WebMD may be due for a checkup

WebMD, the one-time dot-com darling, is facing a host of complaints about lost and incomplete claims that have jeopardized critical payments to health care providers around the country that rely on its software and services.

Frustrated customers have taken their complaints to medical associations and federal lawmakers, hoping to clear up problems they say threaten the financial viability of some medical providers. The outcry even led the American Medical Association and other physician groups to take the highly unusual step of writing a public letter to WebMD earlier this year urging the company to take action.

"It took some pretty widespread and egregious problems to get us to do this," said Dr. Michael Fleming, president of the American Academy of Family Physicians, one of the letter's signatories.

The problems are the latest of many unanticipated turns for WebMD, which grew out of the heady ambitions of Netscape Communications founder Jim Clark. His brainchild, a start-up called Healtheon, merged with the original WebMD in 1999 with the intent of creating the largest Web site devoted to providing health care information for consumers and physicians.

That business proved increasingly difficult, and WebMD eventually morphed into a services company that provides medical management software and claims processing for physician practices and other medical providers. Although far from its original vision, the Elmwood, N.J., company has grown into a $1 billion business, which includes the nation's largest clearinghouse of medical claims.

"It took some pretty widespread and egregious problems to get us to do this." --Dr. Michael Fleming, president American Academy of Family Physicians

But complaints about its clearinghouse services began to accumulate last year when federal standards for the transmission of electronic claims began to take effect under HIPAA, the Health Insurance Portability and Accountability Act. The law carried enormous ramifications for the health care industry and WebMD in particular, as it was responsible for processing medical claims according to the new regulations and technical specifications.

In an interview, WebMD CFO Andy Corbin described the HIPAA-related problems as isolated. "We've had some hiccups because of the conversion, but no systemic issues," he said, though WebMD did report a $17 million loss for 2003 that Corbin attributed partly to HIPAA changes.

A WebMD spokeswoman added that the company "has put into place processes to ensure we are doing a better job in communicating and detecting problems in a time frame so the doctor doesn't feel it." She said that the issues affected only a "tiny fraction" of WebMD's customer base, which includes 1,200 payers, 5,000 hospitals and 300,000 physicians.

"There has been confusion in the marketplace over HIPAA, and we are by far the largest (clearinghouse) player," said the spokeswoman, who asked not to be named. "Any time you implement such massive changes there will be problems."

Where it hurts
Such comments, however, are of little comfort to businesses such as New England Geriatrics, a $6 million provider of medical services to nursing homes in Massachusetts. The West Springfield company has lost about $20,000 to $25,000 worth of claims filed through WebMD's Envoy clearinghouse, said President and CEO Steve Marcus.

"Because of some huge company, a little guy like me gets stuck." --Steve Marcus, CEO New England Geriatrics

He said his company also spent $70,000 to $80,000 in resources over the past year trying to get the process to work. Finally, desperate to keep its business afloat, the company sought the help of Sen. Edward Kennedy, D.-Mass., who forwarded the matter to the AMA. But when the missing claims were eventually found, the 90-day Medicaid filing deadline had passed--meaning that the medical provider might not get paid.

"We did the work in good faith," Marcus said. "Because of some huge company, a little guy like me gets stuck."

In recent days, New England Geriatrics reported some progress in negotiating a settlement with WebMD. "But even if they make me whole, how are they going to solve this huge problem going forward?" Marcus asked.

Similar complaints have been lodged by other health care providers that have done business with WebMD. City Family Practice, a two-person doctor's office in Forrest City, Ark., said payments had virtually ground to a halt last year on its all-important Medicare and Medicaid claims, which accounted for most of its income.

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"We were down to just about zero cash flow," recalled Claudette Cantrell, office manager for City Family Practice, which includes Dr. George Conner and a nurse practitioner.

With about $72,000 worth of claims missing, City Family's calls to WebMD grew urgent. "They never really gave us a response," Cantrell said, so she phoned the local offices for Medicare and Medicaid herself. "They said they didn't have our claims either."

When it contacted its state medical society and looked into borrowing money to cover payroll and office expenses, City Family found out it was scarcely alone in its experience with WebMD.

"We started receiving calls like this at the end of October," said Loretta Duncan, practice management consultant for the Arkansas Medical Society. "The biggest issue was that WebMD always wanted to place the blame on someone else, like the doctor's office."

After receiving three or four dozen calls like these in October and November--a "very significant" number in a membership of 4,000 practices, she said, the Arkansas society contacted the AMA.

The AMA was already well aware of the issue, having fielded inquiries from other parts of the country, as had two sister organizations, the American Academy of Family Physicians and the American College of Physicians. The three national organizations--along with five local medical societies in Arkansas, Colorado, Iowa, Kentucky and Texas--compared notes and then sent a letter to WebMD on Jan. 8.

The letter cited "numerous complaints" from physicians "regarding lost claims, incomplete claims transmissions, and lack of connectivity between WebMD and health insurers' internal claims management systems...These transaction problems have resulted in thousands, and in some cases, hundreds of thousands of dollars in delayed and denied claims payments to physicians by health plans and other third-party payers."

On Jan. 29, the company responded. "Despite our best efforts, we are aware that delays have occurred in a small fraction of the 2 billion transactions WebMD processes each year," said the letter, signed by CEO Roger Holstein. "All of us at WebMD are sensitive to the fact that some customers have experienced service problems in connection with the HIPAA transition, and that resulting delays in cash flow can be disruptive to physician practices."

That exchange was followed by a Feb. 13 meeting in Chicago involving WebMD, the AMA and representatives of most of the other signatories. Cantrell of City Family Practice reported that WebMD was much more helpful after the meeting.

(WebMD's Envoy) really seems to be putting forth an effort to improve what they are doing. --Claudette Cantrell Medical-office manager

"For the past several weeks the situation has been much better," she said in March. WebMD's Envoy "has started to correct the problems on their end" by being more communicative about the status of claims. "They really seem to be putting forth an effort to improve what they are doing," she said.

But AMA spokesman Robert Mills told CNET News.com on April 20 that the organization was continuing to get complaints about WebMD. Although he acknowledged that the company was making efforts to resolve problems, largely on a case-by-case basis, he said WebMD still lacked a universal fix to upgrade its practice management software for filing HIPAA-compliant claims.

The WebMD spokeswoman said Friday that "we've seen a dramatic drop in the number of customer service complaints we've been receiving" since the HIPAA transition began. The company has added technical, service and support enhancements, such as a "customer first account management program," to stem the tide of complaints, she said. WebMD had no immediate comment on the individual cases from New England Geriatrics and City Family Practice.

Likened to Microsoft
Eric G. Brown, vice president and health care analyst at Forrester Research, said WebMD's problems with customers seem to stem more from attitude--the arrogance of a dominant player--than from technology failures. "They're perceived as the Microsoft of the health care sector," he said.

In a mid-2003 Forrester survey of 27 major health care payers, 78 percent said they used WebMD as their clearinghouse because of its broad reach within the provider community. But ominously for WebMD, almost half of those surveyed believed they were paying too much for clearinghouse services, and many planned to reduce their reliance on such middlemen. Forty-eight percent of the plans already exchange claims directly with at least some providers.

One large payer that has chosen to bypass WebMD's Envoy clearinghouse is Harvard Pilgrim Health Care, a health care plan that has 800,000 members and a network of 22,000 providers and 130 hospitals in Massachusetts, New Hampshire and Maine. In March, Harvard Pilgrim said it stopped paying "click" charges of 35 cents per claims transaction to WebMD.

"We believe that with HIPAA-compliant transactions, the click model is gone," said Kimberly Grose, vice president of network services and operations for Harvard Pilgrim, based in Wellesley, Mass. Thirty-five cents may not seem like much, but it adds up quickly for Harvard Pilgrim because it handles 19 million transactions annually from its providers, and WebMD is the largest processor of those claims.

Grose said Harvard Pilgrim has already reached an agreement with Envoy competitor ProxyMed for a flat contractual fee for providing and maintaining a pipeline for electronic claims and other transactions. "We're paying for value-added services, not a click fee," she stressed.

So far it has been unable to reach a similar agreement with WebMD. "Every discussion with them starts with, 'How are you going to preserve my revenue stream?'" said Bob Trombly, deputy CIO for Harvard Pilgrim.

The WebMD spokeswoman accused Harvard Pilgrim "of using HIPAA as a foil to shift costs to the provider market." She said Envoy is continuing to process claims for Harvard Pilgrim physicians, who pay a fee for that service.

Corbin said large payers and providers "will always explore direct links," but "not everyone can handle that."

Indeed, the WebMD customers who are most affected by the clearinghouse problems--small physician practices and providers--are also the ones who will find it most difficult to switch.

While large providers and payers can bypass middlemen, Envoy is becoming a clearinghouse "for leftover claims" from small providers that don't want to be bothered by the effort of setting up direct connectivity with hundreds of payers, said Sean Wieland, a research analyst with W.R. Hambrecht.