Profiles of E-health Businesses

KEY MESSAGESE-health business growth is being driven by the high degree of industry fragmentation, interaction costs and consumer/provider demand

A broad range of e-health business have emerged to facilitate efficient interchange of content, commerce and interconnectivity

Significant opportunity exists for the development of high value e-health businesses in Korea

HospitalsCare centersClinicsPharmaciesSuppliersInsurers/funding bodies

DRIVING FORCES: FRAGMENTATION AND INTERACTION COST

Continuum of careWellness-focusCase/Lifetime-orientedIntegrated delivery networksCapitation/casemix type paymentsCost centres and prevention incentivesFocus on customer needsThe recognition of opportunities for process improvement and cost reduction is driving the development of more integrated, consumer oriented and outcomes focused health systems.Episodic CareIntervention FocusTransaction-orientedHospital/Hospital systemsFee-for-service/global budgetRevenue Centres/ intervention centresFocus on internal needsDRIVING FORCES: FRAGMENTATION AND INTERACTION COST

DRIVING FORCES: CHANGING CONSUMER DEMANDSRecognition of the enormous growth in ability to access information Desire for greater control/participation Increasing administrative and clinical service quality expectationsSignificant take up of purchasing over the internet

DRIVING FORCES: PROFESSIONAL INFORMATION NEEDSOngoing information needs highPatient data collection and management is arduous and time consuming. Little information is captured as a by product of care deliveryBasic lack of integrated clinical information systemsPractice management systems demands are high for small practices

KEY MESSAGESE-health business growth is being driven by the high degree of industry fragmentation, interaction costs and consumer/provider demand

A broad range of e-health business have emerged that facilitate efficient interchange of content, commerce and interconnectivity


E-HEALTH BUSINESS FRAMEWORKSource:McKinsey analysis SpecificDescriptionCreate and aggregate content, build communities, and offer value-added servicesProvide online commerce solutions for product and service purchasesProvide end-to-end solutions and/or a combination of multiple services to various healthcare participantsProvide solutions to connect various healthcare participants (information connectivity)Revenue modelMultiple revenue streamsAdvertisingSponsorshipsSubscriptionsService-related feesDirect online commerce and off-line pullVariesMostly transaction-based revenues, also fees fromSubscriptionsLicensesServicesBusiness-to-consumer (health products)Business-to-businessOnline insurance brokeringContentCommerceCustomer information portalsPhysician/Healthcare professional servicesHealth plan/Hospital servicesAggregateTransaction/practice management servicesOnline patient medical recordsOnline care servicesConnectivityHorizontalVertical

E-HEALTH CONTENT: 3 MAIN APPLICATIONSSource:McKinsey analysis, News clippingsDescriptionClinical information and other health-related topicsExamplesOnHealth.comMayoHealth.comiVillage.comAdam.comDrKoop.comDiscoveryHealth.comHealthcentral.comOxygens Thrive onlineContentCustomer information portalsPhysician/Healthcare professional servicesHealth plan/Hospital services

CONTENT CUSTOMER INFORMATION PORTAL EXAMPLE: ONHEALTH.COMSource:Company financial report and website, Hoovers, News clippings, Jupiter Analyst Report 9/99Value PropositionDeep proprietary health content covering both traditional and alternative medicinesPartnerships with the Cleveland Clinic, Mount Sinai Cardiovascular Institute, the Scripps Clinic, the International Diabetes Center, Harvard Medical SchoolResident expert columnistsTraffic driven to Onhealth.com from +600 different sitesBusiness ModelRevenue primarily generated through:Advertising/ sponsorshipsE-commerce transactionsPremium servicesContent syndicationStrategic RelationshipsPortal: AOL Digital Cities, Infoseek/Go, GeoCities, Planet Direct, WebTV, Weather.com, Myway.com, Snap.com, Yahoo!, MindSpring, About.com, Ask Jeeves, Better Homes and GardensCommerce: drugstore.com, The Vitamin Shoppe, Amazon.com, ProFlowers, American Greetings, WholeFoods.com, gazoontite.com, The Green MarketplaceCompany SnapshotLaunched: July 1998Ownership: Public (Nasdaq: ONHN), Acquired by Healtheon/WebMDIndustry: Healthcare online content providersMarket cap:$75.0 million1999 Revenues:$3.8 millionOther:Most trafficked health site on the web as of 2/2000, Best Health and Medicine Website - US News and World ReportKey IssuesDifferentiation on proprietary health content is subject to fierce competition from other health content, lifestyle-sites, women-sites, and portals

E-HEALTH CONTENT: 3 MAIN APPLICATIONS

Source:McKinsey analysis, News clippingsDescriptionWeb-based services to simplify and enhance information access, communications, and training for physiciansExamplesMedscape.comPhysicians onlineStanford SHINEMedsite.comContentCustomer information portalsPhysician/Healthcare professional servicesHealth plan/Hospital services

CONTENT PHYSICIAN/HEALTHCARE PROFESSIONAL SERVICES EXAMPLE: MEDSCAPE.COMSource:Company financial report and website, Hoovers, News clippingsDescriptionPhysician-focused portal and content site designed to educate health care professionals with reference materials, educational programs, tools, and servicesFeatures include:Integrated search engine to retrieve abstracts and full-text peer reviewed clinical medicine articles from +500 leading medical publicationsNext-day conference summaries Medscape General Medicine: Internets first primary source medical journalPrograms to earn CME creditDaily and weekly specialty newslettersPersonal physician websitesMoney & Medicine: Online financial resource centerMedscape bookstoreSpecialty site for medical studentsPalm Docs: Downloadable Palm organizer tools and resourcesValue PropositionLargest single source of articles and news on health topicsPalm Docs enables physicians to create and retrieve information in ways that fit into their workflowBusiness ModelRevenue primarily generated through:Advertising and sponsorshipsMarket researche-commerce Member feesStrategic RelationshipsCommerce: BarnesandNoble.com, Drugstore.comConnectivity: SoftwatchContent: CBS, Healthcare Communications, MSNBC, National Data Corporation, Reuters Health Information, TMP Worldwide/Monster BoardCompany SnapshotOwnership:Public (Nasdaq: MSCP), Proposed merger with MedicaLogicIndustry:Healthcare online content providersMarket cap:$145.1 million1999 Revenues:$11.2 millionOther:Boasts 1.7 million registered members worldwideKey IssuesProposed merger with MedicaLogic will provide key technology for creating online health records

E-HEALTH CONTENT: 3 MAIN APPLICATIONS

Source:McKinsey analysis, News clippingsDescriptionExamplesKaiser Foundation Health PlanCignaWeb-based services to simplify and enhance information access and communications to hospital/health plan membersContentCustomer information portalsPhysician/Healthcare professional servicesHealth plan/Hospital services

CONTENT HEALTH PLAN/HOSPITAL SERVICES EXAMPLE: KAISER PERMANENTE HEALTH PLANSSource:Company website, News clippings, Jupiter Analyst Report 9/99DescriptionNonprofit, public benefit corporations that contract with individuals and groups to arrange comprehensive medical and hospital services. KFHP, along with Kaiser Foundation Hospitals and the Permanente Medical Group, is a part of Kaiser Permanente Internet features include:Online doctor appointment registrationOnline prescription refill requestsAdvice nursePhysician directoryMedical and disease informationDiscussion groupsHealth education classesValue PropositionOffers more member services and features than any of its HMO/health plan competitors Business ModelOverall goal is cost control, not revenue generationStrategic RelationshipsKaiser Permanente has 8.6 million members, creating a low-cost channel for driving adoption of servicesCompany SnapshotLaunched: 1997 (www.kponline.org)Ownership:NonprofitIndustry: HMO/Health plans

E-HEALTH COMMERCE: 3 MAIN APPLICATIONS

Source:McKinsey analysis, News clippingsDescriptionOnline selling of consumer health productsExamplesPlanetRX.comCVS.comDrugEmporium.comDrugstore.comFamilymeds.comRX.comeNutrition.comHealthshop.commore.comMotherNature.comGreentree.comvitaminshoppe.comBusiness-to-consumer (health products)Business-to-businessOnline insurance brokeringCommerce

COMMERCE BUSINESS-TO-CONSUMER (HEALTH PRODUCTS) EXAMPLE: PLANETRX.COMSource:Company financial report and website, Hoovers, News clippings, Jupiter Analyst Report 9/99Value PropositionConvenient, 24/7 shopping with product selection that includes +28,000 SKUsRecent alliance with ePhysician allows for doctors to transmit prescriptions via ePhysician technology to PlanetRx pharmaciesFirst e-commerce site to offer scanner functionalities, enabling customers to scan bar codes of products to purchase from the websiteBusiness ModelRevenue primarily generated through:Sales and related shipping costsStrategic RelationshipsCommerce: McKesson, HBOC, Bergen BrunswickPortal: Women.com, AOL, Netscape, BabyCenter.com, Time, Inc., Yahoo!, iVillageContent/services: FOX, Health Network, Healthcentral, DrugDigest.org, The American Society of Health-System Pharmacists, AllHealth.com, Medline Company SnapshotLaunched:March 1999Ownership:Public (Nasdaq: PLRX)Industry:Drug and Health Product RetailersMarket Cap:$195.3 million1999 Revenues:$9 millionOther:Chairmans choice recognition award - EARL Awards 2000, excellence in online and in-store retailingKey IssuesAcquisition of YourPharmacy.com completed key revenue strategy by becoming the exclusive online pharmacy to Express Scripts 36 million plan members for 5 yearsUnlike its competitors, PlanetRx will have to build a brand name without the assistance of a consumer-branded partner

E-HEALTH COMMERCE: 3 MAIN APPLICATIONS*Company descriptions provided in the following pages or in appendix Source:McKinsey analysis, News clippingsDescriptionBusiness trading community for healthcare products and servicesExamplesCimtekMedicalmedibuy.com*Neoforma.com*Medline.comOmnicell.com*SciQuest.comProposedUnnamed (J&J, GE Medical systems, Baxter International, Abbot labs, Medtronic)*newhealthexchange.com (AmeriSource, Cardinal Health, Fisher Scientific, McKesson HBOC, Owens & Minor)Business-to-consumer (health products)Business-to-businessOnline insurance brokeringCommerce

THE B2B WEB INFRASTRUCTURE AND SERVICES LANDSCAPEThe B2B landscapeWeb enabling infrastructureB2B ServicesWeb-based business process enabling systemsPSMSCMDescriptionExamplesProviders of web-based, XML-enabled purchasing automation softwareProviders of web-based, XML-enabled logistics improvement software

THE B2B WEB INFRASTRUCTURE AND SERVICES LANDSCAPEDescriptionExamplesFirms facilitating management & delivery of website contentProviders of software that translate information from an internal computer system into XML, transport it across the internet, and finally reconfigure it into a format that can be understood by a partners systemProviders of auctioning tools/softwareThe B2B landscapeWeb enabling infrastructureSoftware providersContent managementAuction solutionsXML-based application-integrationWeb-based business process enabling systems

THE B2B WEB INFRASTRUCTURE AND SERVICES LANDSCAPEThe B2B landscapeWeb enabling infrastructureApplication service provider/ outsourcing agentsDescriptionExamplesASPs host software and provide other services to various companies for a feeClients avoid cost investmentsClients pay for services as needed

Third parties managing select functions in the web development process e.g., web hosting, fulfillment, billing etc.Web-based business process enabling systemsSoftware providers

THE B2B WEB INFRASTRUCTURE AND SERVICES LANDSCAPEThe B2B landscapeB2B ServicesDescriptionExamplesTools/services to conduct real time, bulletin board, or sealed bid auctionsAuctions

THE B2B WEB INFRASTRUCTURE AND SERVICES LANDSCAPEThe B2B landscapeB2B ServicesDescriptionExamplesMarkets created by aggregating a number of suppliers and buyersAggregators

THE B2B WEB INFRASTRUCTURE AND SERVICES LANDSCAPEThe B2B landscapeB2B ServicesDescriptionExamplesOnline market making by matching buy and sell orders between multiple suppliers and buyersExchanges

THE B2B WEB INFRASTRUCTURE AND SERVICES LANDSCAPEThe B2B landscapeB2B ServicesDescriptionExamplesCommunity of interest focused on vertical industry segments providing a forum for information sharing, news, and creating exchangesCommunities

THERE ARE ACTUALLY FOUR DIFFERENT SOURCES OF VALUE IN B2B COMMERCEOpportunity for valueDriversReduce interaction/ process costsOrder processingSales, marketing, and customer serviceBuyer search/purchasingStandardize IT and business processesReduce supply chain costsOptimizeLean inventory managementReduction in errors/reworkEnhanced production planning/yieldsMore efficient distributionIncrease market efficiencyBroad product/price information on availability, control over unauthorized buyingNew market-making mechanisms, e.g., exchanges reverse auctions, demand aggregationIncrease revenueIncrease value capture from current customersReach new customersEnable new products/services1234

THE PORTION OF RAW MATERIALS AND SERVICE PURCHASE IN TOTAL COSTS Percent Source:McKinsey estimatesCost of purchased materials and services 100% = Total costs 80-858075-80703050-6050408560

MANY DIFFERENT TYPES OF PRODUCTS ARE TYPICALLY PURCHASED BY A COMPANY

DIFFERENT PURCHASING SOLUTIONS AND METHODS REQUIRED FOR DIFFERENT PRODUCT TYPES - TYPICAL OVERALL SAVINGS 25-30%Frequent Spot decisionsImmediate needsMany purchasersOnline bidding to negotiate contractStrategic negotiation with suppliersCommoditiesSpecialtiesStandardized productsMany suppliersGrey zone productsTightly specified products Few suppliers

COMMERCE BUSINESS-TO-BUSINESS EXAMPLE: NEOFORMA.COMSource:Company financial report and website, Hoovers, News clippingsDescriptionProvides B2B e-commerce services for medical products, supplies, and equipmentFeatures include:Shop: 400,00- product listings from 13,000 suppliers across 10,000 categories; users can send e-mail RFQsAuction: Online and live auctions, appraisals, and liquidation of >1,000 items of used, refurbished, and surplus equipmentPlanning: Allows users to design a facility online - provides shopping list to address complexity and 3-D tour to visualize planInformation: Regulatory library, trade, and customer resources, news personalized by specialty external linksCareer: Job search and posting Value PropositionMulti-supplier marketplace for health care professionals (purchasing managers, administration, doctors)Buyer enablement focus, managing shopping lists track buyer behavior to allow repeat one-click orderingBusiness ModelRevenue primarily generated through:Listing and transaction fees charged to suppliers for confirmed orders from shopCommission from online auctionsStrategic RelationshipsPartnering with SAP to integrate into mySAP.com marketplace - provides seamless link from SAP back-end to NeoformaPartnered with Healtheon, MD On-Line.com, ECRI, University of Chicagos Duchossois Center for Advanced Medicine, and World TelehealthPurchased auction company, General Asset Recovery (8/99), to provide brick-and-mortar auctionsCompany SnapshotOwnership:Public (Nasdaq: NEOF)Industry:Medical Products DistributionMarket Cap:$485.8 million1999 Revenues:$1 millionOther:Announced merger with Eclipsys Corporation (provider of end-to-end health care information solutions) and HEALTHvision (provider of Web-based solutions to health care organizations), 3/2000 Key IssuesThe medical products marketplace is highly fragmented, and estimated to be worth $140 millionMerger created exclusive 10-year deal with Novation LLC (product buying consortium for 6,500 hospitals worldwide) giving Neoforma.com access to 1/3 of all US hospitalsLack of investor confidence over the recent announcement of planned acquisition of Eclipsys plummeted Neoforma.com share prices J&J/GE Medical Systems announcement over global health care exchange venture is troubling because GE Medical Systems is a venture investor in Neoforma.com

E-HEALTH COMMERCE: 3 MAIN APPLICATIONSSource:McKinsey analysis, News clippingsDescriptionOnline selling of health insuranceExampleseHealthInsurance.comChannelpoint.comHealthaxis.comBusiness-to-consumer (health products)Business-to-businessOnline insurance brokeringCommerce

B3. COMMERCE ONLINE INSURANCE BROKER EXAMPLE: HEALTHAXIS.COMSource:Company website, News clippingsDescriptionProvides internet solutions for health care insurance marketing, sales, and payor connectivity; end-to-end solutions for the health insurance industryFeatures include:Customer Services: online platform, allowing customers to shop for, buy, and service health care plansApplications Solutions: Web-based software applications for transaction processing, internet enrollment, online access to plan and claims data, technology infrastructure management, and data capturing servicesValue PropositionOnly e-health care company servicing both the consumer and B2B marketplacesCompany SnapshotOwnership:Public (Nasdaq: HAXS)Market Cap:$74.4 million1999 Revenues:$77.5Industry:Online health insuranceStrategic RelationshipsCarrier Partners: Aetna US Healthcare, Blue Cross, Celtic, Fortis, Peoples Benefit, Provident, Security Life InsuranceNetwork Partners: First Health, CAREington, PCS Health Systems, Prudent Buyer PPO, Private HealthCare SystemAffinity Partners: AOL, Lycos, CNET, Snap!, 98point6, SPAN, PersonalMD, NCA, Insurance.com, Care City, DOCSDepot.com, USA Rewards, Ask the Doctors, BizOffice.com, Student AdvantageBusiness ModelRevenue primarily generated through:Commission

E-HEALTH CONNECTIVITY: 3 MAIN APPLICATIONSConnect providers and consumers with healthcare organizations, including payors, hospitals, laboratories, and pharmaciesCareInsite.comClaimsnet.comcybearcymedixAllscriptsproxymed.com

Source:McKinsey analysisDescriptionExamplesTransaction/practice management servicesOnline patient medical recordsOnline care servicesConnectivity

CONNECTIVITY TRANSACTION PRACTICE MANAGEMENT SERVICES EXAMPLE: CAREINSITE.COMKey IssuesCareInsite has the right payor-focused model and a strong management teamPotential significant competition on the horizon with payors currently developing a competing consortiumCareInsite needs to aggressively develop a substantial customer baseSource:Company financial report and website, Hoovers, News clippingsDescriptionProvides health care network and e-commerce services to enable the exchange of clinical, administrative, and financial information among physicians and their patients, and affiliated health plans, providers, and suppliersServices include:TransactionRxInsite: prescription communicationLaboratory communicationManaged care communication: claims, eligibility, referral and pre-certification authorizationContentMessaging Value PropositionIntegration of payor-specific benefit rules and guidelines with patient-specific information at the point of care serves to control costs and improve health care qualityExtensive management experience in clinical process automation, health care transaction processing, and benefit managementSystem built with existing, well-proven software and system interfaces (licensed Cerner technology)Business ModelRevenue primarily generated through:Sales and implementation servicesCompany SnapshotLaunched:February 1999Ownership:Public (Nasdaq: CARI)Industry:Medical Practice Management and ServicesMarket Cap:$1.8 billion1999 Revenues:$1.4 millionOther:Medical Manager Corporation, which was purchased by Healtheon/WebMD, owns 69%Strategic RelationshipsTHINCCernerHorizon Blue Cross Blue Shield AOL

E-HEALTH CONNECTIVITY: 3 MAIN APPLICATIONSAggregate medical information from various sources to rebuild patient medical recordsMedicaLogic.comHealthMagic.comWellMedMedicalRecord.comPersonalMD.comHealinx.com


CONNECTIVITY ONLINE PATIENT MEDICAL RECORD EXAMPLE: MEDICALOGIC.COMKey IssuesAboutMyHealth.net is still in beta test modeNeeds to quickly and aggressively expand its physician base in order to expand its customer baseSource:Company financial report and website, Hoovers, News clippings, Jupiter Analyst Report 9/99DescriptionProvides web-based storage and management of medical records, as well as related products and servicesProducts and services include:Electronic medical records for physicians (Logician)Personal health portfolio for consumers through AboutMyHealth.netHealth-related content and e-commerceInternet health record for integration of physicians electronic medical records and consumers personal health portfolioValue PropositionE-health care products connect patients and physicians in a way that enhances quality, delivery, and cost-effectivenessBusiness ModelRevenue primarily generated through:Advertising and sponsorship through AboutMyHealth.netPrepaid licensing and monthly fees from physiciansStrategic RelationshipsAlliances: LabCorp, to directly link lab results and corresponding EMRs, CVS.com, drugstore.com, PlanetRx.com, EnvoyContent: HealthGateCustomers: Baylor College of Medicine, Providence Health System, Oregon Health Sciences University, VHA, Wake Forest Baptist Medical CenterCompany SnapshotOwnership:Public (Nasdaq: MDLI)Industry:Healthcare online content providerMarket cap:$415.5 million1999 Revenues:$19.7 millionOther:Proposed merger with Medscape (Nasdaq: MSCP)

E-HEALTH CONNECTIVITY: 3 MAIN APPLICATIONSOnline consultations and Internet-enabled telemedicine services to customersiPhysicianNet.comMedwiredHealthHero.comAlere.com


Source:Company website, News clippingsDescriptioniPhysicianNet establishes a physical and internet-enabled electronic presence in physicians private offices, enhancing communication between pharmaceutical companies and physiciansProducts and features include:Interactive, real-time PC-based videoconferencing systeme-Detailing: real-time detailing, allowing pharmaceutical company sales reps to communicate directly with physicians in their private officesHigh speed telecommunications linesValue PropositionProvides a cost-effective and efficient e-commerce communication channel between the pharmaceutical company and other health care professionalsUsing iPhysicianNet.com can result in a five-fold increase in the number of effective detail calls by a pharmaceutical representativeBusiness ModelRevenue primarily generated through:ServicesStrategic RelationshipsConnectivity: Hitachi Data Systems, x-ChangeMag.com, Axolotl, Rhythms NetConnectionsCustomers: GlaxoWellcomeCompany SnapshotOwnership:Currently private, IPO filed Feb 2000Industry:Internet-enabled health care services Key IssuesConsidering expansion into onsite medical conferencing, remote peer consultations, and other conferencing servicesCONNECTIVITY ONLINE CARE SERVICES EXAMPLE: iPHYSICIANET.COM

CONNECTIVITY OTHER EMERGING AREASSource:Company website, News clippingsPrivate online educationPatient communitiesVirtual personal clinicsHome testing/monitoringTeleradiologyTelepathologyTelepsychiatry Broadband access and new voice and video over IP technologies will enable telemedicine and other virtual healthservice growth.

E-HEALTH AGGREGATOR: 2 MAIN APPLICATIONSSource:McKinsey analysis, News clippingsDescriptionProvide end-to-end solutions or combination of multiple services to various healthcare industryExamplesVentro.comAggregateHorizontalVertical

HORIZONTAL AGGREGATOR EXAMPLE: VENTRO.COMSource:Company financial report and website, Hoovers, News clippingsDescriptionBuilder and operator of vertical B2B e-commerce marketplace companies; Purchases products from suppliers and resells them to customersProducts/services include advanced search engines, transaction software, and systems integration capabilitiesHealth care-related companies:Promedix: customers purchase products from medical product manufacturers with a single purchase order; 500 specialty suppliers represent over 325,000 SKUsBroadlane: high volume hospital and medical supplies, still in the development phaseValue PropositionDifferent approach to e-commerce, focusing on end-to-end solutions tied to hospital ERP systems, rather than just a website making ordering and inventory management more efficientLower sales and marketing costs, as well as improved inventory management and product delivery for suppliersStreamline business processes, increase productivity, and reduce costs throughout the supply chainBusiness ModelRevenue primarily generated through:Resale of products Commission from salesStrategic Relationships (for Broadlane and Promedix)Tenet Healthcare/ Buypower (JV to form Broadlane, exclusive purchasing agreement with Promedix) Connectivity: VWR, Commerce One, Concur Technologies, IBM, Ariba, SAPRecently acquired SpecialtyMD.comCompany SnapshotOwnership:Public (Nasdaq: VNTR), Formerly Chemdex CorporationIndustry:Multi-sector internet marketplace companiesMarket cap:$1.1 billion1999 Revenues:$30.8 millionOther:Ventro is the parent company to 5 online companies - Chemdex (specialty chemicals in life sciences), Amphire (food services), Promedix (specialty medical items), Broadlane (health care supplies), and Industria (process-plant supplies)Key IssuesStrong management teamKey to success will be to rapidly expand hospital/ GPO base. However, hospitals and GPOs may be reluctant to share pricingCritics say that Ventro focuses too much on back-end solutions, thereby underselling the importance of front-end featuresMarket is waiting for Ventro to prove its model

E-HEALTH AGGREGATOR: 2 MAIN APPLICATIONSSource:McKinsey analysis, News clippingsDescriptionProvide end-to-end solutions or combination of multiple services across the healthcare industryExamplesHealtheon.comAggregateHorizontalVertical

VERTICAL AGGREGATOR EXAMPLE: HEALTHEON / WEBMD.COMKey IssuesHealtheon/WebMD has a first-mover advantage, an attractive service-based business model, an experienced management team, and key strategic partnersSubstantial increased competition has been posed by established technology companies and fast internet start-upsExecution is in question, due to the rapid acquisition of different immature and untested business modelsDependent on a few major partners and customers for large percentage of revenuesSource:Company financial report and website, Hoovers, News clippings, Goldman SachsDescriptionHealtheon:Uses an internet-based information and transaction platform to create Virtual Healthcare Networks (VHNs) that facilitate and streamline interactions among participants in the healthcare industry (i.e., providers, payors, employers, laboratories, pharmacies, patients) Services include enrollment and eligibility determination, referrals and authorizations, laboratory and diagnostic test ordering, clinical data retrieval and claims processingWebMD: Provides physicians with administrative transaction services, medical new s and research, CME credit, customized web sites and e-mail accounts, and career services (WebMD Practice). Provides customers with free health and wellness news and information, support communities, interactive tools, and online shopping (WebMD Health)Value PropositionCommunity for physicians, health care professionals, and consumersOffers both information exchange as well as support for complex transactions for disparate participants across geographic boundariesOffers freedom from expensive proprietary systems and technologyBusiness ModelRevenue primarily generated through:Non-internet, network-based transaction services, development, consulting, and IT management servicesSoftware licensing fees AdvertisingSubscription feesStrategic RelationshipsRecently acquired Kinetra, pending acquisition of Medical Manager and CareInsite, OnHealth.comSee attached pagesCompany SnapshotIntegrated website launched:Nov 1999Ownership:Public (Nasdaq: HLTH)Industry:Vertical Internet solutions, Internet and Intranet Software Services, Healthcare online content ProviderMarket cap:$3.5 billion1999 Revenues:$102.1 million

MARKET CAP RANGES FOR VARIOUS E-HEALTH BUSINESS APPLICATIONS**First quarter, 2000Source:McKinsey analysis, HooversMarket cap (in $100 millions)12356789102035N/AN/ASpecificBusiness-to-consumer (health products)Business-to-businessOnline insurance brokeringContentCommerceCustomer information portalsPhysician/Healthcare professional servicesHealth plan/Hospital servicesAggregateTransaction/practice management servicesOnline patient medical recordsOnline care servicesConnectivityHorizontalVertical 4

KEY MESSAGESE-health business growth has been driven by the high degree of industry fragmentation, interaction costs and consumer/provider demand

A broad range of e-health business have emerged that facilitate efficient interchange of content, commerce and interconnectivity


CURRENT E-HEALTH COMPANIES IN KOREA

Source:McKinsey analysis, Websites, News clippingsSelect Companies / websites

HealthOK , DrCyber, Crezio, Medion, Doctor21, Webhospital, Healthcare, Healthpia, InternetPost, HealthInfo, HealthKorea, DoctorKoreaemedicalsCarecampConcentration of e-health activity

Kimsonline, MediGate, Opendoctors, MediKorea, Medipark*, Mdhouse, MediNPharmSpecificBusiness-to-consumer (health products)Business-to-businessOnline insurance brokeringContentCommerceCustomer information portalsPhysician/Healthcare professional servicesHealth plan/Hospital servicesAggregateTransaction/practice management servicesOnline patient medical recordsOnline care servicesConnectivityHorizontalVertical

E-HEALTH OFFERINGS BY SELECTIVE HOSPITALS AND MEDICAL CENTERS IN KOREASource:WebsitesHospital/Medical centerKyungpook University Medical CenterHospital/Medical centerService InformationReservation ServicesHealth InformationPatient QueriesInformation and services offeredKangnung Hospital, Asan FoundationKangnam Sungshim Hospital, Hallym University Medical centerKyunghee University Medical CenterAhnam Hospital, Korea University Medical CenterSeverance HospitalGhil Hospital, Ghachun Medical University Asan Medical CenterSamsung Medical CenterKangnam St. Marys Hospital, The Catholic University Medical CenterHanyang University Medical Center

CONTENT CUSTOMER INFORMATION PORTAL EXAMPLE: HEALTHOK.CO.KRSource:Company website, News clippingsBusiness ModelRevenue primarily generated through:AdvertisementMembershipCommission from commerceOnline marketingSales (e.g., through providing internet solutions for pharmacies)Strategic RelationshipsConnectivity: Oracle, Netro21Content: Mediservice, Korea Vitamin Information Center, Roche Korea, Cell BiotechCustomers: OnnuriHealth (drugstore chain) Company SnapshotLaunched: 1/2000Ownership: SK CorporationIndustry: Online healthcare content providerOther:HealthOK is a part of the OKcashbag business by SK CorpKey IssuesHealthOK, along with PharmOK, are currently SK Corps main e-health businessesDescriptionCustomer-focused health care informationFeatures include:OK Clinic: Information regarding symptoms and treatment for ~140 diseases and illnesses; online health care professionals answer patient queriesHealthmallAsk the pharmacistSpecific health-related topics (e.g., diabetes, vitamins)Healthfinder: Provides links ~1,800 health care-related sitesClinic and pharmacy directoriesCyberERPost office

CONTENT PHYSICIAN/HEALTHCARE PROFESSIONAL SERVICES EXAMPLE: MEDIPARK.COMSource:Company website, News clippingsValue PropositionOne-stop internet services for physicians and other health care professionalsProvides the latest medical informationProvides links to relevant academic associationsBusiness ModelRevenue primarily generated through:AdvertisementManagement/ operations contractsStrategic RelationshipsConnectivity: OnnetContent and connectivity: 16 medical professional associationsCompany SnapshotLaunched: 3/2000Ownership: M2 CommunityIndustry: Online healthcare content providerOther: Medipark is a spin-off business of Medison (Korean medical device manufacturer); Majority investors include Medison, Medidas, Onnet, Terasource Venture CapitalKey IssuesCompany admits that the business model of Medipark.com is not to generate revenue but to create substantial network of physicians which can be used for other businessesDescriptionInformation portal for physicians and other healthcare professionalsFeatures include:Online libraryTraining, lectures, and conferencesPersonal member websitesE-mail servicesCustomized newsCyber communities

COMMERCE BUSINESS-TO-BUSINESS EXAMPLE: eMEDICALS.CO.KRSource:Company website, News clippingsDescriptionMedical product distributions and clinical testing service for small, mid-sized hospitalsFeatures include:Product purchasingInventory managementManagement analysisAutomatic orderingElectronic settlementOnline laboratory testsStrategic RelationshipsConnectivity: Bit Computer, Brain Consulting, Medidas, SCLExclusive contract with 3M KoreaSK Global sponsors MediGate, the online doctors communityCompany SnapshotAnnounced:12/99Ownership:SK GlobalIndustry:Medical products distribution Value PropositionHigh quality medical products at lower price enabled by integrating telecommunication technology and distribution networkGuaranteed quality product/outcome backed by highly recognized SK brand Efficient process management through proprietary program which can be installed to any existing systemPossible delivery of products within 24 hoursBusiness ModelRevenue primarily generated through:Commission from salesAdvertisementsKey IssuesCatalog information available through website, but customers are required to use proprietary software for servicesBusiness is still in the nascent stage of developmentCurrently limited offering with only one manufacturer per product

VERTICAL AGGREGATOR EXAMPLE: CARECAMP.COMValue PropositionHigh quality medical supplies at lower pricesBusiness ModelRevenue primarily generated through:AdvertisingCommissionMembership feesSource:Company website, News clippingsStrategic RelationshipsSamsung Corporation, Unitel, Medimedia, Medicamp, Gil Medical Center, Soonchunhyang University Hospital, Hallym University Medical Center, Cha General Hospital, Paik HospitalGE Medical, Medimedia Korea (Vivendi)Company SnapshotLaunched: 4/2000Ownership:Currently privateIndustry:Vertical Internet SolutionsOther:Majority investor is Samsung Corporation with 53%; carecamp.com owns 50% of Medipharm (chain of 1300 drugstores)Key IssuesBusiness is still under developmentDescriptionProvides B2B e-commerce solutions, as well as health and disease information for physiciansProposed features include:E-marketplace: provides opportunity for hospitals, drugstores, medical wholesalers, and retailers to purchase and sell medical equipment and supplies through auctions Telemedicine: online care services linking members and cyber doctorsCyber hospital: health and disease information accessible to members, physician communitiesOnline shopping: health products and beauty supplies

CONCLUSIONExtensive opportunities exist for E-health commerce and connectivity business in Korea

The focus of commerce and connectivity activity should be directed to high value areas, particularly those reducing fragmentation and interaction cost Hospitals/clinics should actively explore concortia opportunities that drive mutual benefit rather than developping me-too solutions

7856More than 85% of total supply chain liquidity is outside of scope for traditional exchanges. Capturing full liquidity potential will require enabling rich information flows through the supply chain, i.e., "virtual integration".More than 85% of total supply chain liquidity is outside of scope for traditional exchanges. Capturing full liquidity potential will require enabling rich information flows through the supply chain, i.e., "virtual integration".More than 85% of total supply chain liquidity is outside of scope for traditional exchanges. Capturing full liquidity potential will require enabling rich information flows through the supply chain, i.e., "virtual integration".More than 85% of total supply chain liquidity is outside of scope for traditional exchanges. Capturing full liquidity potential will require enabling rich information flows through the supply chain, i.e., "virtual integration".More than 85% of total supply chain liquidity is outside of scope for traditional exchanges. Capturing full liquidity potential will require enabling rich information flows through the supply chain, i.e., "virtual integration".More than 85% of total supply chain liquidity is outside of scope for traditional exchanges. Capturing full liquidity potential will require enabling rich information flows through the supply chain, i.e., "virtual integration".More than 85% of total supply chain liquidity is outside of scope for traditional exchanges. Capturing full liquidity potential will require enabling rich information flows through the supply chain, i.e., "virtual integration".

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Profiles of E-health Businesses