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WebMD-HealthSouth deal
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September 14, 1999: 12:45 p.m. ET
Online network inks $50M marketing pact with struggling health-care firm
By Staff Writer Martha Slud
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NEW YORK (CNNfn) - Healtheon Corp., an online medical services company, and its merger partner WebMD Inc. agreed Tuesday to a $50 million marketing partnership with the struggling outpatient surgery and rehabilitation services company HealthSouth Corp.
HealthSouth (HRC) and WebMD will put up $25 million apiece for the venture, whose centerpiece will be a new sports medicine Web site for patients and doctors featuring news, expert advice and chat rooms on sports-related medical woes such as back pain and arthritis. The companies will share revenue from sponsorships, electronic commerce and advertising generated from the Web site.
As part of the pact, HealthSouth also will promote the WebMD service in its patient waiting rooms and its doctors will be connected to the online billing and administration network developed by Healtheon (HLTH).
The deal "creates a completely unique model to build market share and create new revenue opportunities," WebMD CEO Jeff Arnold said in a statement announcing the deal. The initiative "is an unprecedented opportunity to address one of health care's most dynamic growth areas."
The site is expected to debut by the end of the year.
Healtheon stock jumped 2-1/2 to 36-7/8 by midday Tuesday. HealthSouth, whose stock has plummeted amid recent warnings it will take hundreds of millions in charges for reorganization, inched up 1/16 to 5-13/16.
WebMD is privately held. The firm has a partnership to provide content to CNN.com and CNN has a minority stake in WebMD.
The new Web site may find a niche in the increasingly crowded field of online medical information, said online health-care analyst David Restrepo of Jupiter Communications.
"What it will eventually do -- if it works properly -- is further build out the consumer side of the Healtheon-WebMD business," he said.
Sports medicine information targeting the injury-prone weekend warrior "fits in well with the popularity of sports sites in general online," he said, adding that potential sponsors such as athletic shoe companies and sports drink makers might be attracted to advertise on the site.
WebMD already has a content partnership with CBS SportsLine.
Santa Clara, Calif.-based Healtheon and Atlanta-based WebMD, both fledgling Internet companies, announced in May they would merge in a stock swap estimated at the time to be worth $7.9 billion.
After the deal was announced, Healtheon stock shot up as high as 126-3/16, but has settled back sharply over the past few months. The merger is backed by Microsoft Corp. (MSFT) and other technology giants, with Microsoft underwriting doctors' subscriptions to the service.
HealthSouth, of Birmingham, Ala., bills itself as the largest provider of outpatient surgery and rehabilitative and diagnostic health-care services in the world. The company last week shelved plans to spin off its in-patient facilities, saying the idea was currently unworkable.
Health-care Web sites are increasingly linking up with health-care providers to provide a variety of services. For example, the Onhealth.com site features a heart disease section on its site that was created by the Zena and Michael A. Wiener Cardiovascular Institute at the Mount Sinai Medical Center of New York.
But the links between medical Web sites and health-care providers have raised some eyebrows. The popular drkoop.com site, led by former Surgeon General C. Everett Koop, recently has come under fire from critics who say the service does not adequately disclose financial arrangements with medical providers that it features on its site.
Restrepo said the WebMD-HealthSouth venture and other such services will have to be careful to explicitly disclose their arrangements with health-care organizations.
"You have to tell people where the content is coming from," he said.
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Healtheon
HealthSouth
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