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MAY 4, 2000


Spilling Your Health History Online

Two dot-coms' ideas for cutting employers' health costs raise powerful privacy issues

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The Web is no miracle cure for the inefficiencies in health care -- as many dot-coms have discovered. Some entrepreneurs think they've found a winning formula, though: create Web pages for companies that can analyze employees' medical data and send them targeted information or advice. The early intervention supposedly helps cap clients' soaring health costs. And the entrepreneurs get a wealth of data that they can market to drug companies.

That's the niche two new companies, Salus Media in Santa Barbara, Calif., and Axonal Health Solutions in Washington, D.C., are pioneering. The two companies have a handful of test clients now and plan to launch officially in May. Their strategies differ somewhat. Salus encourages employees to adopt healthier "lifestyles" -- it received a patent in 1999 for online behavioral modification. For up to $36 per year per employee, Salus analyzes data that employees provide on their habits and health goals and then spits out information and a program called LifeStyles with inspirational messages from such well-known people as astronaut Buzz Aldrin.

Axonal's CareSteps claims to be more scientific. (The company refused to divulge prices for its service.) Employees enter their health information, and the software responds with medical advice based on articles in reputable medical journals.

INTIMATE PORTRAIT. Axonal President Mark Ridinger, an internist and radiologist, speaks about the humanitarian potential of his service in terms usually used for disaster-relief programs: "This is a chance to really help people on a macro scale. I have the opportunity to impact hundreds of thousands of people."

Yet the assumptions behind online health advisory services are controversial, to say the least. It's far from certain that their advice can change behavior and reduce health costs -- or that workers will use such services, especially once they realize that the companies may sell what they disclose or pair it with insurance information, giving their employers an intimate portrait.

Salus Media makes no bones about its commercial intentions. "Data mining and warehousing is an integral part of what we do. It's an additional benefit to have that [information] to market to the pharmaceutical [companies], retail companies, and HMOs," says Peter Douglas, Salus Media's CEO, whose background is in the entertainment industry. Salus also hopes that health plans will add its service to their sites, and that the insurers will feed it customer data to enhance its advice. The company will test such a link-up in September.

NO MARKETING? Axonal insists it won't sell its data, which it stores on secure servers. "We're opposed to that, philosophically. Our site isn't intended for marketing purposes," asserts CEO Jeffrey Rice. The company, however, has separately developed a line of business that mines information from client companies' health-insurance claims to predict health-cost trends. Axonal has assessed 1 million people since it began selling the service in late 1998 to large, self-insured companies and health-care providers. Eventually, Axonal hopes to marry such data to add to CareSteps' recommendations.

Both Axonal and Salus Media say they won't give employers the health profiles they compile of individuals so that the companies can't discriminate against staffers who may become too expensive to insure. Companies already know who's a burden on the system, anyway, says J. Graham Chalfant, vice-president for employee benefits for the North and South Carolina division of Willis, a risk-management and employee benefits consulting firm that has signed up with Axonal. "If a large corporation really wanted to find out who all of the sick people are and lay them all off, they could do it now. Axonal isn't opening up any new Pandora's box of privacy issues," he contends.

Insurers and their clients have evaluated employees' claims and steered them into care-management programs for years. "That [data] lets companies pick up leading indicators as to who is on the track for costing a lot of money," says Alan Muney, chief medical officer at Oxford Health Plans. "If you help them organize the care, you're going to prevent a hospitalization and costs drop."

HOW COERCIVE? Such programs are intrusive enough. Axonal and Salus could up the privacy ante several times over by pairing claims information with details people volunteer on their behavior -- over the Web. They insist that employees won't be forced to participate. Still the concept raises questions about how coercive employers may be if they think someone's behavior -- overeating, drinking, or lack of exercise -- is costing them money with health-insurance premiums on the rise.

Potential clients are aware of the issues. Midway Airlines Corp., based in North Carolina, is considering signing up for Axonal's CareSteps program. "As a patient, I don't know that I want my company knowing everything about me from a health standpoint. As a company, I don't know that I want that information [about employees], or even access to it," muses Jonathan Waller, Midway's senior vice-president for administration. Still, Waller says, Midway would like the data to help it project benefit costs. Midway pays about $4,500 a year to insure each of its 1,000 full-time employees. Last year, Midway changed health plans when its carrier announced plans to raise premiums by 40% in 2000.

Other companies' reactions suggest that concerns about pinpointing "the sick people" are valid. Willis plans to distribute CareSteps to 100 of its 400 clients in the Southeast, says Chalfant. According to Willis research, the companies paid as much as $4,500 per employee in 1999, up from $3,600 in 1994. Chalfant says that figure should increase by 6.5% to 12% every year through 2010. "We want that [1999] number to stay put," he adds.

Eventually, he'd like to combine employee's input online with their claims data so that companies have "up-to-date" information about their workforce. "We see the true value [in the program]," says Chalfant. "[Screening the employees] enables us to dig down and identify who those 20% of employees who cause 80% of medical claims. We can get [those people] into disease-management programs."

Douglas won't identify Salus Media's potential clients -- all companies with over 25,000 employees, he says. Three Fortune 500 companies, and one health plan participated in testing.

TAILORED ADVICE. How do the services work? Neither company would allow Business Week Online to try its test site. But they say they'll create secure Web pages for clients. Employees or policyholders log on and create a health profile. In seconds, the sites respond. Someone with asthma might get a list of medications to avoid. A person with a family history of cancer would be told to have regular screenings. The program might prompt others to ask their doctors certain questions. The companies even offer remote courses to stop smoking or deal with anxiety.

The linchpin is employee participation. The programs need a critical mass of stable volunteers to affect health costs and provide enough information.

Analysts are skeptical. Employees should think carefully before sharing their medical particulars, says Elizabeth Boehm, an associate analyst of health care e-commerce for Forrester Research in Boston. A third company evaluating the health data of an employee raises privacy issues. Will it be worth it for employers? "The cost of health care is hard to pinpoint," she cautions.

Todd Richter, managing director and head of health-care equity research for Bank of America in New York says the jury is still out about such services. "There are no studies that show that disease management helps" save lives or money, he says. That should give companies pause before they urge their employees to confide their intimate health details to their Web sites.


By Mica Schneider in New York


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