online marketing: The Cyber File Cabinet

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Dot-coms try to shift storage of medical records online.

Dr. Sam Sugar never expected to be the first client to benefit from his Internet start-up, But that's exactly what happened one Saturday last year when he was admitted to an Illinois emergency room suffering from severe abdominal pain. Sugar, who had undergone spinal surgery in the same hospital just five days earlier, was told that a doctor would have to take a complete medical history - the department that housed his records was closed for the weekend. But instead of answering a lengthy collection of queries about recent illnesses, treatments, and medications, Sugar reached into his wallet and pulled out his 4HealthyLife ID card. A nurse logged onto the site, entered Sugar's password, and retrieved his medical records.

Sugar is president and founder of, one of several Internet newbies trying to generate interest in online storage of medical data. In recent months these online firms - which include eMD, Healtheon/Web MD, CapMed, WellMed, HealthMagic and PersonalMD - have started to package consumers' medical information and house it at a central, password-protected cyberwarehouse. Connectivity among hospitals, doctors' offices, insurers, clinics, pharmacies, and consumers is at the heart of today's health care delivery process. The firms' goal: to eliminate the need for providers to track down important data in the fragmented health care system's paper jungle.

The firms are convinced that the idea will produce robust interest from consumers, who have already embraced the Web as a source of health information. In 1999, 24.8 million Americans searched the Web for health and medical information, compared with 17.1 million the previous year, according to Cyber Dialogue, a New York-based Internet market research firm. Cyber Dialogue expects that figure to rise another 35 percent, to 33.5 million, by the end of this year, and to 52 million by 2003. As a demographic, these "e-health retrievers" are poised to become a propitious marketing opportunity: 54 percent are women, 41 percent are college graduates, and 51 percent are between 30 and 49 years old.

When it comes to marketing health care, dot-coms have already found a prescription for success. More than $1 billion in venture capital flowed into health information companies in 1999. What's more, online health-related ad spending quintupled between 1998 and 1999, according to Deloitte Research, a division of Deloitte Consulting. By 2002, that figure is projected to rise to as much as $265 million, thanks to the popularity of direct-to-consumer advertising. According to a 1998 study published in Prevention Magazine, 163 million adult Americans have seen or heard a direct-to-consumer drug ad, and about 75 percent feel the ads enabled them to become more involved with their own health care and increased their tendency to challenge their doctors.

Although much of the forecast looks rosy, there are some major hurdles. For example, if medical providers can't - or won't - use online records, the system won't work. For cyberwarehousers, the good news is that doctors - once considered the Luddites of cyberspace - are becoming increasingly Net savvy. In a study of 1,084 physicians released this past December, the American Medical Association found the proportion of respondents who use the Internet has nearly doubled from 20 percent in 1997 to 37 percent in 1999. The AMA findings also show that 58 percent of physicians who use a computer but do not have access to the Web are planning to acquire Internet tools in the next six months.

Other issues are more problematic. Since medical records contain highly personal data, some patients may balk at posting information online. Nearly 75 percent of adults recently polled by Cyber Dialogue say they have concerns that sites would share personal health information with a third party without permission; nearly 60 percent say they fear someone hacking into that site. In a Gomez Advisors survey of 12,000 online consumers, 61 percent say they are hesitant to provide health information over the Internet, fearing that others would gain unauthorized access. Of this group, however, nearly 36 percent say they would be "more likely" to provide data to online sites if they had a "better understanding of what happens to that information."

Then there's the obstacle of who should control the online information - the patient, his or her physician, or some combination. Patients may want to handle their own files, but it's questionable whether physicians and other health care providers will accept a patient-created medical record as legitimate. Furthermore, health care is a highly regulated industry; dot-coms will have to abide by its many rules and regulations. A 1996 law requires the federal Department of Health and Human Services to issue rules protecting privacy of medical records transmitted via computers, if Congress didn't pass legislation within a specified period. The legislators missed the 1999 deadline, triggering an ongoing rule-making process. "Right now, there are a lot of roadblocks to the whole idea of medical records online really taking off, but the e-record is the future," says Dr. David Steele, senior health care analyst at Gomez Advisors. "People want information from their doctors or organizations they trust. And it looks like they'll share their information - their most personal information - with organizations they trust."

Nearly 49 percent of consumers polled by Gomez Advisors say they would provide anonymous information to a site; nearly 30 percent say they would provide their name and information about their medical condition. "The medical record is at the center of the entire patient experience," says Graham Pallett, a principal at Deloitte Consulting. "Once people get over the fear of loss of privacy, you'll see more adopters, the same way consumers adopted the ATM: `Nope, don't trust it' to `How can I live without it?'"

It's still unclear what business model - direct-to-consumer, business-to-business, or a hybrid of the two - will be the most successful in attracting clients. HealthMagic, a cyberwarehouser based in Columbia, South Carolina, has designed a medical record management tool that allows data to be imported from the internal systems of hospitals, physician offices, and pharmacies that are clients. The company's proprietary system, HealthCompass, allows discreet sharing and distribution of consumer health information between participants, although consumers have ultimate control over the information, says Gail McFaddin, the company's chief business development officer. Current clients include, HealthScreen America, Managed Care of America, MedeWorks, Traveler's Emergency Network, Rx Remedy, and Each pay $1.20 per customer per year to access the system.

While HealthMagic makes the B-to-B play, another contender is courting both the individual consumer and big business. PersonalMD, a Pleasanton, California-based company, offers consumers free access to medical records housed at its site, and plans to generate revenue from advertisers and partnerships with managed care companies and other health providers. Customers can access their medical records (including EKGs, X-rays, and reports) via the Web or through PersonalMD's automated fax-back system. So far, more than 100,000 people have signed up.

PersonalMD has attracted attention through direct-to-consumer marketing campaigns and business partnerships, as well as an array of co-branding opportunities. The company recently partnered with Executive Health Group - which provides physicals to top execs through a network of physician offices in more than 600 U.S. locations - and has alliances with two pharmaceutical companies, Drug Emporium and Phar-Mor. It also is connected with, which allows members to review and purchase health insurance from a list of partners.

Tom Levin, PersonalMD's president and chief executive, is betting consumers will want control of their records. "It's no secret that patient and empowerment are the new buzzwords," he says. "We're not making any money yet, but we have a business model that makes sense, and a revenue model that makes sense. People's appetite for taking control of their health and their health information isn't going to go away."

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