MedicaLogic/Medscape merger targets point-of-care EMR tools

April 5, 2000

Internet, wireless technologies considered criticalWill the Internet prove to be the missing link for the electronic medical records market? A growing number of EMR vendors seem to think so and are investing heavily in creating an Internet

Internet, wireless technologies considered critical

Will the Internet prove to be the missing link for the electronic medical records market? A growing number of EMR vendors seem to think so and are investing heavily in creating an Internet presence and moving many of their products and services online.

The EMR market has been struggling for years, in large part because of physician reluctance to embrace computer-based clinical record-keeping. Despite such advantages as improved access to patient records, broader availability of clinical decision-making tools and related information, and reductions in paper and storage costs, studies have shown that only around 5% of ambulatory-care facilities have an EMR in place.

But the Internet could change all that. For example, MedicaLogic, a leading EMR vendor, is spending close to $1 billion in stock to join forces with Medscape, a leading provider of health and medical information on the Internet. The Hillsboro, OR-based company is also purchasing Total eMed, a provider of Web-based transcription services for ambulatory-care physicians. Medscape shareholders will receive 0.323 shares of MedicaLogic common stock for each share of Medscape they hold; Total eMed will receive 8 million shares of MedicaLogic common stock for all its outstanding shares and options. Altogether, the deal has been estimated to be worth $735 million to $1.2 billion.

The combined company, which will initially be known as MedicaLogic/Medscape, will operate as three business units. Mark Leavitt, M.D., CEO of MedicaLogic, will now serve as CEO of the new company and will become chairman of the board. Paul Sheils, Medscape’s CEO, will become vice chairman of the new company and president of Medscape. David Moffenbeier, president of the MedicaLogic business division, will remain in that role, while Richard Rehm, M.D., currently CEO of Total eMed, will become president of the Total eMed division based in Nashville, TN. The deal is expected to close by June.

From a product perspective, the MedicaLogic/Medscape/Total eMed combination is intended to provide physicians with the healthcare applications, tools, and information they need to more effectively manage workflow at the point of care, according to Cameron Lewis, vice president of business development for MedicaLogic. The idea is to improve patient-provider communication, reduce physician errors, and significantly expand the customer base for EMR and related products, particularly in the ambulatory-care setting.

“We want to facilitate the use of EMRs and find ways to lower the barriers to entry,” Lewis said. “This is why we did the Total eMed acquisition. We believe that if we can build a transcription component into the EMR at the point of care and put it online, a significant barrier to the use of EMRs is removed.”

This is not MedicaLogic’s first foray onto the Internet. The company has been marketing a Web-based version of its Logician EMR system since last September. Logician Internet is a Web-enabled application designed primarily for use by physicians in the primary-care office environment. Patient charts and related documentation are created on a PC by the physician at the time of a patient encounter; these charts are then stored in an off-site database that is maintained by MedicaLogic and is accessible from any location using a standard Web browser such as Netscape Navigator or Microsoft Internet Explorer.

But, like a growing number of software and even capital equipment companies in the healthcare sector (PNN 2/00), MedicaLogic is interested in expanding its presence on the physician’s desktop. This is where Medscape comes in. To date, Medscape has attracted nearly 2 million registered members—including physicians, allied health professionals, and consumers—to its Web site and created nearly 9000 individual Web sites for physician practices. This presence is expected to fit well with MedicaLogic’s current customer base of nearly 8000 clinicians using Logician to maintain more than 8 million health records.

Both companies are also hoping their collaboration will boost their bottom lines. MedicaLogic completed an initial public offering of 5.9 million shares at $17 per share last December, only to post a fourth-quarter (end-December) loss of $13.1 million compared with a loss of $837,000 in 1998. For the year, the company lost $28 million compared with a loss of $7.2 million the previous year. Revenue was $19.7 million vs. $16.2 million.

Medscape’s recent financials are better, but could still be improved. The company reported revenues of $4 million for the fourth quarter (end-December), vs. $1.5 million for the same quarter a year ago; but losses for the quarter totaled $22.5 million, vs. $1.3 million for the fourth quarter of 1998. Revenue for the year reached $11.2 million, compared to $3.1 million in 1998, but losses climbed to $34.6 million from $3.7 million the previous year.

The newly formed company plans to focus initially on integrating Total eMed’s Web-based transcription and health information services capabilities with MedicaLogic’s EMR products, to enable physicians to create online health records at the point of care. Total eMed’s service uses digital voice capture, dedicated circuits, and the Internet to enable physicians to create patient records without typing the data themselves—something MedicaLogic considers a major barrier to the adoption of EMRs at this point. In addition, using Total eMed’s package, physicians are linked with professional medical transcriptionists through a national data center, and the transcribed data can be tagged using a structured vocabulary that can be interfaced to the MedicaLogic technology.

Eventually, electronic image data will also be available for integration into the online health records, Lewis adds. MedicaLogic is already looking at how best to access and manage both archived images and individual images appended to an EMR through its Logician system.

“The availability of electronic imaging is already in the marketplace,” he said. “It is taking those images and making them available through the Internet to the point of care, where they really need to be, that is the challenge now. But once you’ve created a wireless system that is Internet-compatible, you can drop those images anywhere.”

In addition, the company intends to extend Total eMed’s Web-based transcription capabilities into the personal digital assistant environment and create a wireless PDA device that makes multimedia EMRs and related information available at the desktop, bedside, or from mobile or remote locations.

© 2000 Miller Freeman, Inc., a United News & Media company.