Is MedUnite's Health Failing?

MedUnite's (San Diego) president and chief executive officer, Dave Cox, insists that the recent write-downs of some investor/partners' valuations of the venture—formed to provide an Internet-based link between providers and payers for claims processing and other transactions—were a result of conservative accounting practices and had no reflection on the success of MedUnite.

However, the fact that the consortium also recently waived some sign-up fees may indicate that MedUnite is, in fact, not meeting its original profit-generation goals, according to Steven Etzler, founder, Business Development Institute (Red Bank, NJ), a consultancy with a focus on technology-related alliances and partnerships. MedUnite's founding organizations are Aetna, Anthem, Cigna, Health Net Inc., Oxford, PacifiCare and WellPoint Health Networks.

In addition to charging insurers a fee for hooking up to the standard electronic system (through which all of MedUnite's members transact with healthcare providers), fees per transaction are collected from insurers. Additionally, in the past MedUnite charged physicians a $150 installation fee. In August the physician fee was waived.

Ambitious Business Plans

According to MedUnite's Cox, "The $150 physician fee was waived to encourage small practices to move from their antiquated paper/phone/fax to MedUnite's electronic healthcare transactions site." However, the fee was not waived just for small practices, but for practices of all sizes. Cox adds, "The waiver encourages small practices more than mid-sized or large only because $150 is a bigger expense to them."

Etzler suggests the fees may have been waived to encourage physician adoption of MedUnite's services because its ambitious business goals were not being met. "Common objectives and goals are holding MedUnite's founders together," he says. "Unfortunately, the ambitious business model where there was going to be a lot of revenue generated from this, is starting to wane. I think the founders which use the electronic system themselves are starting to think of MedUnite more as a technology investment," rather than a profit generator.

CEO Cox states, however, that MedUnite's business is thriving. It has processed more than 100 million transactions over the past 12 months, and more than 30,000 doctors are using the system. "We have got another 100,000 doctors and 100 million transactions worth of orders that we are installing right now," says Cox. "From an operating perspective, we are doing just fine."

MedUnite was formed in 2000 by the seven largest US health insurers, which were looking to develop a solution for the long-standing problem of physicians having to communicate with insurance companies in a number of different ways. Currently those seven original founders own approximately 11.5 percent of MedUnite. National Data Corp., the eighth investor, owns approximately 17.5percent of the venture. MedUnite, according to Cox, is currently seeking investors.