites at which patients can receive information and/or participate in managing their chronic conditions, devices using Internet technologies to assist patients in monitoring and relaying clinical information, direct-to-consumer advertising by pharmaceutical companies, and the like.
While B2C eDM applications are exciting and significant, most improvements here will be INCREMENTAL.

In B2C eDM applications, the Internet is competing with other existing approaches and technologies to become a point of contact with the patient. For example, DM companies are already using combinations of face-to-face contact with nurses, case managers and others. They also use telephone, fax, pagers, and customized information appliances.

Another limiting factor is that Internet adoption is inversely correlated with age. The patients who could benefit most from Internet technologies are the ones least likely to be comfortable with them (for now).

For most patients, Internet applications offer a way to make EXISTING contacts with patients better or cheaper. Bottom line: the Internet offers significant INCREMENTAL benefits in the B2C arena.

(One exception here is companies developing easy-to-use Internet information appliances that use the Internet, e.g., HealthHero).

B2B eDM -- REVOLUTIONARY POTENTIAL!

We believe B2B Internet applications for disease management offer REVOLUTIONARY benefits to improve quality, reduce costs, and advance patients' experiences of the health system!

B2B Internet disease management opportunities relate primarily to BACK END applications in the health care delivery system:

1) CONNECTIVITY -- using the Internet to connect the multitude of players in the health delivery system -- doctors, health plans, hospitals, DM companies, case managers, medical call centers, etc. The primary goals here are to providing accurate, real time information about patients and to automate work flows among these players.

What's the revolutionary potential here? B2B eDM has great potential both to take advantage of and to drive NETWORK EFFECTS created when these players become connected in a local health care delivery system through the Internet. The value of a network increases EXPONENTIALLY based on the number of users in the network.

To understand network effects, consider the evolution of fax machine technology. When 5% of business users had fax machines, there was no network effect. At some point the market reaches a critical mass (around 30-50% of the market). At that point, those without fax machines are pressured to join the herd and adopt the technology, or be left behind.
This is a crucial difference between the potential of B2C eDM and B2B eDM.

2) KNOWLEDGE -- connecting the information gathered by various players to develop a more complete profile of patients (data warehousing and data mining).

What's the revolutionary potential here? It's the chance to find TOTALLY NEW PATTERNS for improving patient care and/or reducing costs.
In short, CONNECTIVITY and KNOWLEDGE describe the B2B eDM opportunity!

THE CHALLENGE AND THE OPPORTUNITY FOR DISEASE MANAGEMENT COMPANIES -- BECOME AN eDM COMPANY OR BECOME EXTINCT

Companies that are viewed by investors and/or analysts as "health services" companies are at danger of becoming extinct. While a few years ago the category of health services was a hot area for venture capitalists and other investors, today it is COLD.

Today, most DM companies look a lot more like health services companies than anything else. The Disease Management Purchasing Consortium tracks over 160 companies that provide DM outsourcing and related services. Most of these companies were formed as specialists in particular diseases, e.g., asthma, diabetes, etc. Many have migrated to caring for multiple diseases and some have developed significant information systems capabilities.

Very few DM companies have embraced the power of the Internet in their operating models. (For an exception to this generalization, see our profile of Accordant Health, a company that has made significant investments in Internet technology.)

DM companies are being challenged to reinvent themselves as Internet health companies. As they contemplate the next generation of innovation, be aware there's a major fork in the road: B2C or B2B.

We suggest that DM companies consider taking the B2B fork in the road. B2B opportunities:

We wish you safe travels, and please call BHT if you need a roadmap to B2B opportunities.

TELEHEALTH TECHNOLOGY AND STANDARDS UPDATE

A "Telehealth Update" report discusses the future of telehealth technology and standards. It was issued by The Office of Advancement for Telehealth of The Department of Health and Human Services.

The report cites several trends that will influence the near future of the telehealth industry and dictate the need for technical standards:

One interesting paper referenced within the Telehealth Update deserves its own listing. The "Report of the Workshop on Home Care Technologies for the 21st Century".

WRIST WATCH CELL PHONES AND OTHER COOL TECHNOLOGIES AROUND THE CORNER!

The November 29 issue of the "Rapidly Changing Face of Computing" features short articles and photos from this year's Comdex technology show held in Las Vegas. How might you apply these innovations to provide better and less expensive care for patients?

A QUICK UPDATE ON HEALTH CARE APPLICATION SERVICE PROVIDERS (ASPs)

A previous edition of E-CareManagement News described the huge benefits of ASP applications for physician offices. In early October, one health care ASP, the Trizetto Group, went public. The shares were issued at $9 and were trading around $27 on December 8. Not bad! Further insights about this company and the ASP market can be found at Wit Capital and e*Offering.

PHARMACISTS SPEND 1.6% OF TIME ON DISEASE MANAGEMENT ACTIVITIES

That's the surprising findings of a November 1999 study entitled "Pharmacy Activity Cost and Productivity Study" by consultants Arthur Andersen.

The study describes how pharmacy personnel spend their time on each of nine main pharmacy processes:

Present the Prescription 12.0%
Process the Prescription 24.3%
Prepare the Order 21.2%
Deliver / Dispense the Order 16.3%
Pharmacy Administration and Regulatory 5.3%
Manage Inventory 9.0%
Disease Management 1.6%
Other Health-Related Activities 0.1%
Miscellaneous Activities 10.2%
TOTAL 100.0%

The results are surprising because pharmacy personnel are shown to be spending only a small percentage of time on DM. As a profession, pharmacists have embraced disease management and have made efforts to become active participants. Pharmacists articulate their perspective something like "We see patients routinely and frequently. Patients trust their pharmacist. We can answer their questions. We can inform patients not just about their medicines, but also about other aspects related to their chronic conditions." Any thoughts from our pharmacist readers in the audience?



E-CareManagement News is an e-newsletter that tracks a major change in health care and managed care—the paradigm shift from “managing cost” to “managing care”.  This e-newsletter is brought to you by Better Health Technologies, LLC (http://www.bhtinfo.com).  BHT provides consulting and business development services relating to disease management, demand management, and patient health information technologies.

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