Healtheon

» see healtheon.com as it lived, on the wayback machine

~ the obituary ~

in late 1999 i was a high-school student in ankara with a 33.6k modem and a list of irc rooms i checked in on after homework. the dot-com bubble was a finance-page headline that did not feel particularly close, healtheon merging into webmd at a seven-billion-dollar paper valuation was the kind of number that read like the weather report. the american healthcare internet startup category was not a thing i had context for.

jim clark wrote about the company in his book the new new thing, the michael lewis profile that came out a few months before the merger. clark had founded silicon graphics in 1982 and netscape in 1994. healtheon was his third bet, started in early 1996 with pavan nigam under the original name healthscape. the rename happened to avoid confusion with netscape. mike long came in as ceo in 1997 to run the operating side.

the pitch went through three pivots in two years. first it was a system to connect insurers and hr departments around enrollment, that pitch did not close any deals. then it was an electronic medical records exchange, that one needed regulatory clearance the company did not have. by 1998 the actual business was a clearinghouse for medical claim transactions, plus some acquired assets from actamed for 150 million dollars and mede america for 478 million in stock. the ipo cleared in february 1999 at a modest price that rose 400 percent on the first trading day.

~ the case file ~

~ the climb ~

this happened more in the american health insurance market than where i pretty much was. healthcare in the united states had a paperwork problem that the rest of the rich world had mostly solved through single-payer or single-form systems. claims went through a tangle of insurers and providers and pharmacy benefit managers and intermediaries on paper or via dedicated leased lines. the healtheon pitch was that the internet could replace those leased lines. the unit economics worked if even a single-digit percentage of transactions moved over.

back then. clark had momentum from the netscape exit and he was the new new thing of the michael lewis book. that name got the company through the august 1998 ipo cancellation during the russian financial crisis without the cap table collapsing. the second attempt in february 1999 priced at 8 dollars and traded at over 30 by close. the combined paper net worth of the founding team after the first month of trading was over a billion dollars (close enough).

~ the long tail ~

the webmd merger was announced on 20 may 1999 by clark and webmd's jeff arnold, with a stock-for-stock structure that valued the combined entity around 7 billion dollars at announcement. the close came in november 1999 and the healtheon brand disappeared into webmd. the dot-com peak ran another four months before the nasdaq turned over in march 2000.

webmd as a brand survived the bust, the post-merger entity went through restructurings and a private buyout in 2017 by kkr at a valuation of around 2.8 billion dollars. the healtheon name is a footnote in the new new thing and an entry on jim clark's wikipedia page (or whatever it was called). the actual clearinghouse work it built shows up inside the change healthcare unit that anthem now owns, several layers of acquisition later.

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