Profiles of E-health Businesses

1
Profiles of E-health Businesses
2
KEY MESSAGES

• E-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

3
DRIVING FORCES FRAGMENTATION AND INTERACTION
COST

• Hospitals
• Care centers
• Clinics
• Pharmacies
• Suppliers
• Insurers/funding bodies

4
DRIVING FORCES FRAGMENTATION AND INTERACTION
COST
The recognition of opportunities for process
improvement and cost reduction is driving the
development of more integrated, consumer oriented
and outcomes focused health systems.

• Continuum of care
• Wellness-focus
• Case/Lifetime-oriented
• Integrated delivery networks
• Capitation/casemix type payments
• Cost centres and prevention incentives
• Focus on customer needs

• Episodic Care
• Intervention Focus
• Transaction-oriented
• Hospital/Hospital systems
• Fee-for-service/global budget
• Revenue Centres/ intervention centres
• Focus on internal needs

5
DRIVING FORCES CHANGING CONSUMER DEMANDS

• Recognition of the enormous growth in ability to
  access information
• Desire for greater control/participation
• Increasing administrative and clinical service
  quality expectations
• Significant take up of purchasing over the
  internet

6
DRIVING FORCES PROFESSIONAL INFORMATION NEEDS

• Ongoing information needs high
• Patient data collection and management is arduous
  and time consuming. Little information is
  captured as a by product of care delivery
• Basic lack of integrated clinical information
  systems
• Practice management systems demands are high for
  small practices

7
KEY MESSAGES

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

8
E-HEALTH BUSINESS FRAMEWORK
Description
Revenue model

• Create and aggregate content, build communities,
  and offer value-added services

• Multiple revenue streams
• Advertising
• Sponsorships
• Subscriptions
• Service-related fees

Customer information portals
Physician/Healthcare professional services
Content
Health plan/Hospital services

• Provide online commerce solutions for product and
  service purchases

• Direct online commerce and off-line pull

Business-to-consumer (health products)
Specific
Commerce
Business-to-business
Online insurance brokering

• Provide solutions to connect various healthcare
  participants (information connectivity)

• Mostly transaction-based revenues, also fees from
• Subscriptions
• Licenses
• Services

Transaction/practice management services
Online patient medical records
Connectivity
Online care services

• Provide end-to-end solutions and/or a combination
  of multiple services to various healthcare
  participants

• Varies

Horizontal
Aggregate
Vertical
Source McKinsey analysis
9
E-HEALTH CONTENT 3 MAIN APPLICATIONS
Description
Examples

• OnHealth.com
• MayoHealth.com
• iVillage.com
• Adam.com
• DrKoop.com
• DiscoveryHealth.com
• Healthcentral.com
• Oxygens Thrive online

• Clinical information and other health-related
  topics

Customer information portals
Physician/Healthcare professional services
Content
Health plan/Hospital services
Source McKinsey analysis, News clippings
10
CONTENT CUSTOMER INFORMATION PORTAL EXAMPLE
ONHEALTH.COM
Company Snapshot Launched July 1998 Ownership
Public (Nasdaq ONHN), Acquired by
Healtheon/WebMD Industry Healthcare online
content providers Market cap 75.0 million 1999
Revenues 3.8 million Other Most trafficked
health site on the web as of 2/2000, Best Health
and Medicine Website - US News and World Report

• Value Proposition
• Deep proprietary health content covering both
  traditional and alternative medicines
• Partnerships with the Cleveland Clinic, Mount
  Sinai Cardiovascular Institute, the Scripps
  Clinic, the International Diabetes Center,
  Harvard Medical School
• Resident expert columnists
• Traffic driven to Onhealth.com from 600
  different sites

• Business Model
• Revenue primarily generated through
• Advertising/ sponsorships
• E-commerce transactions
• Premium services
• Content syndication

• Strategic Relationships
• Portal AOL Digital Cities, Infoseek/Go,
  GeoCities, Planet Direct, WebTV, Weather.com,
  Myway.com, Snap.com, Yahoo!, MindSpring,
  About.com, Ask Jeeves, Better Homes and Gardens
• Commerce drugstore.com, The Vitamin Shoppe,
  Amazon.com, ProFlowers, American Greetings,
  WholeFoods.com, gazoontite.com, The Green
  Marketplace

Key Issues Differentiation on proprietary health
content is subject to fierce competition from
other health content, lifestyle-sites,
women-sites, and portals
Source Company financial report and website,
Hoovers, News clippings, Jupiter Analyst Report
9/99
11
E-HEALTH CONTENT 3 MAIN APPLICATIONS
Description
Examples
Customer information portals

• Web-based services to simplify and enhance
  information access, communications, and training
  for physicians

• Medscape.com
• Physicians online
• Stanford SHINE
• Medsite.com

Physician/Healthcare professional services
Content
Health plan/Hospital services
Source McKinsey analysis, News clippings
12
CONTENT PHYSICIAN/HEALTHCARE PROFESSIONAL
SERVICES EXAMPLE MEDSCAPE.COM
Company Snapshot Ownership Public (Nasdaq
MSCP), Proposed merger with MedicaLogic Industry
Healthcare online content providers Market
cap 145.1 million 1999 Revenues 11.2
million Other Boasts 1.7 million registered
members worldwide

• Description
• Physician-focused portal and content site
  designed to educate health care professionals
  with reference materials, educational programs,
  tools, and services
• Features include
• Integrated search engine to retrieve abstracts
  and full-text peer reviewed clinical medicine
  articles from 500 leading medical publications
• Next-day conference summaries
• Medscape General Medicine Internets first
  primary source medical journal
• Programs to earn CME credit
• Daily and weekly specialty newsletters
• Personal physician websites
• Money Medicine Online financial resource
  center
• Medscape bookstore
• Specialty site for medical students
• Palm Docs Downloadable Palm organizer tools
  and resources

• Value Proposition
• Largest single source of articles and news on
  health topics
• Palm Docs enables physicians to create and
  retrieve information in ways that fit into their
  workflow

• Business Model
• Revenue primarily generated through
• Advertising and sponsorships
• Market research
• e-commerce
• Member fees

Key Issues Proposed merger with MedicaLogic will
provide key technology for creating online health
records

• Strategic Relationships
• Commerce BarnesandNoble.com, Drugstore.com
• Connectivity Softwatch
• Content CBS, Healthcare Communications, MSNBC,
  National Data Corporation, Reuters Health
  Information, TMP Worldwide/Monster Board

Source Company financial report and website,
Hoovers, News clippings
13
E-HEALTH CONTENT 3 MAIN APPLICATIONS
Description
Examples
Customer information portals
Physician/Healthcare professional services
Content

• Kaiser Foundation Health Plan
• Cigna

• Web-based services to simplify and enhance
  information access and communications to
  hospital/health plan members

Health plan/Hospital services
Source McKinsey analysis, News clippings
14
CONTENT HEALTH PLAN/HOSPITAL SERVICES EXAMPLE
KAISER PERMANENTE HEALTH PLANS
Company Snapshot Launched 1997
(www.kponline.org) Ownership Nonprofit Industry
HMO/Health plans

• Description
• Nonprofit, 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 registration
• Online prescription refill requests
• Advice nurse
• Physician directory
• Medical and disease information
• Discussion groups
• Health education classes

• Value Proposition
• Offers more member services and features than any
  of its HMO/health plan competitors

• Business Model
• Overall goal is cost control, not revenue
  generation

• Strategic Relationships
• Kaiser Permanente has 8.6 million members,
  creating a low-cost channel for driving adoption
  of services

Source Company website, News clippings,
Jupiter Analyst Report 9/99
15
E-HEALTH COMMERCE 3 MAIN APPLICATIONS
Description
Examples

• Online selling of consumer health products

• PlanetRX.com
• CVS.com
• DrugEmporium.com
• Drugstore.com
• Familymeds.com
• RX.com

• eNutrition.com
• Healthshop.com
• more.com
• MotherNature.com
• Greentree.com
• vitaminshoppe.com

Business-to-consumer (health products)
Business-to-business
Commerce
Online insurance brokering
Source McKinsey analysis, News clippings
16
COMMERCE BUSINESS-TO-CONSUMER (HEALTH PRODUCTS)
EXAMPLE PLANETRX.COM
Company Snapshot Launched March
1999 Ownership Public (Nasdaq
PLRX) Industry Drug and Health Product
Retailers Market Cap 195.3 million 1999
Revenues 9 million Other Chairmans choice
recognition award - EARL Awards 2000, excellence
in online and in-store retailing

• Value Proposition
• Convenient, 24/7 shopping with product selection
  that includes 28,000 SKUs
• Recent alliance with ePhysician allows for
  doctors to transmit prescriptions via ePhysician
  technology to PlanetRx pharmacies
• First e-commerce site to offer scanner
  functionalities, enabling customers to scan bar
  codes of products to purchase from the website

• Business Model
• Revenue primarily generated through
• Sales and related shipping costs

• Strategic Relationships
• Commerce McKesson, HBOC, Bergen Brunswick
• Portal Women.com, AOL, Netscape, BabyCenter.com,
  Time, Inc., Yahoo!, iVillage
• Content/services FOX, Health Network,
  Healthcentral, DrugDigest.org, The American
  Society of Health-System Pharmacists,
  AllHealth.com, Medline

• Key Issues
• Acquisition of YourPharmacy.com completed key
  revenue strategy by becoming the exclusive online
  pharmacy to Express Scripts 36 million plan
  members for 5 years
• Unlike its competitors, PlanetRx will have to
  build a brand name without the assistance of a
  consumer-branded partner

Source Company financial report and website,
Hoovers, News clippings, Jupiter Analyst Report
9/99
17
E-HEALTH COMMERCE 3 MAIN APPLICATIONS
Description
Examples
Business-to-consumer (health products)

• Business trading community for healthcare
  products and services

• CimtekMedical
• medibuy.com
• Neoforma.com
• Medline.com
• Omnicell.com
• SciQuest.com

• Proposed
• Unnamed (JJ, GE Medical systems, Baxter
  International, Abbot labs, Medtronic)
• newhealthexchange.com (AmeriSource, Cardinal
  Health, Fisher Scientific, McKesson HBOC, Owens
  Minor)

Business-to-business
Commerce
Online insurance brokering
Company descriptions provided in the following
pages or in appendix Source McKinsey analysis,
News clippings
18
THE B2B WEB INFRASTRUCTURE AND SERVICES LANDSCAPE
The B2B landscape
Web enabling infrastructure
B2B Services
Web-based business process enabling systems
Description
Examples

• Providers of web-based, XML-enabled purchasing
  automation software

PSM

• Providers of web-based, XML-enabled logistics
  improvement software

SCM
19
THE B2B WEB INFRASTRUCTURE AND SERVICES LANDSCAPE
The B2B landscape
Web enabling infrastructure
Web-based business process enabling systems
Software providers
Description
Examples

• Firms facilitating management delivery of
  website content

Content management

• Providers of auctioning tools/software

Auction solutions

• Providers 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 system

XML-based application-integration
20
THE B2B WEB INFRASTRUCTURE AND SERVICES LANDSCAPE
The B2B landscape
Web enabling infrastructure
Web-based business process enabling systems
Application service provider/ outsourcing agents
Software providers
Description
Examples

• ASPs host software and provide other services to
  various companies for a fee
• Clients avoid cost investments
• Clients pay for services as needed
• Third parties managing select functions in the
  web development process e.g., web hosting,
  fulfillment, billing etc.

21
THE B2B WEB INFRASTRUCTURE AND SERVICES LANDSCAPE
The B2B landscape
B2B Services
Auctions
Description
Examples

• Tools/services to conduct real time, bulletin
  board, or sealed bid auctions

22
THE B2B WEB INFRASTRUCTURE AND SERVICES LANDSCAPE
The B2B landscape
B2B Services
Aggregators
Description
Examples

• Markets created by aggregating a number of
  suppliers and buyers

23
THE B2B WEB INFRASTRUCTURE AND SERVICES LANDSCAPE
The B2B landscape
B2B Services
Exchanges
Description
Examples

• Online market making by matching buy and sell
  orders between multiple suppliers and buyers

24
THE B2B WEB INFRASTRUCTURE AND SERVICES LANDSCAPE
The B2B landscape
B2B Services
Communities
Description
Examples

• Community of interest focused on vertical
  industry segments providing a forum for
  information sharing, news, and creating exchanges

25
THERE ARE ACTUALLY FOUR DIFFERENT SOURCES OF
VALUE IN B2B COMMERCE
Opportunity for value
Drivers

• Order processing
• Sales, marketing, and customer service
• Buyer search/purchasing
• Standardize IT and business processes

Reduce interaction/ process costs
1

• Optimize
• Lean inventory management
• Reduction in errors/rework
• Enhanced production planning/yields
• More efficient distribution

Reduce supply chain costs
2

• Broad product/price information on availability,
  control over unauthorized buying
• New market-making mechanisms, e.g., exchanges
  reverse auctions, demand aggregation

Increase market efficiency
3

• Increase value capture from current customers
• Reach new customers
• Enable new products/services

Increase revenue
4
26
THE PORTION OF RAW MATERIALS AND SERVICE PURCHASE
IN TOTAL COSTS
Cost of purchased materials and services
Percent
100 Total costs
80-85
85
80
75-80
70
50-60
50
40
60
30
Source McKinsey estimates
27
MANY DIFFERENT TYPES OF PRODUCTS ARE TYPICALLY
PURCHASED BY A COMPANY
28
DIFFERENT PURCHASING SOLUTIONS AND METHODS
REQUIRED FOR DIFFERENT PRODUCT TYPES - TYPICAL
OVERALL SAVINGS 25-30
Commodities
Specialties

• Standardized products
• Many suppliers

• Tightly specified products
• Few suppliers

Grey zone products

• Frequent Spot decisions
• Immediate needs
• Many purchasers

Online bidding to negotiate contract
Strategic negotiation with suppliers
29
COMMERCE BUSINESS-TO-BUSINESS EXAMPLE
NEOFORMA.COM
Company Snapshot Ownership Public (Nasdaq
NEOF) Industry Medical Products
Distribution Market Cap 485.8 million 1999
Revenues 1 million Other 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

• Value Proposition
• Multi-supplier marketplace for health care
  professionals (purchasing managers,
  administration, doctors)
• Buyer enablement focus, managing shopping lists
  track buyer behavior to allow repeat one-click
  ordering

• Business Model
• Revenue primarily generated through
• Listing and transaction fees charged to suppliers
  for confirmed orders from shop
• Commission from online auctions

• Description
• Provides B2B e-commerce services for medical
  products, supplies, and equipment
• Features include
• Shop 400,00- product listings from 13,000
  suppliers across 10,000 categories users can
  send e-mail RFQs
• Auction Online and live auctions, appraisals,
  and liquidation of gt1,000 items of used,
  refurbished, and surplus equipment
• Planning Allows users to design a facility
  online - provides shopping list to address
  complexity and 3-D tour to visualize plan
• Information Regulatory library, trade, and
  customer resources, news personalized by
  specialty external links
• Career Job search and posting

• Strategic Relationships
• Partnering with SAP to integrate into mySAP.com
  marketplace - provides seamless link from SAP
  back-end to Neoforma
• Partnered with Healtheon, MD On-Line.com, ECRI,
  University of Chicagos Duchossois Center for
  Advanced Medicine, and World Telehealth
• Purchased auction company, General Asset Recovery
  (8/99), to provide brick-and-mortar auctions

• Key Issues
• The medical products marketplace is highly
  fragmented, and estimated to be worth 140
  million
• Merger 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 hospitals
• Lack of investor confidence over the recent
  announcement of planned acquisition of Eclipsys
  plummeted Neoforma.com share prices
• JJ/GE Medical Systems announcement over global
  health care exchange venture is troubling because
  GE Medical Systems is a venture investor in
  Neoforma.com

Source Company financial report and website,
Hoovers, News clippings
30
E-HEALTH COMMERCE 3 MAIN APPLICATIONS
Description
Examples
Business-to-consumer (health products)
Business-to-business
Commerce

• Online selling of health insurance

• eHealthInsurance.com
• Channelpoint.com
• Healthaxis.com

Online insurance brokering
Source McKinsey analysis, News clippings
31
B3. COMMERCE ONLINE INSURANCE BROKER EXAMPLE
HEALTHAXIS.COM
Company Snapshot Ownership Public (Nasdaq
HAXS) Market Cap 74.4 million 1999
Revenues 77.5 Industry Online health insurance

• Value Proposition
• Only e-health care company servicing both the
  consumer and B2B marketplaces

• Business Model
• Revenue primarily generated through
• Commission

• Description
• Provides internet solutions for health care
  insurance marketing, sales, and payor
  connectivity end-to-end solutions for the health
  insurance industry
• Features include
• Customer Services online platform, allowing
  customers to shop for, buy, and service health
  care plans
• Applications Solutions Web-based software
  applications for transaction processing, internet
  enrollment, online access to plan and claims
  data, technology infrastructure management, and
  data capturing services

• Strategic Relationships
• Carrier Partners Aetna US Healthcare, Blue
  Cross, Celtic, Fortis, Peoples Benefit,
  Provident, Security Life Insurance
• Network Partners First Health, CAREington, PCS
  Health Systems, Prudent Buyer PPO, Private
  HealthCare System
• Affinity Partners AOL, Lycos, CNET, Snap!,
  98point6, SPAN, PersonalMD, NCA, Insurance.com,
  Care City, DOCSDepot.com, USA Rewards, Ask the
  Doctors, BizOffice.com, Student Advantage

Source Company website, News clippings
32
E-HEALTH CONNECTIVITY 3 MAIN APPLICATIONS
Description
Examples

• Connect providers and consumers with healthcare
  organizations, including payors, hospitals,
  laboratories, and pharmacies

• CareInsite.com
• Claimsnet.com
• cybear
• cymedix
• Allscripts
• proxymed.com

Transaction/practice management services
Online patient medical records
Connectivity
Online care services
Source McKinsey analysis
33
CONNECTIVITY TRANSACTION PRACTICE MANAGEMENT
SERVICES EXAMPLE CAREINSITE.COM
Company Snapshot Launched February
1999 Ownership Public (Nasdaq
CARI) Industry Medical Practice Management and
Services Market Cap 1.8 billion 1999
Revenues 1.4 million Other Medical Manager
Corporation, which was purchased by
Healtheon/WebMD, owns 69

• Value Proposition
• Integration of payor-specific benefit rules and
  guidelines with patient-specific information at
  the point of care serves to control costs and
  improve health care quality
• Extensive management experience in clinical
  process automation, health care transaction
  processing, and benefit management
• System built with existing, well-proven software
  and system interfaces (licensed Cerner technology)

• Business Model
• Revenue primarily generated through
• Sales and implementation services

• Description
• Provides 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 suppliers
• Services include
• Transaction
• RxInsite prescription communication
• Laboratory communication
• Managed care communication claims, eligibility,
  referral and pre-certification authorization
• Content
• Messaging

• Strategic Relationships
• THINC
• Cerner
• Horizon Blue Cross Blue Shield
• AOL

• Key Issues
• CareInsite has the right payor-focused model and
  a strong management team
• Potential significant competition on the horizon
  with payors currently developing a competing
  consortium
• CareInsite needs to aggressively develop a
  substantial customer base

Source Company financial report and website,
Hoovers, News clippings
34
E-HEALTH CONNECTIVITY 3 MAIN APPLICATIONS
Description
Examples
Transaction/practice management services

• Aggregate medical information from various
  sources to rebuild patient medical records

• MedicaLogic.com
• HealthMagic.com
• WellMed
• MedicalRecord.com
• PersonalMD.com
• Healinx.com

Online patient medical records
Connectivity
Online care services
Source McKinsey analysis
35
CONNECTIVITY ONLINE PATIENT MEDICAL RECORD
EXAMPLE MEDICALOGIC.COM
Company Snapshot Ownership Public (Nasdaq
MDLI) Industry Healthcare online content
provider Market cap 415.5 million 1999
Revenues 19.7 million Other Proposed merger
with Medscape (Nasdaq MSCP)

• Value Proposition
• E-health care products connect patients and
  physicians in a way that enhances quality,
  delivery, and cost-effectiveness

• Business Model
• Revenue primarily generated through
• Advertising and sponsorship through
  AboutMyHealth.net
• Prepaid licensing and monthly fees from physicians

• Description
• Provides web-based storage and management of
  medical records, as well as related products and
  services
• Products and services include
• Electronic medical records for physicians
  (Logician)
• Personal health portfolio for consumers through
  AboutMyHealth.net
• Health-related content and e-commerce
• Internet health record for integration of
  physicians electronic medical records and
  consumers personal health portfolio

• Strategic Relationships
• Alliances LabCorp, to directly link lab results
  and corresponding EMRs, CVS.com, drugstore.com,
  PlanetRx.com, Envoy
• Content HealthGate
• Customers Baylor College of Medicine, Providence
  Health System, Oregon Health Sciences University,
  VHA, Wake Forest Baptist Medical Center

• Key Issues
• AboutMyHealth.net is still in beta test mode
• Needs to quickly and aggressively expand its
  physician base in order to expand its customer
  base

Source Company financial report and website,
Hoovers, News clippings, Jupiter Analyst Report
9/99
36
E-HEALTH CONNECTIVITY 3 MAIN APPLICATIONS
Description
Examples
Transaction/practice management services
Online patient medical records
Connectivity

• Online consultations and Internet-enabled
  telemedicine services to customers

• iPhysicianNet.com
• Medwired
• HealthHero.com
• Alere.com

Online care services
Source McKinsey analysis
37
CONNECTIVITY ONLINE CARE SERVICES EXAMPLE
iPHYSICIANET.COM
Company Snapshot Ownership Currently private,
IPO filed Feb 2000 Industry Internet-enabled
health care services

• Description
• iPhysicianNet establishes a physical and
  internet-enabled electronic presence in
  physicians private offices, enhancing
  communication between pharmaceutical companies
  and physicians
• Products and features include
• Interactive, real-time PC-based videoconferencing
  system
• e-Detailing real-time detailing, allowing
  pharmaceutical company sales reps to communicate
  directly with physicians in their private offices
• High speed telecommunications lines

• Value Proposition
• Provides a cost-effective and efficient
  e-commerce communication channel between the
  pharmaceutical company and other health care
  professionals
• Using iPhysicianNet.com can result in a five-fold
  increase in the number of effective detail calls
  by a pharmaceutical representative

• Business Model
• Revenue primarily generated through
• Services

• Strategic Relationships
• Connectivity Hitachi Data Systems,
  x-ChangeMag.com, Axolotl, Rhythms NetConnections
• Customers GlaxoWellcome

Key Issues Considering expansion into onsite
medical conferencing, remote peer consultations,
and other conferencing services
Source Company website, News clippings
38
CONNECTIVITY OTHER EMERGING AREAS
Broadband access and new voice and video over
IP technologies will enable telemedicine and
other virtual healthservice growth.

• Private online education
• Patient communities
• Virtual personal clinics
• Home testing/monitoring
• Teleradiology
• Telepathology
• Telepsychiatry

Source Company website, News clippings
39
E-HEALTH AGGREGATOR 2 MAIN APPLICATIONS
Description
Examples

• Provide end-to-end solutions or combination of
  multiple services to various healthcare industry

• Ventro.com

Horizontal
Aggregate
Vertical
Source McKinsey analysis, News clippings
40
HORIZONTAL AGGREGATOR EXAMPLE VENTRO.COM
Company Snapshot Ownership Public (Nasdaq
VNTR), Formerly Chemdex Corporation Industry Mult
i-sector internet marketplace companies Market
cap 1.1 billion 1999 Revenues 30.8
million Other 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)

• Description
• Builder and operator of vertical B2B e-commerce
  marketplace companies Purchases products from
  suppliers and resells them to customers
• Products/services include advanced search
  engines, transaction software, and systems
  integration capabilities
• Health care-related companies
• Promedix customers purchase products from
  medical product manufacturers with a single
  purchase order 500 specialty suppliers represent
  over 325,000 SKUs
• Broadlane high volume hospital and medical
  supplies, still in the development phase

• Value Proposition
• Different 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 efficient
• Lower sales and marketing costs, as well as
  improved inventory management and product
  delivery for suppliers
• Streamline business processes, increase
  productivity, and reduce costs throughout the
  supply chain

• Business Model
• Revenue primarily generated through
• Resale of products
• Commission from sales

• Strategic 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, SAP
• Recently acquired SpecialtyMD.com

• Key Issues
• Strong management team
• Key to success will be to rapidly expand
  hospital/ GPO base. However, hospitals and GPOs
  may be reluctant to share pricing
• Critics say that Ventro focuses too much on
  back-end solutions, thereby underselling the
  importance of front-end features
• Market is waiting for Ventro to prove its model

Source Company financial report and website,
Hoovers, News clippings
41
E-HEALTH AGGREGATOR 2 MAIN APPLICATIONS
Description
Examples
Horizontal
Aggregate

• Provide end-to-end solutions or combination of
  multiple services across the healthcare industry

• Healtheon.com

Vertical
Source McKinsey analysis, News clippings
42
VERTICAL AGGREGATOR EXAMPLE HEALTHEON / WEBMD.COM
Company Snapshot Integrated website launched Nov
1999 Ownership Public (Nasdaq
HLTH) Industry Vertical Internet solutions,
Internet and Intranet Software Services,
Healthcare online content Provider Market
cap 3.5 billion 1999 Revenues 102.1 million

• Description
• HealtheonUses 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 processing
• WebMD 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 Proposition
• Community for physicians, health care
  professionals, and consumers
• Offers both information exchange as well as
  support for complex transactions for disparate
  participants across geographic boundaries
• Offers freedom from expensive proprietary systems
  and technology

• Business Model
• Revenue primarily generated through
• Non-internet, network-based transaction services,
  development, consulting, and IT management
  services
• Software licensing fees Advertising
• Subscription fees

• Strategic Relationships
• Recently acquired Kinetra, pending acquisition of
  Medical Manager and CareInsite, OnHealth.com
• See attached pages

• Key Issues
• Healtheon/WebMD has a first-mover advantage, an
  attractive service-based business model, an
  experienced management team, and key strategic
  partners
• Substantial increased competition has been posed
  by established technology companies and fast
  internet start-ups
• Execution is in question, due to the rapid
  acquisition of different immature and untested
  business models
• Dependent on a few major partners and customers
  for large percentage of revenues

Source Company financial report and website,
Hoovers, News clippings, Goldman Sachs
43
MARKET CAP RANGES FOR VARIOUS E-HEALTH BUSINESS
APPLICATIONS
Market cap (in 100 millions)
1
2
3
5
6
7
8
9
10
20
35
4
Customer information portals
Physician/Healthcare professional services
Content
N/A
Health plan/Hospital services
Business-to-consumer (health products)
Specific
Commerce
Business-to-business
Online insurance brokering
Transaction/practice management services
Online patient medical records
Connectivity
N/A
Online care services
Horizontal
Aggregate
Vertical
First quarter, 2000 Source McKinsey
analysis, Hoovers
44
KEY MESSAGES

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

45
CURRENT E-HEALTH COMPANIES IN KOREA
Concentration of e-health activity
Select Companies / websites

• HealthOK , DrCyber, Crezio, Medion, Doctor21,
  Webhospital, Healthcare, Healthpia, InternetPost,
  HealthInfo, HealthKorea, DoctorKorea

Customer information portals
Physician/Healthcare professional services
Content
Health plan/Hospital services

• Kimsonline, MediGate, Opendoctors, MediKorea,
  Medipark, Mdhouse, MediNPharm

Business-to-consumer (health products)
Specific
Business-to-business
Commerce
Online insurance brokering

• emedicals

Transaction/practice management services
Online patient medical records
Connectivity
Online care services
Horizontal
Aggregate

• Carecamp

Vertical
Source McKinsey analysis, Websites, News
clippings
46
E-HEALTH OFFERINGS BY SELECTIVE HOSPITALS AND
MEDICAL CENTERS IN KOREA
Information and services offered
Hospital/Medical center Service Information
Health Information
Hospital/Medical center
Reservation Services
Patient Queries
ü
ü
ü
Kyungpook University Medical Center
ü
ü
Kangnung Hospital, Asan Foundation
ü
ü
Kangnam Sungshim Hospital, Hallym University
Medical center
ü
ü
ü
ü
Kyunghee University Medical Center
ü
ü
ü
Ahnam Hospital, Korea University Medical Center
ü
ü
ü
Severance Hospital
ü
ü
Ghil Hospital, Ghachun Medical University
ü
ü
ü
Asan Medical Center
ü
ü
ü
ü
Samsung Medical Center
ü
ü
ü
Kangnam St. Marys Hospital, The Catholic
University Medical Center
ü
ü
ü
Hanyang University Medical Center
Source Websites
47
CONTENT CUSTOMER INFORMATION PORTAL EXAMPLE
HEALTHOK.CO.KR
Company Snapshot Launched 1/2000 Ownership SK
Corporation Industry Online healthcare content
provider Other HealthOK is a part of the
OKcashbag business by SK Corp

• Description
• Customer-focused health care information
• Features include
• OK Clinic Information regarding symptoms and
  treatment for 140 diseases and illnesses online
  health care professionals answer patient queries
• Healthmall
• Ask the pharmacist
• Specific health-related topics (e.g., diabetes,
  vitamins)
• Healthfinder Provides links 1,800 health
  care-related sites
• Clinic and pharmacy directories
• CyberER
• Post office

• Business Model
• Revenue primarily generated through
• Advertisement
• Membership
• Commission from commerce
• Online marketing
• Sales (e.g., through providing internet solutions
  for pharmacies)

• Strategic Relationships
• Connectivity Oracle, Netro21
• Content Mediservice, Korea Vitamin Information
  Center, Roche Korea, Cell Biotech
• Customers OnnuriHealth (drugstore chain)

Key Issues HealthOK, along with PharmOK, are
currently SK Corps main e-health businesses
Source Company website, News clippings
48
CONTENT PHYSICIAN/HEALTHCARE PROFESSIONAL
SERVICES EXAMPLE MEDIPARK.COM
Company Snapshot Launched 3/2000 Ownership M2
Community Industry Online healthcare content
provider Other Medipark is a spin-off business
of Medison (Korean medical device manufacturer)
Majority investors include Medison, Medidas,
Onnet, Terasource Venture Capital

• Description
• Information portal for physicians and other
  healthcare professionals
• Features include
• Online library
• Training, lectures, and conferences
• Personal member websites
• E-mail services
• Customized news
• Cyber communities

• Value Proposition
• One-stop internet services for physicians and
  other health care professionals
• Provides the latest medical information
• Provides links to relevant academic associations

• Business Model
• Revenue primarily generated through
• Advertisement
• Management/ operations contracts

• Strategic Relationships
• Connectivity Onnet
• Content and connectivity 16 medical professional
  associations

Key Issues Company 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 businesses
Source Company website, News clippings
49
COMMERCE BUSINESS-TO-BUSINESS EXAMPLE
eMEDICALS.CO.KR
Company Snapshot Announced 12/99 Ownership SK
Global Industry Medical products distribution

• Description
• Medical product distributions and clinical
  testing service for small, mid-sized hospitals
• Features include
• Product purchasing
• Inventory management
• Management analysis
• Automatic ordering
• Electronic settlement
• Online laboratory tests

• Value Proposition
• High quality medical products at lower price
  enabled by integrating telecommunication
  technology and distribution network
• Guaranteed quality product/outcome backed by
  highly recognized SK brand
• Efficient process management through proprietary
  program which can be installed to any existing
  system
• Possible delivery of products within 24 hours

• Business Model
• Revenue primarily generated through
• Commission from sales
• Advertisements

• Strategic Relationships
• Connectivity Bit Computer, Brain Consulting,
  Medidas, SCL
• Exclusive contract with 3M Korea
• SK Global sponsors MediGate, the online doctors
  community

• Key Issues
• Catalog information available through website,
  but customers are required to use proprietary
  software for services
• Business is still in the nascent stage of
  development
• Currently limited offering with only one
  manufacturer per product

Source Company website, News clippings
50
VERTICAL AGGREGATOR EXAMPLE CARECAMP.COM
Company Snapshot Launched 4/2000 Ownership Cur
rently private Industry Vertical Internet
Solutions Other Majority investor is Samsung
Corporation with 53 carecamp.com owns 50 of
Medipharm (chain of 1300 drugstores)

• Description
• Provides B2B e-commerce solutions, as well as
  health and disease information for physicians
• Proposed 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 doctors
• Cyber hospital health and disease information
  accessible to members, physician communities
• Online shopping health products and beauty
  supplies

• Value Proposition
• High quality medical supplies at lower prices

• Business Model
• Revenue primarily generated through
• Advertising
• Commission
• Membership fees

• Strategic Relationships
• Samsung Corporation, Unitel, Medimedia, Medicamp,
  Gil Medical Center, Soonchunhyang University
  Hospital, Hallym University Medical Center, Cha
  General Hospital, Paik Hospital
• GE Medical, Medimedia Korea (Vivendi)

Key Issues Business is still under development
Source Company website, News clippings
51
CONCLUSION

• Extensive 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