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BCG

BCG REPORT

Vital Signs

E - H E A L T H I N T H E U N I T E D S T A T E S

The Boston Consulting Group is a general management consulting firmthat is a global leader in business strategy. BCG has helped companiesin every major industry and market achieve a competitive advantage bydeveloping and implementing winning strategies. Founded in 1963, thefirm now operates 54 offices in 34 countries. For further information,please visit our Web site at www.bcg.com.

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the Biopharmaceutical Industry

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Vital Signs Update: Doctors Say E-Health Delivers

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Vital Signs: The Impact of E-Health on Patients and Physicians

A report by The Boston Consulting Group, February 2001

Patients, Physicians, and the Internet: Myth, Reality, and Implications

A report by The Boston Consulting Group, January 2001

Ensuring Cost-Effective Access to Innovative Pharmaceuticals:

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The Pharmaceutical Industry into Its Second Century:

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In addition, BCG’s Health Care practice publishes Opportunities for Action

in Health Care, articles on topical issues for senior executives.

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The Boston Consulting Group publishes other reports that may be of interest to senior health-care executives.

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CARINA VON KNOOP

DEBORAH LOVICH

MARTIN B. SILVERSTEIN, M.D.

MICHAEL TUTTY

Vital SignsE - H E A L T H I N T H E U N I T E D S T A T E S

J A N U A R Y 2 0 0 3

2

© The Boston Consulting Group, Inc. 2003. All rights reserved.

For information or permission to reprint, please contact BCG at:E-mail: [email protected]: 617-973-1339, attention IMC/PermissionsMail: IMC/Permissions

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Table of Contents

NOTES TO THE READER 4

EXECUTIVE SUMMARY 5

INTRODUCTION 7

THE ROLE OF E-HEALTH IS EXPANDING AMONG PHYSICIANS 9

Doctors Gain Sophistication in Seeking Information Online 10

Physicians Embrace E-Health Tools to Improve Patient Care 13

E-HEALTH IS GAINING GROUND AMONG PATIENTS 21

Expanding Online Usage 21

The Enhanced Importance and Impact of the Internet 24

HARNESSING THE POWER OF THE INTERNET 29

Implications for Pharmaceutical Companies 30

Implications for Managed Care Organizations 32

Implications for Health Delivery Systems 35

Implications for E-Health Vendors 36

CONCLUSION 39

3

Notes to the Reader

4

About the Authors Carina von Knoop is a vice president and director in the New York office of The Boston Consulting Groupand head of the firm’s E-Health topic area. Deborah Lovich is a vice president and director in BCG’s Bostonoffice and head of the firm’s Marketing and Sales topic area. Martin B. Silverstein, M.D., is a senior vice pres-ident and director in BCG’s Boston office and head of the firm’s North American Health Care practice.Michael Tutty is a senior analyst for BCG’s global Health Care practice.

AcknowledgmentsThe authors would like to thank the advisory team of Philippe Guy, Alastair Flanagan, and David Matheson.They would also like to acknowledge the contributions of the project team: Fred Aslan, Pamela Carter, MaryDeVience, Kelly Gittlein, and Malka Rabinowitz. Finally, the authors would like to thank the editorial teamof Barry Adler, Katherine Andrews, Patricia Berrian, Nancy Graham, and Sharon Slodki.

For Further Contact The authors welcome your questions and feedback.

Carina von KnoopThe Boston Consulting Group, Inc. 430 Park AvenueNew York, NY 10022Telephone: 212-446-2800Fax: 212-446-2801 E-mail: [email protected]

Deborah LovichThe Boston Consulting Group, Inc.Exchange Place, 31st FloorBoston, MA 02109Telephone: 617-973-1200Fax: 617-973-1339E-mail: [email protected]

Martin B. Silverstein, M.D.The Boston Consulting Group, Inc. Exchange Place, 31st FloorBoston, MA 02109Telephone: 617-973-1200Fax: 617-973-1339E-mail: [email protected]

Michael TuttyThe Boston Consulting Group, Inc. Exchange Place, 31st FloorBoston, MA 02109Telephone: 617-973-1200Fax: 617-973-1339E-mail: [email protected]

Executive Summary

5

Our third report in the Vital Signs series reveals thatin the United States, e-health is growing more per-vasive among—and more relevant to—physiciansand patients alike. Long after the e bubble hasburst, physicians continue to move online and toreport that the information they find in the virtualrealm influences their real-world medical decisionsin significant ways. In addition, more physiciansthan ever before are adopting online tools todeliver patient care. Similarly, the Internet’s reachhas expanded, and its call to action has increased,among the overall patient population. Indeed, e-health has advanced and accelerated the movementfirst initiated by direct-to-consumer drug advertis-ing: the migration of patients toward more activeengagement in their care.

The Internet continues to have a major impact onphysicians in the United States. As we reported in2001, physicians continue to spend about threehours a week online for professional reasons. Ourlatest data show that they spend more than half ofthat time on the Internet at home, where they arefree from the distractions of the office and are oth-erwise unreachable. Once online, the vast majorityof doctors continue to use the Internet to augmenttheir clinical knowledge. Most physicians onlinealso say that the information they find on theInternet has an impact on their knowledge aboutsymptoms, treatments, and possible diagnoses.Around three-quarters continue to report that theinformation they find online has an impact on theirprescription decisions. Furthermore, physicianshave begun to embrace more sophisticated toolsand to use the Internet in more discerning ways—

engaging in more interactive activities, addingmore types of Web sites to their repertoire, andreferring patients to Web sites.

Electronic prescribing, electronic medical records,and remote disease monitoring are garnering wideraudiences as obstacles to the adoption of thesetools are overcome. In the past year, use of the toolshas grown beyond a core group of early adopters.Although the number of physicians is still small,about 40 percent more now use at least one of thethree tools. Overall, doctors are turning to patient-care tools because they deliver on the two dimen-sions most important to them: enhanced quality ofcare and improved efficiency. Online communica-tion with patients—the fourth major tool exploredin previous Vital Signs reports—is holding steady. Ofthe one-quarter of doctors who communicate withpatients online, most do so only with the handfulwho request this method of consultation.

Doctors are not alone online: about 80 percent ofall patients we surveyed now search the Internet forinformation about health-related topics. On aver-age, patients—by which we mean people withchronic medical conditions—are going online forhealth information about nine times a year. Thevast majority of them report that the informationthey find enhances their understanding of theirhealth problems, has an impact on how they man-age their overall health, affects how they communi-cate with their doctors, and improves their compli-ance with prescribed treatments. Once they’velogged on, patients continue to visit about three tofive health Web sites regularly. They still find them

6

primarily through general search engines. WebMDcontinues to lead the pack of health care sites, fol-lowed by the health sections of mass-market portals,such as Yahoo! and MSN.

Exactly how patients use the Internet and how theyare influenced by the information they find therecontinue to differ on the basis of the severity oftheir illness and their attitudes about their own rolein their health care. Although e-health is gainingground among all patients, its impact—and thegrowth of that impact—are most pronouncedamong patients whose conditions are most severe,who visit their doctors most frequently, and whotake the greatest number of prescription drugs.The data show that e-health is an increasingly effec-tive channel for reaching this audience most attrac-tive to health care players.

As e-health evolves, it is changing the economics,interrelationships, and competitive landscape in theindustry—gradually but fundamentally. Health careplayers must keep pace with these changes by hon-ing their strategies and experimenting with newones. In recent years, pharmaceutical marketinghas focused on winning the drug-sales game largelythrough vast sales forces. But the interactive and

automatic nature of e-health—and e-prescribing inparticular—could change the nature of that game.In fact, it will bolster formularies, shifting the bal-ance of power and influence to managed careorganizations.

To remain competitive in such a dynamic land-scape, health care players must adjust their strate-gies as e-health evolves. They must understand thate-health poses different kinds of opportunities andchallenges to different types of organizations. Webelieve that as the influence of the online channelincreases among doctors and patients alike, allhealth-care players should continue to add theInternet and Web-based technologies to theirstrategic and operational initiatives. Rather thanbeing viewed as a separate and distinct channel, theInternet should be integrated closely with offlinecapabilities currently used to reach patients andtheir doctors. Already, as more and more physiciansrecommend health-related Web sites to theirpatients, the means for reaching physicians andpatients are converging. As a result, health careplayers should no longer market to two individualaudiences but target both physicians and patientswith a unified approach that delivers consistentmessages across audiences and channels.

Introduction

7

Since 1999, The Boston Consulting Group has beentaking the pulse of e-health, measuring the pene-tration and impact of online medical informationand tools among physicians and patients. In this lat-est Vital Signs report, our data show that the Inter-net is having more and more of an impact on bothgroups in the United States. These same powerfultrends are also at work in Europe, as our forthcom-ing companion study, European Physicians and theInternet, will show.

Our findings are based on surveys of more than 400physicians and more than 10,000 patients in theUnited States.1 The surveys were designed by TheBoston Consulting Group in conjunction with Har-ris Interactive, and they were fielded using HarrisInteractive’s research expertise and capabilities.

The physician survey revealed that doctors are turn-ing to online patient-care tools in greater numbersthan before; more important, they are being influ-enced in greater numbers by the information theyfind online. The patient survey revealed the samerise in the Internet’s influence on consumers, par-ticularly on the heaviest users of health care—thosepatients whose medical conditions are most severe.

Although it is undeniable that the Internet is takinghold in the health care arena, the explosive revolu-tion that was once anticipated has simply not hap-pened. Indeed, early forecasts overestimated thespeed with which e-health would become a reality—

and at the same time underestimated the impactthat the Internet would have.

The evolution of e-health has turned out to be agradual one: slowly but surely, it is becoming anintegral part of the business processes of pharma-ceutical, managed-care, and health delivery organi-zations. We expect the pace and scope of this evo-lution to get a significant boost once e-healthovercomes the obstacles currently impeding itsmore widespread acceptance. Such obstaclesinclude physicians’, patients’, and organizations’concerns about the privacy of online patient data,the legitimacy of using patient data in marketing,and the still uncertain regulatory impact of thefederal Health Insurance Portability and Account-ability Act (HIPAA).

Today e-health is ushering in fundamental changeand shifting the balance of power among healthcare players. Ultimately, the trends suggest that e-health tools and sites can serve as a valuable bridgebetween physicians and patients—one that can ini-tiate, inform, and reinforce the discussions that tai-lor health care decisions to each patient’s needsand each physician’s practice. Health care playersthat exploit the opportunities offered by e-healthcan position themselves at the point of convergencebetween patient and physician, online and offlinemarketing, information and influence—making theInternet a valuable component in marketing acrossaudiences.

1. Physicians were sampled randomly by telephone, but the survey was administered only to those doctors who reported spending at least 20 hours aweek caring for patients. The patient survey was conducted online and was weighted to the online chronic-patient population; the data cover more than40 chronic conditions.

The Role of E-Health Is Expanding Among Physicians

9

The e-health tools that doctors use in patient careare gaining greater acceptance and having moreand more of an impact in the health care arena.Physicians report that electronic prescribing, elec-tronic medical records (EMRs), and remote diseasemonitoring (RDM) enjoy impressive “efficacy”rates. Most of the doctors who use these toolsreport that they deliver on their promise ofincreased efficiency, better care, and enhancedpatient satisfaction. In addition, use of the toolsseems to be spreading—through favorable word ofmouth—from a core of pioneers to a broadeningbase of physicians. Granted, even with the highadoption rates, the universe of physicians usingthese tools is still small. Nonetheless, our resultsconfirm the growth of electronic patient-care tools.

Helping fuel this growth are two trends. First, virtu-ally every U.S. physician engaged in patient care isnow online. The proportion of surveyed doctorswho use Web-based technologies has risen from analready impressive 89 percent in 2001 to 96 percentin 2002. Of those physicians online, 99 percent useInternet-based technologies for professional rea-sons—60 percent spending at least one-fifth of theirtime online for this purpose. This trend is playingout in Europe as well, where, by 2005, physicians’use of the Internet is expected to be on a par withcurrent rates in the United States.

Second, the doctors who turn to the Internet forprofessional reasons are getting more activelyinvolved in the medium. The 2002 study indicatedthat the number of physicians attending virtual con-ferences grew by 35 percent and the number tak-

ing online continuing-medical-education (CME)courses grew by 29 percent. Such activities engagedoctors more interactively than traditional onlinesearching. Furthermore, physicians have nowbegun to shift their online knowledge-gatheringfrom general health portals to disease- andspecialty-specific Web sites—mirroring the shift wefirst discovered among patients in 2001.

These two trends make the Internet an increasinglyrelevant medium for reaching physicians, who areinundated with information. Today doctors arefinding that simply hearing messages from healthcare players—much less choosing which ones toheed—is difficult and growing more so every day.For even as doctors must see more patients in lesstime, they must also select from a growing list ofavailable treatment options. Many physicians strug-gle to stay abreast of the new therapies, workingharder to juggle their administrative responsibili-ties, educational and informational needs, and timewith patients.

Moreover, in the past four years the sales staff ofpharmaceutical companies has doubled to approxi-mately one rep for every ten physicians. In an envi-ronment where 89 percent of doctors reported thatthe overall time they spend with sales representa-tives is holding steady or declining, more reps andmore products add up to more frequent—andtherefore shorter and less informative—visits formany physicians. In addition, industry statisticsshow that doctors must wade through a growingnumber of protocols and practice guidelines frompayers and delivery systems.

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Doctors Gain Sophistication in Seeking Information Online

The online channel remains a powerful tool for in-forming and influencing physicians. Researchingclinical information continues to be the most com-mon online activity among physicians who log onfor professional purposes, with 90 percent of themreporting that they use the Internet for this reason.Similarly, reading articles from medical journalsand communicating with colleagues are holdingroughly steady in popularity. (See Exhibit 1.)

Doctors told us that the medical information theyfind online is still having an impact on the care theyprovide. Information gleaned online continues tohave an impact on physicians’ knowledge aboutnew treatments (96 percent of doctors online) andabout symptoms and diagnoses (91 percent). (SeeExhibit 2.) In keeping with the findings from 2001,this information also has an impact on how morethan 70 percent of physicians interact with patients,diagnose illnesses, and prescribe treatments.

Our study also uncovered several new findings. Wenow know, for example, that on average, doctors

To complicate matters further, physicians must con-tend with the deluge of information generatedby direct-to-consumer (DTC) advertisements fordrugs. As intended, the $3 billion spent on DTC adsin 2001 produced a steady stream of messages topatients, which in turn boosted queries to doctors.Indeed, 92 percent of physicians reported that theirpatients asked about drugs that they learned ofthrough advertising. Almost 70 percent of thosephysicians told us that such requests are escalating,and 30 percent said the increases are significant.No doctors reported that the number of queries hasdeclined.

To overcome these obstacles and better reach physi-cians, it is incumbent upon drug companies, man-aged care organizations, and health delivery sys-tems to devise new ways of exploiting the onlinechannel. By now, almost every player has experi-mented or invested in the area. But players mustkeep in mind that e-health is far from static. It’s amoving target, and they must continually adapttheir strategies as e-health evolves. For all these rea-sons, players must stay abreast of how doctors areusing the Internet to seek medical information andemploying online tools to improve patient care.

EXHIBIT 1The Internet Remains a Powerful Tool for Informing and Inf luencing Physicians . . .

Do you use the Internet to . . . ?

Research clinical information

100

40

20

60

80

2001 survey 2002 survey

90

912

90

Read articles from medical journals

7874

Communicate with colleagues

61 63

Complete continuing medical education

45

58

Attend online conferences

31

42

Percentage of doctors online

SOURCES: BCG proprietary physician surveys, 2001 and 2002.

NOTE: In 2001 the number of respondents was 356 out of our survey population of 400. In 2002 it was 385.

11

spend more than half of their time online at homefor professional reasons. Because physicians tend tolog on when they are free from the distractions ofthe office, the Internet gives players uninterruptedand previously unavailable access to doctors. Also,physicians have begun to embrace more sophisti-cated tools and to use the Internet in more dis-cerning ways—engaging in more interactive activi-ties, adding more types of Web sites to theirrepertoire, and referring patients to sites.

More physicians are attending conferences andcompleting CME courses online. Whereas 31 per-cent of doctors in 2001 said that they had attendeda virtual conference, 42 percent said they had doneso in 2002. Similarly, 58 percent of physiciansreported completing CME course work online—upfrom 45 percent in 2001. And for every ten physi-cians who completed course work online, ninereported that they found virtual CME useful andtwo said that they found the programs very useful.

The notable rise in these activities is particularlyintriguing because online conferences and online

CME are far more interactive and require far moreinvolvement from physicians than traditionalonline research. The growing acceptance of—andsatisfaction with—these knowledge-building toolsdemonstrate that doctors are gaining comfort withbasic online functions and beginning to migrate tomore complex tasks and sophisticated offerings.

This finding bodes well for health care players seek-ing deeper relationships and more meaningfulinteractions with doctors. In particular, it suggeststhat in the future doctors may be more willing touse e-detailing—electronically enabled video visitsand other virtual information sessions with drugreps—to replace in-person visits.

Doctors are beginning to broaden the range of Websites they visit and are homing in on specializedsites for focused information. About 70 percent ofphysicians continue to visit three or fewer Web sitesregularly in search of medical information, but thetraffic patterns are changing slightly. Althoughphysicians continue to favor health portals, espe-cially WebMD and Medscape, some traffic has

EXHIBIT 2. . . And I t Is Having a S ignif icant Impact on the Care They Provide

Has the information you have gotten from the Internet had a major impact on . . .


. . . your knowledge about new treatments, including drugs?

No impactat all

Majorimpact

Minor impact

. . . your knowledge about symptoms and possible diagnoses?

. . . the way you interact with your patients?

. . . your prescription of treatments, including drugs?

. . . the types of diagnoses you have made?

Percentage of doctors who regularly visit at least one health-related site

74

139

2124

2626

2119

3435

2119

1912

1313

1111

5961

6672

6064

6060

6870

9396

8791

7976

7373

7981


NOTE: In 2001 the number of respondents who regularly visited at least one health-related site was 297; in 2002 it was 338.

begun to migrate from those sites to sites sponsoredby professional associations, such as the AmericanAcademy of Pediatrics and the American Academyof Family Physicians. The success of these two sitesin particular owes in part to their broad appeal tosizable areas of care: children’s health and generalpractice. But when viewed collectively, all the pro-fessional association sites (including smaller andmore focused associations, such as for cardiologistsand endocrinologists) command a 43 percent totalshare of physicians online—up from 32 percent in2001. (See Exhibit 3.)

Physicians appear to be turning to these sites insearch of continuing medical education and addi-tional information about specific diseases and thelatest treatments. And since most of these sitesfocus narrowly on the interests at the heart of spe-cialist practices, physicians may visit them in searchof affinity and affiliation with other like-mindeddoctors. As with other types of sites, doctors tend tovisit association sites after they learn of themthrough medical ads and word of mouth among col-leagues.

With more and more physicians visiting niche sites,achieving laserlike targeting online promises tobecome easier. Roche, for example, attempts to tapinto this shift by sponsoring AcneNet, a site linkedwith the American Academy of Dermatology. All vis-itors to the site can read about the causes of andtreatments for acne, including the most effectivedrug available for treatment of severe acne:isotretinoin, which Roche manufactures asAccutane. In this way, the company zeroes in on themost likely prescribers of its drug. It also gains cred-ibility from associating its product with the expertorganization in the field and from filtering theinformation through an objective third party.

Similarly, the Swiss biotech company Serono, amanufacturer of fertility drugs, sponsors Ferti.Netthrough an unrestricted educational grant. The sitekeeps fertility specialists up to date on the lateststudies, drugs, and conferences. It also providesexplanations of studies and their implications forgeneral health practitioners and patients.

Doctors are directing patients to medical Web sites.Now comfortable with Internet technologies and

12

EXHIBIT 3Doctors Are Adding Si tes Sponsored by Professional Associat ions to Their Onl ine Repertoire

Which three Web sites do you visit most often for health-related information?

Professionalassociation Web sites1

50

20

10

30

40


32

43

CDC

7 8

Medline

107

MD Consult

75

PubMed

6 5

Physicians’ Online

18

11

Medscape

20

14

WebMD

2623

Representsseveral

sites

Percentage of doctors who regularly visit at least one health-related site


NOTE: In 2001 the number of respondents who regularly visited at least one health-related site was 297; in 2002 it was 341.

1Examples include the American Academy of Family Physicians, the American Academy of Pediatrics, and the American Medical Association.

13

convinced of the medium’s benefits, physicians arebeginning to share the wealth of online medicalinformation. Sixty-five percent of the physicians wesurveyed recommended health-related Web sites totheir patients. They did so because they found theinformation on the sites valuable and becausereviewing the information outside office visits wasconvenient for both their patients and themselves.

More than one-third of doctors who recommendedWeb sites directed patients to professional associa-tion sites, many of which feature patient-referencesections. More than one-fifth of doctors directedpatients to WebMD, and about another fifthreferred them to disease-specific sites.

Such behavior presents an unparalleled oppor-tunity for health care players. It creates a conver-gence—an avenue that reaches both patients andphysicians, even if they don’t use the same portionsof the site or consult it for the same types of infor-mation. As a result, integrated marketing to physi-cians and patients is not just possible but necessary.The look and feel of the messages delivered acrossboth audiences should be consistent and share asingle vision.

Physicians Embrace E-Health Tools to Improve Patient Care

Just as more and more physicians have begun to useinteractive formats for learning online, increasingnumbers have embraced the interactive electronictools that aid in delivering care to patients. Overthe past year, about 40 percent more physiciansonline have adopted at least one of the followingtools: electronic prescribing, electronic medicalrecords, and remote disease monitoring. (SeeExhibit 4.) Physicians’ use of online communica-tion with patients—the fourth tool assessed in ourstudy—held relatively steady compared with the2001 figures. Physicians’ predictions about theirplanned usage—which may be slightly optimistic—indicate that penetration of the tools will be evengreater within 18 months. Because of the differ-ences in their underlying economics, technologies,and industry standards, however, adoption of thetools will continue to progress at different rates.

The growth in patient-care tools is noteworthy—particularly since standards have not yet emerged toensure that the tools are compatible with existinghealth-care processes and technologies. Indeed,

EXHIBIT 4More Physicians Are Embracing Interact ive Electronic Tools

Does your practice use or plan to use any of the following online patient-care tools?

Electronic prescribing Remote disease monitoring Online communication with patients

25

50

75

Plan to use within 18 monthsCurrently use

3731

1514

3439

2120

89

913

Electronic medical records

54

42 24

20

2230

1611 75

2526

2001 2002 2001 2002 2001 2002 2001 2002

Percentage of doctors surveyed


14

technology and information standards remain acritical missing link for all the tools. Moreover,obstacles such as the cost of the tools, their lack ofcompatibility with other technologies and officeprocesses, and their exposure to breaches of privacyhinder their growth and threaten their viability.Certainly, as e-health evolves, its customers andvendors will evolve, too, in ways that could make thecurrent obstacles obsolete or create new ones.

Once standards do emerge in the years ahead, weexpect patient-care tools to become still more per-vasive among physicians. The history of onlinepractice-administration tools provides one exampleof how such tools could spread throughout thephysician population.

Originally, a core of early adopters embraced online practice-administration tools for claims sub-mission, reimbursement, and other administrativefunctions. Once the value of the tools in accelerat-ing payments was demonstrated and standards wereset for sharing claims and administrative data on-line, the medical community turned to the tools indroves. Today most doctors online use the tools tosubmit electronic claims (78 percent) and receivepayments (55 percent). We anticipate the same typeof growth among patient-care tools once standardsare set and the tools’ contributions to productivityand efficiency have been demonstrated.

Although doctors ranked efficiency as one of theprimary reasons for adopting several of the patient-care tools in 2001, the 2002 study shows a generalrise in the number of doctors citing improvedpatient care as the key reason for their trial and useof the tools. This heightened emphasis on qualityunderscores the potential that the tools offer healthcare players seeking to have a positive impact oncare. And the fact that the tools are still makinggood on their promise to improve care, deliver effi-ciency, and aid doctors in other ways bodes well fortheir continued acceptance by physicians.

Below we explore each of the four patient-care toolswe researched, analyzing the factors that drive andlimit their adoption, the ways in which physiciansdeploy them, and how well they perform.

Electronic Prescribing. The fastest growing of allthe patient-care tools is e-prescribing, which allowsphysicians to use Web-based technologies to checkprescriptions automatically against drug formula-ries and potential interactions. In addition, doctorscould use the tools to send prescriptions to thepharmacy for fulfillment. Indeed, our survey showsthat the proportion of physicians “writing” pre-scriptions electronically has risen from 11 percentto 16 percent of all physicians online.

Fueling this growth is a powerful value proposition:many doctors reported that e-prescribing improvesboth their compliance with drug formularies andthe quality of the care they deliver. (See Exhibit 5.)Physicians are able to realize these gains because e-prescriptions reduce their need to address queriesfrom pharmacies about prescriptions that are illeg-ible, that were accidentally written for inappropri-ate or nonexistent dosages, that threaten to interactwith a patient’s other medications, or that are notcovered by a health plan’s formulary. The Institutefor Safe Medication Practices estimates that phar-macists make about 150 million phone calls tophysicians annually to clarify prescriptions. Sim-ilarly, more than half of the clinical calls that physi-cians deal with are related to pharmacy issues.

It would seem that e-prescribing tools are indeedbetter mousetraps—that is, superior approaches tohandling the prescription-writing process. It’s notsurprising, then, that the medical world is begin-ning to beat a path to the door of e-prescribing ven-dors. Although many vendors have subsidized thecosts of the technologies that make e-prescribingpossible for doctors, one-third of current usersreported that they employ the tools even thoughthey receive no subsidies at all. The fact that thesephysicians foot the bill for e-prescribing technolo-gies demonstrates that they are drawn to—and will-ing to pay for—tools they consider valuable.

Forecasting the growth of e-prescribing is difficultat this stage. Growth will depend in part on howwell the makers of the technologies address theissue of technological incompatibility—the primaryreason physicians cited for not adopting e-prescribing tools. In addition, several types of play-

ers are jockeying for the greatest recognitionamong physicians in this still-emerging space. Anda significant number of start-up players, such asPocketScript and LogonHealth, have already goneout of business. Others, such as iScribe, have suc-cumbed to consolidation in the industry.

The evolution of e-prescribing will be determinedby the industry standards that emerge. Will they bethe standards currently advocated by retail pharma-cies through SureScripts, by pharmacy benefit man-agers through RxHub, by the nation’s health plansthrough MedUnite, or by some combination of (oralternative to) these proposals? In fact, the futureof e-prescribing may not hinge entirely on the freemarket: threatened government regulation couldmandate that all players take e-prescribing moreseriously.

Electronic Medical Records. EMRs—which capturepatients’ medical history, prescribing information,x-rays, and other data for convenient access byproviders online—are the most widely used of allthe patient-care tools. Thirty percent of physicians

15

online currently use EMRs—up from 22 percent in2001. An additional 24 percent said they plan toadopt the tools within 18 months.

Physicians first turned to EMRs for the efficienciesthat the paperless systems offered—in particular,less time spent filing and searching for files. Butefficiency has declined in comparison with physi-cians’ other goals: about 20 percent fewer physi-cians cited it in 2002 as a primary reason for adopt-ing EMRs than in 2001. A higher percentage ofdoctors reported that they equipped their officeswith EMRs primarily to meet mandates from man-aged care companies and group practices, and toimprove the quality of care. By ensuring that themost complete patient-health information isinstantly accessible, the tools enable physicians totreat patients more comprehensively by integratingcare across illnesses and coordinating treatmentsand medications. In fact, 87 percent of EMR userssaid that the tools help them deliver better care,and 78 percent said that they improve patient satis-faction. In addition, 89 percent said that EMRs

EXHIBIT 5E-Prescr ibing Improves Formulary Compliance and Qual i ty of Care


Improving overall efficiency

Impact of e-prescribing on

No impactat all

Majorimpact

Minor impact

Saving the practice money

Improving patient satisfaction

Delivering better care

Improving compliance with managed care formularies

Percentage of doctors who have adopted e-prescribing

1431

2833

Not available26

2120

1618

3626

1218

22

3332

4527

4843

4549

52

4347

3655

8469

5767

74

7679

8182


NOTE: In 2001 the number of respondents who started writing prescriptions electronically was 42; in 2002 it was 63. Figures do not always add up to 100 percent

because respondents could also choose “not sure” or “decline to answer.”

16

improve their compliance with managed care for-mularies. (See Exhibit 6.)

Most physicians who made the switch from paperrecords to EMRs have converted at least three-quarters of their documents to online files. Giventhe large initial expense of the technological hard-ware, there are obvious scale advantages to pro-ceeding wholeheartedly. But when it comes to actu-ally using EMRs, many physicians have not yet beenable to exploit all the tools’ intended features.Almost three-quarters of physicians use the recordssolely to store data for their own in-office use.Limiting the full-scale exchange of data is theabsence of widespread standards for technologyand information, which would facilitate data shar-ing across hospitals and offices.

The cost of implementing EMR systems—perceivedas prohibitive by many doctors—remains a leadingimpediment to their widespread adoption, cited by44 percent of nonusers. For that reason, the toolstend to be used by physicians in practices withhigher revenues—namely, specialist and larger

practices. Some 35 percent of specialists use EMRscompared with 25 percent of primary-care physi-cians. Similarly, 43 percent of physicians in prac-tices with more than 25 physicians employ the tools,whereas only 19 percent of physicians in practiceswith fewer than 25 do so.

Also hindering the adoption of EMRs is widespreaduncertainty about still-developing HIPAA regula-tions. It remains to be seen how the regulations willaffect the collection, sharing, and storage of med-ical data—as well as how compliance with the fed-eral rules will affect the delivery of patient care.Even though the regulations have been relaxedunder the current administration, many physiciansand health delivery systems believe that a balanceremains to be struck between the quality and com-prehensiveness of patient data and privacy protec-tions for the data.

As hospitals upgrade their computer systems and asstandards emerge for sharing data across medicalfacilities, physicians will find it easier to use EMRsto their full capacity. The advances in technology

EXHIBIT 6Electronic Medical Records Improve Formulary Compliance and Qual i ty of Care



Impact of EMRs on

No impact at all Major impact Minor impact





Percentage of doctors who have adopted EMRs

742

1626

Not available22

1013

3011

5625

2932

25

4653

2658

3633

4042

53

4234

4131

9258

6974

78

8887

6789


NOTE: In 2001 the number of respondents who adopted EMRs was 89; in 2002 it was 130. Figures do not always add up to 100 percent because respondents could

also choose “not sure” or “decline to answer.”

17

and standards will help make the tools not onlymore compatible with other systems but also moretime and cost effective.

Remote Disease Monitoring. RDM uses technologyto capture, report, and analyze patients’ health dataso that doctors and patients alike can take a moreactive role in managing chronic conditions betweenoffice visits. The monitoring typically includes com-munication about how patients can adjust theirlifestyles to prevent their conditions from worsen-ing or complications from arising. RDM is appliedselectively to patients whose symptoms require fre-quent monitoring, such as those with diabetes,chronic hypertension, or heart conditions. Speci-fically, of the small group that has adopted RDMtools, the vast majority use them to monitor bloodglucose levels; monitoring blood pressure and pulserates are the next most common uses.

In 2001, 5 percent of doctors online used RDM. In2002 that figure rose to 7 percent—still a small per-centage, but growing. Today the tools are used pri-marily to improve care (by 71 percent of physicians

who employ them), and they deliver powerfully onthat goal and on patient satisfaction. Ninety-threepercent of those using RDM said that it enablesthem to deliver better care, and 96 percent said thatit improves patient satisfaction. (See Exhibit 7.) Weexpect RDM’s exemplary performance to generatea “buzz” among physicians in the near future, whichwill in turn encourage more of them to adopt the tools.

RDM’s success can also be measured on the bottomline. For example, the managed care organizationPacifiCare determined that hospitals using RDMdevices for patients with chronic heart failure real-ized a 174 percent return on their investment. Thedevices helped patients return home sooner andavoid further cardiac events that would haverequired emergency care and readmission. Inanother study, researchers at the University ofColorado concluded that teenagers with type I dia-betes who share their blood-sugar readings withphysicians every two weeks through a modemdevice could manage their disease as effectively asthey could with quarterly office visits. The modem

EXHIBIT 7Remote Disease Monitor ing Improves Qual i ty of Care and Pat ient Sat isfact ion



Impact of RDM on

No impact at all Majorimpact

Minor impact





Percentage of doctors who have adopted RDM

1617

2150

Not available4

167

Not available41

2629

1612

39

3243

7

5854

4238

57

50

52

8483

5850

96

5293

59

84


NOTE: In 2001 the number of respondents who started using remote disease monitoring was 19; in 2002 it was 28. Figures do not always add up to 100 percent

because respondents could also choose “not sure” or “decline to answer.”

transmissions, although not yet covered by insur-ance, cost about one-sixth of the $300 office visits.

RDM may face one of its biggest hurdles notbecause physicians have negative perceptions aboutit but because they have no perceptions about it atall. In fact, of all the patient-care tools, nonusers ofRDM are the most likely to cite lack of awareness(17 percent) as the reason they haven’t yet tried it.The costs of the systems and a lack of clarity abouttheir benefits also prevent doctors from using RDM.A number of other factors may be hindering aware-ness and adoption as well:

• Unlike tracking medical data, prescribing drugs,and communicating with patients, RDM is notmerely a traditional health-care process movedonline. Rather, it requires significant changes inphysician behavior—most notably, the addition ofactivities that are not currently reimbursable,such as a daily review of patients’ vital signs andinstant notification or treatment adjustmentswhen the signs modulate even slightly.

• The monitoring technologies themselves tend tobe cutting-edge and are typically offered by smallstart-ups or niche companies. In combination,these factors hinder widespread promotion of thetools and make it difficult for physicians practic-ing general medicine to stay actively informedabout the latest developments. For example,high-tech RDM devices outside the normal prac-tice of medicine include Cygnus’s GlucoWatchBiographer and a new personal urinalysismachine. The GlucoWatch Biographer, one of theproducts in Cygnus’s glucose-monitoring niche, isworn on the wrist as a transdermal substitute fortraditional blood tests. Similarly, the Food andDrug Administration has recently approved palm-size monitors that can perform daily tests onsmall urine samples for patients at risk of devel-oping renal disease.

Despite those obstacles, proven results in savingcosts and improving care are bound to win theattention of managed care organizations, whichalready consider managing chronic disease anessential element of their offerings. By sponsoring

RDM, these players can help convert doctors intousers of the tools.

Online Communication with Patients. The propor-tion of doctors currently communicating withpatients over the Internet is holding steady at about25 percent. Growth has stalled because there aremore physicians who are afraid of getting boggeddown in Web communication than who view them-selves as liberated by its enhanced reach and con-nectivity. This fear has kept many from embracingor even experimenting with handling requests fordrug refills, addressing queries about minor ail-ments, and providing other, less critical consulta-tions online.

In particular, 22 percent of those who don’t com-municate with patients online avoid the mediumbecause they fear that online communication mightnot be secure enough to protect their patients’ pri-vacy. Many of these physicians worry that doctorsmight be held responsible if patient informationgot into the wrong hands. Other doctors (15 per-cent of nonusers) avoid online communication withpatients because they fear an unending stream ofinformal—and unpaid—consultations.

Nevertheless, penetration among even one-quarterof the physicians online is a respectable showing—and one that will improve once the issues about lia-bilities and reimbursement are resolved. Specific-ally, we expect that online communication will growslowly but steadily as more and more patientsrequest it. In fact, demand is already the leadingreason why physicians communicate with theirpatients online, cited by 51 percent of those whouse the tool—up from 41 percent in 2001. (SeeExhibit 8.) In addition, physicians continue to seepatient satisfaction as the area where online com-munication delivers the greatest impact. (SeeExhibit 9.)

Patients themselves told us that they want to com-municate with their physicians online. Over 40 per-cent of the more than 10,000 patients surveyed saidthey would like to have their medical test results e-mailed to them, and over 45 percent want to receivee-mail responses to their queries.

18

19

EXHIBIT 9Onl ine Communicat ion Improves Pat ient Sat isfact ion and Qual i ty of Care



Impact of online communication on

No impactat all

Majorimpact

Minor impact





Percentage of doctors who have adopted online communication

3433

5562

9 24 66 9014

1627

Not available70

138

26

19

1410

4

5259

4032

67

6863

26

6567

4238

86

8273

30


NOTE: In 2001 the number of respondents who communicated with patients over the Internet was 103; in 2002 it was 100. Figures do not always add up to 100 per-

cent because respondents could also choose “not sure” or “decline to answer.”

EXHIBIT 8Doctors Are Communicat ing Onl ine Because Pat ients Request I t

What is the primary reason you started using the Internet to communicate with your patients?

Your patients requested it To deliver better care Other

25

50

75

51

41

1216

99

To improve your overall efficiency

2830


Percentage of doctors who have adopted online communication


NOTE: In 2001 the number of respondents who communicated with patients over the Internet was 103; in 2002 it was 100.

The vast majority (89 percent) of doctors who com-municate with patients online opt for e-mail—which is widely available and easy to use—overother online interfaces offered by vendors such asMyDocOnline and RelayHealth (formerly Healinx).They use the medium to send test results, diagnosecommon ailments, schedule appointments, andshare medical information that will aid patients in managing diseases and administering their own care. But most doctors use e-mail selectively,with 76 percent who communicate online limiting

those interactions to fewer than 5 percent of their patients.

* * *

Clearly, physicians are using e-health to enhancetheir practice of medicine—and they are using it inincreasingly interactive ways with increasing impact.This means that the Internet and Web-based tech-nologies are critical avenues for reaching and influ-encing physicians.

20

21

E-Health Is Gaining Ground Among Patients

E-health is gaining ground and influence not justamong doctors but among patients as well. That’sbecause the Internet offers round-the-clock accessi-bility and can tailor information to specific medicalconditions and knowledge levels. Also, because ofconsumers’ growing confidence in it as an informa-tion channel, the Internet is pulling alongsidephysicians as one of the primary sources of medicalinformation for patients.

The information that patients find online is havingmore and more of an impact on their under-standing and management of their conditions—including how they interact with their doctors, the questions they ask, the diagnoses they them-selves suggest, and the treatments they request. The impact of the online medium has become par-

ticularly pronounced among the patients whomhealth care players most wish to educate and influ-ence: those whose medical conditions are mostsevere and those who are most in control of theirhealth care.

Still, the rise of e-health is not supplanting the roleof physicians but transforming it. Ultimately, patients no longer need physicians to dispenseinformation as they dispense medicine—with un-questioned authority and when they determine it isneeded. Rather, patients today are beginning toview physicians as expert guides, interpreters whocan aid them in navigating a sea of information ontheir own.

This trend offers health care players an opportunityto design an integrated and complementary mar-keting effort that reaches patients and physicians atonce. To exploit this and other strong trends,health care players must explore in detail the con-tinuing and emerging patterns in patients’ onlinebehavior.

Expanding Online Usage

About 80 percent of all patients look online forinformation about health-related topics. But exactlyhow they use the Internet and how they are influ-enced by the information they find there continueto differ with the severity of their condition andtheir attitude toward their doctor. (See Exhibit 10.)On the basis of those differences, patients fall intothe following four categories, first identified in ouroriginal Vital Signs report in February 2001:

EXHIBIT 10The Onl ine Pat ient Populat ion Fal ls into Dist inct Segments

Low

Moderate

High

Godlike Partner Supplier

Severity of condition

Attitude toward physician

Accepting

InformedInternet usage

Involved

In control

SOURCE: BCG analysis.

22

Accepting. These patients rely almost entirely ondoctors for health information and decisions. Thissegment represents 17 percent of the patients surveyed in 2002.

Informed. These patients also rely on doctors tomake decisions but typically go online to learnmore about a diagnosis or prescribed treatmentwithout, in their view, wasting the doctor’s time withquestions. This group accounts for 55 percent ofpatients.

Involved. These patients view themselves as part-ners with their physicians in making health caredecisions. Before and after visits, they seek infor-mation online to discuss with their doctors; but theystill rely on them to make the ultimate decisions.This category represents 24 percent of patients.

In Control. These patients believe that they are best suited to determine their own care. They useonline information to diagnose their conditions be-fore visits, determine which treatments they want,and persuade their doctors to treat them accord-ingly. This segment accounts for 4 percent of patients.

Every patient falls into one of the four segments,but the size of each segment varies by disease. (Seethe insert “Some Patients Are More in ControlThan Others,” page 27.) For health care playersseeking to influence treatment decisions, the in-control and involved patients are the most valuabletargets. That’s because the severity of their illnessesand their active engagement in treating their dis-eases drive them to visit their doctors more oftenthan patients in the other two segments. Further-more, whereas the average patient with a chronicdisease takes 3 prescription medications per month,the involved patient takes 3.4 and the in-controlpatient takes 4.9. (See Exhibit 11.) As a result, thesetwo groups receive the greatest volume of treat-ments and services.

Across the patient population overall, BCG’s seg-mentation has held relatively steady in the surveysconducted since 1999. (See Exhibit 12.) This year’sdecline in the involved and in-control groups sug-gests that as the Internet has gained broader

EXHIBIT 11Involved and In-Control Pat ients Are the Most Frequent Users of Health Care

80

100

60

40

20

How many visits have you made to the doctor in the past 12 months?1

Average number of visits per year:

>12 6–12 3–5 1–2 None

Informed Involved In control TotalAccepting

4.4 7.1 12.5 5.01.9

%

80

100

60

40

20

Approximately how many prescription medications do you take in an average month?2

Average number of prescription medications per month:

>10 5–10 1–4 None


2.7 3.4 4.9 3.02.6

%

SOURCES: BCG analysis; Harris Interactive 10,000 Patients Survey, 2002.

1The number of respondents was 11,323. Results were weighted to reflect

the demographics of the entire online patient population.2The number of respondents was 9,412. Results were weighted to reflect

the demographics of the entire online patient population.

of patients in the in-control segment already use asoftware program to track and manage their ownhealth or that of a family member—a finding thatmay anticipate the future success of RDM.

Online Destinations. Overall, patients’ online-usagetrends, identified in earlier Vital Signs reports, arecontinuing. About three-quarters of patients stillvisit two to five health sites regularly. Most Internetusers are still finding those sites primarily throughsearch engines.

Like doctors, patients are broadening the range ofsites they visit. The health portal WebMD continuesto lead the pack of e-health sites. The health sec-tions of mass-market portals—Yahoo! Health, MSNHealth, and the AOL Health Channel—continue toround out the four sites mentioned most frequentlyby patients. (See Exhibit 13, page 24.) The contin-ued presence of these sites—as well as the burstingof the e bubble—have squeezed out the runawayleader of e-health’s early days: drkoop.com.

Since WebMD provides content for three of the top four sites—and since these online services

23

acceptance, patients with less severe illnesses—whotherefore are less compelled to act on the informa-tion they find online—have come to embrace e-health. But even though the impact of the Internetamong patients overall appears slightly diluted, thechannel’s influence has actually increased amongthe involved and in-control segments.

Our research into patients’ behavior on theInternet examined both their online activities andtheir online destinations.

Online Activities. Although most doctors we sur-veyed expressed concerns about communicatingonline with patients, patient demand may forcethem to adopt e-mail messaging and virtual visits.Nearly half (47 percent) of the more than 10,000patients surveyed said they wanted their doctors torespond to their queries by e-mail. About as many(41 percent) expressed a desire to receive testresults by e-mail. In addition, slightly more thanone-third of patients (37 percent) want online ac-cess to medical records and appointment schedul-ing. And one-fifth (20 percent) want to be able tomonitor their conditions online. In fact, 17 percent

EXHIBIT 12BCG ’s Pat ient Segmentat ion Is Holding Relat ively Steady

20

40

60

11

1999a 2001b 2002c

Informed Involved In controlAccepting

8

17

57 55 55

2328

24

9 94

Percentage of patient population

SOURCES: BCG analysis; Harris Interactive.

NOTE: Results were weighted to reflect the demographics of the entire online patient population.

aHarris Interactive 10,000 Patients Survey, 1999 (number surveyed = 10,069).bHarris Interactive 10,000 Patients Survey, 2001 (number surveyed = 15,815).cHarris Interactive 10,000 Patients Survey, 2002 (number surveyed = 11,323).

24

account for the vast majority of e-health visits—players should be able to blanket much of the on-line population with health care messages deliveredin some way through WebMD. At the same time,even as mass-market online services experienceoverall growth, health-related portals and highly fo-cused disease-specific sites are continuing to makeheadway among involved and in-control patients.

Not surprisingly, at a time when expenditures ondirect-to-consumer drug advertising have skyrock-eted to $3 billion, pharmaceutical companies aredoing an effective job of attracting patients to theirsites. Respondents ranked sites sponsored by phar-maceutical companies as the second-most-frequenttype of site they visit—slightly higher than sitessponsored by academic or research institutions,medical journals, and patient support or advocacygroups. (See Exhibit 14.) Both the amount of traf-fic these sites are attracting and their relative sharesuggest that patients view them as objective, reli-able, and valuable repositories of product- anddisease-specific information. Indeed, almost three-

quarters of all patients online said they find sitessponsored by pharmaceutical companies somewhator very credible.

The Enhanced Importance and Impact of the Internet

E-health is becoming an increasingly importantchannel for educating patients. As a result, it hasemerged as a persuasive medium for influencingpatients and it is having a powerful impact on thecare they request and ultimately receive.

The Importance of the Internet. Thirty percent ofthe patients we surveyed said that they are mostlikely to turn to the Internet when seeking infor-mation about a specific disease or medication. One-fifth of patients in the accepting segment said theyprefer the Internet when researching a disease or amedication. And when it comes to the in-controlgroup, the Internet actually outpaces physicians—46 to 45 percent—as the preferred medium forreceiving such information. (See Exhibit 15.) Todaythe average patient with a chronic condition goes

EXHIBIT 13WebMD and Mass-Market Portals Lead the Pack of E-Health S i tes

Most frequently visited site (up to three choices)

WebMD


5053

Yahoo!Health

NA1

25

MSNHealth

27 25

AOL HealthChannel

14 15

Mayoclinic.com

14 14

drkoop.com

11 10

iVillageHealth

NA

9

drugstore.com

127

Merck-Medco

NA6

Medscape

5 5

eDiets.com

6 5

WeightWatchers

NA5

Other

37 37

Percentage of patients accessing health information online

20

40

60

SOURCES: BCG analysis; Harris Interactive 10,000 Patients Survey, 2001 and 2002.

NOTE: In 2001 the number of respondents who used the Internet for health-related information was 9,908; in 2002 it was 9,505. Results were weighted to reflect the

demographics of the entire online patient population.

1Data are not available because survey choices differed in 2001 and 2002.

25

online 9 times a year—almost twice as often as he orshe visits the doctor. The average in-control patientgoes online 24.5 times a year and visits the doctor12.5 times a year.

The Impact of the Internet. With patients embrac-ing the Internet to educate themselves, it’s no won-der that e-health is having a more pronouncedimpact on the questions that patients ask their doc-tors, the treatments they request, and the specificdiagnoses they suggest. More than 90 percent of allpatients online said that the medical informationthey find on the Internet has enhanced their under-standing of their health problems. Similarly, morethan 80 percent said that e-health has affected howthey manage their overall health. About 75 percentsaid that it has changed the way they communicatewith their doctor, and around 65 percent said thatit has improved their compliance with treatmentstheir doctor prescribes.

In addition, the Internet’s call to action continuesto be heard among the patient population overall—and is growing among the involved and in-controlsegments. Twenty-eight percent of all patients now

EXHIBIT 15Physicians and the Internet Are the Most CommonSources of Medical Information

80

100

60

40

20

Which resource are you most likely to turn to for information about a specific disease or medication?

Journal articlesRelative/friend

Patient groupPhysician Internet


Patients (%)

12 7 5 4 7

6359

5145

57

2028

36 4630

5 5 7 3 50 1 1 2 1


NOTE: The number of respondents was 11,323. Results were weighted to

reflect the demographics of the entire online patient population.

EXHIBIT 14Sites Sponsored by Pharmaceutical Companies Rank Second Among Pat ients

Which of the following have sponsored the health care Web sites you have visited?

20

40

60

80

100

Health pagescreated by

online services

50.9

Pharmaceuticalcompanies

27.3

Academic orresearch institutions

27.2

Medicaljournals

27.2

Patient supportor advocacy groups

for specific diseases

21.3

Health insurance companies or

managed care plans

20.7

Medicalsocieties

19.0

Percentage of patients accessing health information online


NOTE: The number of respondents was 9,505. Results were weighted to reflect the demographics of the entire online patient population.

often ask their physicians more specific questions—a step up from the 24 percent who did so in 2001.In addition, the percentages of patients whorequest specific treatments and suggest particulardiagnoses on the basis of their symptoms haveremained steady. (See Exhibit 16.) Again, theInternet’s impact is greatest on the in-control andinvolved segments, as the following data suggest:

• Seventy-eight percent of patients in the in-controlsegment requested a brand-name drug—up from61 percent in 2001 and more than three times the24 percent of patients overall who have done the same

• Sixty-three percent of in-control patients—twiceas many as the overall patient population—and 42percent of involved patients often ask more spe-cific questions

• Twenty-nine percent of in-control patients—threetimes as many as the overall patient population—

and 15 percent of involved patients often requestspecific treatments

• Eighteen percent of in-control patients—morethan twice as many as the overall patient popula-tion—and 12 percent of involved patients oftensuggest to their doctors that their symptoms indi-cate a particular illness

* * *

With patients frequently turning to the Web formedical information, health care players need tounderstand how important e-health is for commu-nicating with patients and educating them to par-ticipate in decisions regarding their care. This isparticularly true for the patients who are the mostfrequent consumers of health care and thereforethe most motivated to take action on informationthey find online. But the channel is viable forcommunication across all segments and patientpopulations.

26

EXHIBIT 16The Internet Is Having the Greatest Impact on the Involved and In-Control Segments

I often ask more specific questions1

I often request a specific treatment1

I often suggest a specific illness1

I requested a specific brand-name drug2


Total

Accepting

Informed

Involved

In control

Patients (%) Patients (%) Patients (%) Patients (%)

2428

53

2119

3642

5763

109

60

45

1415

2829

77

52

34

1012

1918

2424

00

1013

3942

6178

SOURCES: BCG analysis; Harris Interactive 10,000 Patients Survey, 2001 and 2002.

1In 2001 the number of respondents was 14,277; in 2002 it was 9,505. Results were weighted to reflect the demographics of the entire online patient population.2In 2001 the number of respondents was 14,012; in 2002 it was 9,385. Results were weighted to reflect the demographics of the entire online patient population.

27

About 300,000 people in the United States areafflicted with the degenerative disorder multiplesclerosis (MS)—a tiny fraction of, say, the estimated50 million to 60 million who suffer from allergies.But the way the smaller population of MS patientsuse the Internet to search for information online—and particularly the way their offline behavior isinfluenced by the information they find there—makes it far easier for health care players to reachthem through the Web and to have a greater impactdoing so.

MS patients are about six times more likely thanallergy patients to fall into the in-control category.(See the exhibit “Patients with Multiple Sclerosis Arethe Least Accepting and the Most in Control.”) Why?The consequences of MS include immobility andsometimes even death; most allergies, by contrast,cause only drowsiness, breathing irregularities, orskin irritations. And the greater the discomfort or riskassociated with a disease, the more motivated thepatient is to seek out advice that will help alleviateor treat the condition.

As a result, people with multiple sclerosis across allfour patient segments search the Internet for medicalinsights and treatment options for their conditionand are moved to act by the information they findonline. (See the exhibit “And They Are Also Influ-enced More by Information They Find Online,” page28.) For example:

• MS patients go online for medical information 20times per year on average—more than twice the 9annual online visits the average allergy patientmakes and the 9 annual visits made by the aver-age chronic online patient.

• MS patients are about twice more likely thanallergy patients (68 percent versus 26 percent) toread or post messages to an online news group orbulletin board that focuses on health care or theircondition.

• MS patients are over five times more likely thanallergy patients and average chronic onlinepatients to participate in forums or chat sessionsabout health care or their medical condition.

S O M E P A T I E N T S A R E M O R E I N C O N T R O L T H A N O T H E R S

Patients with Mult iple Sclerosis Are the Least Accepting and the Most in Control . . .

17

Overall Allergies Multiple sclerosis

Informed Involved In controlAccepting

15

3

55 54

38

2427 26

4 5

32

Patients (%)

20

40

60


NOTE: The number of respondents overall was 11,323; of respondents with allergies, 6,093; of respondents with multiple sclerosis, 86. Results were weighted to reflect

the demographics of the entire online patient population.

28

• Unlike chronic patients overall and allergypatients, MS patients search for health-relatedinformation more often through disease-specificWeb sites and company- or product-sponsoredWeb sites. Such focused online-usage patternsmake it easier for health care players to home inon these patients with messages and productsspecific to MS.

• Once they find information online, MS patients arealso more likely to act on it before, during, andafter consulting with their doctors. Higher percent-

ages of MS patients reported that as a result ofinformation found online, they ask more specificquestions of their doctor, suggest specific ill-nesses, and request specific treatments.

• Although allergy patients are flooded with direct-to-consumer advertising, MS patients are morelikely to request brand-name drugs (27 percentversus 33 percent).

. . . And They Are Also Inf luenced More by Information They Find Onl ine

I often ask more specific questions1

I often requesta specific treatment1

I often suggest a specific illness1

I requested a specific brand-name drug2

Total

Allergies

Multiplesclerosis

Patients (%) Patients (%) Patients (%) Patients (%)

28

29

45

9

10

13

7

8

14

24

27

33


1The number of respondents overall was 9,505; of respondents with allergies, 5,194; of respondents with multiple sclerosis, 82. Results were weighted to reflect the

demographics of the entire online patient population. 2The number of respondents overall was 9,385; of respondents with allergies, 5,180; of respondents with multiple sclerosis, 79. Results were weighted to reflect the

demographics of the entire online patient population.

29

Harnessing the Power of the Internet

How e-health will evolve remains unknown, but sev-eral truths will hold as the arena develops. First, ase-health tools become more cost effective, userfriendly, and better at enhancing the quality andefficiency of care, more physicians and patients willhave an economic and emotional incentive to trythem. Second, new legal, technological, and med-ical standards are certain to emerge and expeditethe sharing of patient and other health data online.Already, Congress has proposed legislation thatwould mandate e-prescribing as a condition forreimbursement under an expanded Medicare drugbenefit. The mere threat of such a requirement willno doubt compel the industry to embrace e-prescribing technologies in even higher numbers.

In this environment, health care players mustactively consider how to help shape e-health toolsand their scope today or risk ceding that role totheir competitors and other players in the field.Almost every player has made an initial investmentin the area, with some investing more than others.Still, the evolving nature of e-health requires a con-stant revisiting of these strategies.

The approaches for further exploiting the advan-tages of the Internet fall into two general cate-gories: boosting existing capabilities or forging newones. On the one hand, players can deploy theonline channel to reinforce many of their currentofferings. Pharmaceutical companies, for example,can use e-health to reinforce and augment the mes-sages they are already sending through drug reps,advertising, and communications. Although thissounds straightforward, many companies today

treat the online and offline channels as an either-orproposition: they compare the costs and benefits ofeach and then choose one over the other. But thechannels are complementary and far more power-ful when used together.

On the other hand, companies can use e-health tobroaden their focus beyond their current capabili-ties in order to engage with sectors of the healthcare industry—as well as with portions of the healthcare value chain—in which they haven’t previouslyplayed. Academic medical centers and large inte-grated delivery systems, for example, can exploittheir credibility with and access to doctors by pro-viding continuing medical education online. Someare already deploying e-health to link patients anddoctors to their systems in ways that could only havebeen imagined a decade ago.

Of all the forces at work in e-health today, at leastone phenomenon will have a major impact on allcategories of players: over the next three to fiveyears, e-prescribing is certain to become a wide-spread reality and to change the competitive land-scape in the industry. Already, 36 percent ofpatients report that they desire computerized pre-scriptions, and more than one-third of doctors useor plan to use the tool. The tool’s economics arebecoming increasingly compelling for many health-care players, particularly managed care players.That’s because e-prescribing makes formulariesautomatically and electronically accessible—andtherefore considerably more enforceable—at thepoint of prescription. In the extreme, doctors’enhanced compliance with formularies would

30

dilute the influence that drug reps and DTC adver-tising enjoy today, shifting the greatest influenceover treatment selection to managed care playersthat develop and administer formularies.

Simultaneously, e-prescribing also promises to spurfurther changes in health care by collecting and uti-lizing more information about prescription writingand filling:

• E-prescribing could boost patients’ compliancewith drug regimens, which translates directly intohigher drug sales and better health. Twenty per-cent of the patients we surveyed reported thatthey don’t fill the prescriptions their doctorswrite: they either don’t take the prescriptions tothe pharmacy or they don’t pick them up. E-prescribing could solve both problems. First,because it can be used to send prescriptionsdirectly to the pharmacy, it can eliminate oneobstacle to compliance among busy patients. Inaddition, the data captured by e-prescribingcould be used to track—and alert—doctors whenpatients are not picking up their medicines.

• E-prescribing will capture a wealth of electronicdata on which drugs physicians prescribe—datathat organizations can use to tailor their messages

to doctors. Today the providers of pharmaceuticaldata derive their information from filled pre-scriptions. As a result, no data are currently cap-tured on the 20 percent of prescriptions that arewritten but not filled. Because e-prescribing willcapture data at the point of prescription, it willoffer a far more comprehensive look into physi-cians’ drug preferences.

Below we explore in greater depth how individualplayers—pharmaceutical companies, managed careorganizations, health delivery systems, and e-healthvendors—can take steps to harness the power of e-health. (For some steps that all players can take, seethe insert “Effective Marketing.”)

Implications for Pharmaceutical Companies

For pharmaceutical companies, e-health is chang-ing the competitive landscape in a way that unlocksseveral significant opportunities for reachingpatients and physicians. It also poses at least onemajor threat.

Understanding and Addressing the New Environ-ment for Prescribing. As we noted above, e-prescribing could undermine the influence of drug

In rolling out new e-health technologies and ser-vices, health care players will want to embrace anapproach for marketing that we advocated in earlierVital Signs reports: the drug launch process. Thatprocess, already proven successful, engages theforces that move doctors and patients to trial:demonstrated efficacy, key opinion leaders, and tar-geted marketing. It consists of five steps.

Detail aggressively. Take the new products directlyto doctors and train them in how to use the tools.Engage reps not only in sales but also in training andcustomer service and support.

Provide evidence of efficacy. Furnish doctors withcompelling data on the tools’ effectiveness.

Cultivate a network of key opinion leaders. Re-spected peers can provide professional recommen-dations and personal testimony.

Engage in strategic partnerships to copromotetools. This includes relying on incentives frommanaged-care, pharmaceutical, and e-health tech-nology players, as well as on the broad relationshipsof health delivery systems.

Educate and mobilize patients. Deploy an integratedonline/offline DTC campaign to arm patients with the information they require in order to request theWeb sites and e-health services that may best suittheir needs.

E F F E C T I V E M A R K E T I N G

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reps and DTC advertising by making formulariesconsiderably more accessible and more enforceableat the point of prescription. But this risk does notmean that pharmaceutical companies should steerclear of e-health in general and e-prescribing inparticular. Instead, companies must continue tohone their e-health strategies or forfeit their placein the examination room to other types of playersgaining enhanced access to doctors through theWeb. What steps, then, should pharmaceutical com-panies take in the short term? Can they minimize orperhaps even eliminate the potentially negativeimpact that e-prescribing may have on formularyselection and pricing negotiations with managedcare organizations (MCOs)?

How companies behave in the short term shouldvary depending on the scope and shape of theirindividual product portfolios. For example, compa-nies with blockbuster, unique, patent-protected, orparticularly efficacious drugs may find it easy to winthe coveted top spot on the formulary for treat-ments in their therapeutic area. In such cases, salesof these products would be minimally affected by e-prescribing—and might see a gain without a signif-icant compromise on price. At the same time, com-panies that produce the most cost-effective drugsmight also do well in the new environment.

By contrast, me-too drugs in crowded product cate-gories will need to differentiate themselves or riskexclusion from the formulary—and potential exclu-sion from the market. Such players could mitigatethat risk by, for example, deepening their relation-ships with doctors, MCOs, and vendors. Companieswith powerful sales forces may determine that theyhave the presence and manpower to influence doc-tors’ drug selections effectively whether or not theirdrugs are on the formulary. Still other players, how-ever, might feel the need to make price concessionsin order to secure their place on the formulary.

Whether—or how—pharmaceutical companiesdecide to engage with e-prescribing in the shortterm, no company can afford to ignore the tool orthe major consequences that its adoption mighthave on the industry over the long run.

Finding and Targeting Unique Patient andPhysician Audiences. Novartis has created a Website—called Novartis Transplant in the UnitedStates and TransplantSquare in other countries—that educates physicians and the public about theorgan transplant field while collecting data frompotential prescribers and patients for its antirejec-tion drugs. Similarly, Knoll—maker of the popularthyroid treatment Synthroid—sponsors GlandCentral, a site where patients must enter personaldata, including which thyroid medications theytake, to secure a “library card” that allows themaccess to the materials at the site. In this way, thecompanies identify potential customers and micro-market to them in a situation where mass-marketchannels might be less appropriate—an approachthat could prove critical in the future. Finally, devel-opments in genomics promise one day to deliverdrugs uniquely effective in patients genetically sus-ceptible to certain diseases. Such niche marketingwill benefit from new channels where customer tar-geting is more precise and cost effective.

Already, such approaches may hold promise fordrugs like GlaxoSmithKline’s Lotronex, which canbe prescribed for irritable bowel syndrome onlyvery narrowly in order to qualify for approval by theFDA. For such products, pharmaceutical companiescould minimize the risk of contraindications byusing the Internet to deliver detailed informationto patients and physicians. They also could rely ontargeted marketing to build a database of the nar-row patient and physician audiences for the drug.That’s because the Internet affords not only en-hanced access to the critical audiences in healthcare—physicians and patients—but also an in-creased understanding of those individuals’ onlineand offline behaviors, attitudes, health status andhistories, and lifestyles. At each point of onlineaccess—corporate Web sites, health portals, aggre-gated information collected by e-prescribing—e-health makes it possible for health care organiza-tions to track the details about the patients anddoctors they serve—or want to serve.

Online forms and site memberships collect names,disease information or areas of specialty, and con-

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tact preferences—a wealth of data that could beused in general market analysis, recruitment fordrug trials, or marketing. When these data are jux-taposed with, for example, the four-part patient seg-mentation, they could give organizations detailedinsight into the type of patients they serve and howthey can best reach and motivate those patients toaction. Furthermore, companies should track thebehaviors and attributes of their physician contactsonline, including whether the physicians are e-prescribers or users of EMRs, online communica-tion, or RDM. This knowledge will indicate whichtools and channels companies can use to reach andserve different groups of physicians.

Enhancing Relationships with Physicians. Pharma-ceutical companies looking to exploit e-health tothe fullest should embrace Web-based communica-tion as a secondary channel—and in some cases asa primary one.

E-health tools offer large pharmaceutical compa-nies the opportunity to enhance their existing com-munication with physicians and patients. Compa-nies can use the online tools that doctors employfor gathering medical information to augment evershorter sales-rep visits with more detailed follow-upinformation.

Similarly, the Internet continues to be a low-costalternative to sales-rep visits for contacting ruraldoctors, low-volume prescribers, and other physi-cians who are difficult to reach through sales-repvisits. In an environment where pharmaceuticalcompanies face pressures to squeeze revenues outof shrinking pipelines, the Internet can also beused to continue promoting drugs later in their lifecycle—after sales-rep support is traditionally pulledand transferred to newer drugs with greater rev-enue potential.

By contrast, small pharmaceutical companies canuse e-health to expand their marketing reach todoctors and patients whom they cannot afford tocontact. These players often lack a vast sales-forcepresence to call on doctors, as well as the resourcesto reach consumers with DTC advertising. There-fore, they should seriously consider the Web as a

cost-effective communication channel with doctorsand potential users of their products.

Another way to build relationships with physiciansis to help enhance relationships between physiciansand patients. To that end, pharmaceutical compa-nies can increase traffic to and boost the credibilityof sites that feature messages about their productsby drawing on the rise in physicians’ recommenda-tions to patient Web sites. Ultimately, they can alsoensure that doctors and patients alike find consis-tent messages that prepare them for a dialogueabout the appropriateness of a particular treat-ment option.

For example, pharmaceutical companies could cre-ate prepackaged content for physicians’ personalWeb sites or for other sites that offer patients back-ground information and details about diseases andtreatments. The approach has three benefits. First,it ensures that information about a company’sproduct is perceived as objective and crediblebecause it appears on a site sponsored by a thirdparty rather than by the drug company itself.Second, it provides doctors with online destinationswhere they can send their patients for medical edu-cation. Third, it draws on word of mouth fromrespected physicians—a powerful force—to buildpatient traffic to the sites and disseminate the med-ical information.

Implications for Managed Care Organizations

Virtually every managed-care organization has seri-ously explored how best to engage in e-health andhow to build online capabilities. Thus, most haveinvested significantly to deploy the online mediumin enhancing their relationships with their cus-tomers. But the resulting investments and outcomeshave varied widely among MCOs. Some have posi-tioned e-health at the heart of their interface andinteraction with physicians, patients, and employ-ers—hoping to redefine their operations as theyredefine their relationships with customers. Othershave simply tweaked their offline strategies toreflect online realities so that they can better man-age costs.

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Given the physician and patient behaviors identi-fied in this survey, however, it’s clear that none ofthese players have achieved overwhelming successin driving e-health utilization. In fact, one couldargue that MCOs have largely failed to leverage e-health successfully for enhanced influence in thehealth care market.

Consider that nearly every individual covered byprivate insurance in the United States—160 millionpeople—carries a health plan card in his or her wal-let, but few turn to health plan sites when they seekmedical information online. Most individuals turninstead to nationwide mass-market Web portalswhen they desire information about their illnessand potential treatments or the latest health news.Equally telling is the fact that the patients we sur-veyed ranked pharmaceutical companies as a moretrusted source than their own health plans, eventhough MCOs offer personal relationships withlocal providers and highly customized knowledgeabout individual patients.

These facts suggest that managed care players musttake more steps, but which ones should they take?It’s not simply a matter of how much MCOs invest—how they invest is important as well. MCOs mustalign their investments in e-health with their overallstrategic priorities, among them managing medicalcare for cost and quality, managing administrativecosts, and building closer affiliations with patientsand physicians.

Managing Medical Care for Cost and Quality. Theconnectivity and automation made possible by e-health increase the potential impact of many of themost rudimentary tools in the managed care hand-book—and introduce several additional tools aswell. The most tangible effect that e-health will havein managed care, for example, is the potentialimpact of e-prescribing on enhanced formularycompliance. Automating formularies and makingthem interactive gives teeth to the mechanism thatMCOs rely on to influence physicians’ choices atthe point of prescription. By making formulariesaccessible to doctors at the precise moment they arewriting prescriptions, e-prescribing has already

begun to improve doctors’ cost-effective selectionof drug treatments. Ultimately, heightened formu-lary compliance should afford MCOs a better bar-gaining position when they sit down to negotiatedrug prices with pharmaceutical companies orperformance-based contracts with employercustomers.

In the short to medium term, pharmacy benefitmanagers and retail pharmacies stand to gain thegreatest efficiencies and cost savings from e-prescribing. But over the long haul, the automationof formularies could make redundant some of theservices the pharmacy benefit managers provide. Asa result, these organizations may have to redefinethemselves to remain valuable to those they serve.The fight over exactly who will hold the keys toadjudication of pharmacy claims remains hotlycontested.

But lower prescription costs are just part of thepromise of e-health. Online tools and interfacescould also afford MCOs a more integrated andeffective means of managing other elusive opportu-nities to save costs—such as finding less expensiveways to serve high-cost patients and reducing out-patient costs overall. In serving high-cost patients—such as those with major illnesses or serious com-plications—technology-based solutions are alreadybecoming commonplace.

Today national managed-care companies, such asUnitedHealthcare, and regional MCOs, such asTufts Health Plan and Blue Shield of California, arestarting to deploy computer-enabled predictivemodeling to deliver higher-quality and lower-costcare. The modeling uses aggregated data from pastpatients to identify current patients who may be-come costly to serve. As a possible next step andlogical extension of the success MCOs already enjoyonline, MCOs might use Web-based channels to col-lect and disseminate medical information and tocommunicate with these high-cost patients andtheir physicians.

Similarly, MCOs are the most appropriate sponsorsfor RDM because the tools take disease manage-ment to the next level—automating monitoring

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and making the management of specific diseasespossible around the clock. The cost-effectiveness ofRDM—particularly in preventing illnesses fromescalating to emergency situations that requiremore invasive treatments—is an obvious boon topayers at risk for shouldering the cost of patientcare. Even for self-insured accounts, however, suchelectronically enabled disease management canserve as an attractive part of an MCO’s offering.Thus MCOs should focus on helping to acceleratethe adoption of RDM programs, particularly amongspecialists—perhaps by leveraging their relation-ships with network providers and possibly by steer-ing patient referrals to physicians who activelyembrace the tools.

A final e-health opportunity for payers is exploringemerging online platforms for secure patient-physician interactions, such as those used byRelayHealth and MyDocOnline.com. These newchannels not only insert the MCO into the relation-ship between the physician and the patient in a waythat allows them to add value, but the channels alsoappear to offer potentially attractive economics forhealth plans and providers, according to recentstudies reported by RelayHealth. The hope, whichplayers are beginning to realize, is that lower-cost“virtual” visits can substitute for higher-cost officevisits when patients’ health needs are less urgent.Once MCOs address the major obstacles to such vis-its—security of information and reimbursing physi-cians for time spent online—adoption of the plat-forms should accelerate, boosting satisfaction levelsamong both doctors and patients alike.

Managing Administrative Costs. With their originalforay into e-health, most MCOs have sought to cap-ture the scale economics of a Web-based platformin order to lower the administrative burden of theirtransaction-intensive business. That has meantempowering all stakeholders to navigate their ques-tions and issues through self-directed online menusthat eliminate the dependence on costly call cen-ters. Initially, this move transferred mundane trans-actions to the Web, such as changing a patient’shome address. Today MCOs are successfully encour-aging patients to migrate more complex tasks

online, such as queries about claims and referrals—mirroring the transformation that FedEx madewhen it shifted its package tracking online. Forsome players, the challenge has been to build anelectronically enabled administrative functionalityquickly, economically, and in a way that coordinateswith legacy systems. But players that have alreadydeployed the basic platforms have turned theirfocus to driving patients and physicians to theonline interface.

Nevertheless, too few patients think of their healthplan’s Web site as a favorite or frequent online des-tination. To combat underuse and limited impact,MCOs should focus on offering the functionalitythat patients most desire in order to make the sitesmore attractive and viable. They also must marketthe unique online services they offer in order todraw patients to the site.

In addition, MCOs shouldn’t overlook the opportu-nity to use the online realm to improve service toand relations with the final “payer” for health care:employers. No doubt, these clients will value dis-ease management initiatives with high provenreturns on investment. They will also be drawn toMCOs that offer streamlined administrative inter-faces with plans and that simplify tasks such asenrollment. Fortunately, these moves simultane-ously lower the cost of distribution for MCOs.

Building Affiliation Among Patients and Physicians.When all their strategic priorities are considered incombination, MCOs stand to gain the greatestadvantage if they can foster loyalty among—andbuild close ties to—patients and physicians. Theycan accomplish this last goal while pursuing theothers, using the Web to enhance the ease andreduce the cost of every step in the health careexperience of patients and physicians. And if theyare successful, MCOs could win the hearts andminds of patients who currently prefer mass-marketsites, such as WebMD, as their primary source ofmedical information. Undoubtedly, MCOs couldtake any number of paths to accomplish this goal,depending on their scale, scope, geographic focus,competitors, and offerings.

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Implications for Health Delivery Systems

Health delivery systems already reach a great num-ber of patients and physicians—individuals whothemselves lack the relationships and resources toinvestigate and invest in e-health technologies,tools, and systems. Thus, academic medical centersand integrated delivery systems are positioned todraw on their scale and their role as a centralsource of information in order to guide patientsand physicians looking to exploit the advantages ofe-health more fully.

In doing so, health delivery systems can enhancemany of their own critical and strategic functions—and not just by increasing the volume of patients intheir system or reducing the costs to serve them. Infact, the greatest advantage that e-health affordshealth delivery systems is the opportunity to bolsterrelationships with patients and physicians throughthe full range of online offerings: the managementand training of physicians, the education ofpatients and physicians, the dissemination of proto-cols, the administration of formularies, and the col-lection and management of patient data. Severalplayers, such as CareGroup Healthcare Systems,Ohio State University Health System, andIntermountain Health Care, have begun to useInternet and intranet capabilities in this way, offer-ing their patients and affiliated physicians a highlyindividualized and unique service that differenti-ates the system in the marketplace.

Improving the Quality of Patient Care. The wealthof patient data that e-health unleashes is a strongremedy for inaccurate diagnoses, less-than-optimaltreatments, and poor medical outcomes. Because e-health permits more comprehensive and easilyaccessed medical records, automatic screening fordrug interactions, and enhanced medical monitor-ing, it improves accuracy and reduces human errorin the delivery of health care.

Hospitals that successfully deploy a well-integratedand comprehensive EMR platform will be best posi-tioned to analyze electronically stored and detailedpatient data for maximum preprocedural planning

and case management. Having the right data at theright time will help ensure that the most accuratediagnoses are made, that the most appropriate pro-cedures are performed, and that treatments aresuccessful.

Attracting and Building Affiliation with Patients.Although many patients value their relationshipswith their physicians, most don’t consider them-selves as having a relationship with their hospital.Brand loyalty in this area is rare, often becauseexperiences throughout the system seem discon-nected, inconsistent, and unrelated. To combat thisproblem, health delivery systems can use e-healthinterfaces to collect and disseminate patient infor-mation in a seamless, consistent, and highly tai-lored way—over the individual’s lifetime.

First, e-health can be used to recruit patients whomay be well served by a program or service at thehospital—both by culling its databases for targetpatients and by tailoring the marketing and mes-sages through the online and other channels.

Second, e-health tools like EMRs make it easier tocollect information about patients and share itacross visits, providers, and facilities. The value ofthese steps is widely recognized, of course, but thesteps themselves remain challenging and highlycontroversial. Today most hospitals have not yetmerged their administrative and patient-care datasystems. Their reluctance is primarily the result ofthe threat of HIPAA sanctions. But these playersalso share a general concern that capturing thevalue of fully integrated patient data must not vio-late the patient’s trust or privacy.

Third, hospitals that truly embrace patient trackingand data collection through e-health could use theaggregated results of their findings—such as dataabout how a group of patients responded to a par-ticular treatment—to attract and manage clinicaltrials and outcomes research. These activities wouldprovide hospitals with additional revenues outsidetheir core business.

The challenge here will be reaching out to patientswho have not yet moved online or who do not yet

36

share medical information online because they fearbreaches in confidentiality. Thus, creating trust-worthy interfaces and delivering markedly higher-quality care as a result of those data are essen-tial if health delivery systems are to draw patients totheir online channels and build affiliation once they arrive.

Building Affiliation with Physicians. Health deliverysystems can serve as cost-effective clearinghousesfor promoting and rolling out patient-care tools toaffiliated physicians. Their contact with a broadrange of doctors makes them well suited to helpadvocate for standards for the technologies that willapply throughout their systems.

But health delivery systems can disseminate patient-care tools for their own advantage as well. Forexample, by deploying a highly effective EMR plat-form, a health delivery system could attract andstrengthen relationships with physicians who valuethe connectivity, ease of use, and comprehensive-ness of the automated records. A hospital thatoffered such a connection could afford doctors amajor productivity and efficiency advantage—onethat would motivate the physicians to refer patientsto the hospital over its competitors. In fact, oncethe issues of trust and confidentiality are resolved,the strength of e-health technologies and offeringsshould serve as a potent means for health deliverysystems to differentiate themselves.

Furthermore, academic medical centers and uni-versity hospitals at the core of most health-deliverysystems could use e-health to draw on their existingstrengths with physicians to achieve success in a newsector of the industry. Already well-respectedresources for the latest in medical research, aca-demic medical centers and university hospitalscould offer online CME for physicians, who, asnoted, are increasingly turning to virtual classes tomeet continuing education requirements.

Managing Administrative Costs. The efficienciesgained by integrating all administrative and carefunctions online will save health delivery systemssignificant costs and time. In addition, these playerscould see a slight increase in reimbursement if they

successfully deploy EMRs throughout their providernetworks. Because the tools capture in greaterdetail the diagnoses that doctors make and the ser-vices that they provide, EMRs will improve the accu-racy of the coding used in claims. At the very least,the number of queries that doctors receive aboutbills—and the time it takes to resolve them—maydecline.

Implications for E-Health Vendors

There has been an enormous shakeout among thevendors that deliver e-health content and technolo-gies: most of the providers that emerged on thescene in 1999 have now folded or been absorbed.Although the number of players has declined in thewake of consolidation, the variety across vendorsand their offerings remains. Some vendors focus ononly one type of tool, such as MyDocOnline withonline patient communication. Others offer abroad range of products to a defined audience. Forexample, Amicore—the collaboration of Pfizer,Microsoft, and IBM—offers complete clinicalautomation for small doctors’ practices.

No matter what the scope of their offering, e-healthvendors face the same opportunities and con-straints. The following measures will help themsucceed:

Automating Processes to Streamline Work Flow. E-health must add value to physicians by increasingreimbursement, saving time, or cutting costs. If newtechnologies don’t deliver on these imperatives,doctors won’t be able to justify the costs of addingthem. For example, to foster wider acceptanceamong physicians of online communication withpatients, the vendors that provide these interfaceswill need to prove three things: patients will not beable to use the Internet to inundate physicians withdemands, information shared online is secure, andpayers will reimburse physicians for time spent withpatients online.

Medem, MyDocOnline, and RelayHealth continueto explore the first and second requirements. Thecompanies have designed secure sites and pro-

37

tected interfaces that allow streamlined and securepatient-physician consultations over the Web. Andthese same players have begun to investigate thethird requirement by establishing pilot programsthat explore how these “visits” are best reimbursed.All the pilots bill for online consultations at rateslower than those for office visits. For example,RelayHealth, which uses a simplified form to collectpatient information and a secure Web site to facili-tate streamlined interactions online, has initiated aone-year pilot project. The project experimentedwith a $25 reimbursement fee for online visits paid by insurers Blue Shield of California,ConnectiCare, and several self-insured employers.Initial results indicate that the pilot has reduced

unnecessary medical visits, thereby generating sig-nificant cost savings among MCOs as well as highlevels of satisfaction among patients and physicians.

Meeting the Needs of Both Physicians and Patients.Navigating the reimbursement issues will prove tobe no small feat. The long-term viability of onlinecommunication between patients and physicianshinges on how and when the payers and providersagree on the revenues they should generate for doc-tors and the costs they should incur for MCOs.Ultimately, a tool that meets both patients’ increas-ing demands for e-mail communication and physi-cians’ demands for efficiency and reimbursementcould very well be a blockbuster.

Conclusion

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No player that has sat on the sidelines in e-healthhas yet missed out on a blockbuster opportunity.But as e-health continues its journey and gainsground and influence among physicians andpatients, the nature of the opportunity—and thewindow for exploiting it—could change swiftly andsuddenly. E-health is on the road to altering thecompetitive landscape and making the health carevalue chain highly dynamic. Already, it is effectingchange that eases the delivery of health care,including gains in quality, efficiency, accuracy, andcost-effectiveness. Of course, e-health is also posingchallenges for industry players as it changespatients’ expectations about and involvement intheir health care and requires physicians to recon-sider how they interact with patients and what kind

of information they share. E-health also blurs theline between providing care and marketing prod-ucts and services.

In this environment, players must be well informedabout their own choices—as well as those of otherhealth-care companies. They also must stay abreastof regulatory developments and their conse-quences, and must remain sensitive to individualand societal concerns about the privacy of personalmedical data. Finally, they must be ready to explore,experiment with, and exploit the advantages of e-health in their core and extended businesses.

Players in all sectors must stay involved or risk beingleft behind. How will you take advantage of the e-health opportunity?

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The Boston Consulting Group is a general management consulting firmthat is a global leader in business strategy. BCG has helped companiesin every major industry and market achieve a competitive advantage bydeveloping and implementing winning strategies. Founded in 1963, thefirm now operates 54 offices in 34 countries. For further information,please visit our Web site at www.bcg.com.

A Revolution in R&D: How Genomics and Genetics Are Transforming

the Biopharmaceutical Industry

A report by The Boston Consulting Group, November 2001

Vital Signs Update: Doctors Say E-Health Delivers

A BCG Focus, September 2001

Vital Signs: The Impact of E-Health on Patients and Physicians

A report by The Boston Consulting Group, February 2001

Patients, Physicians, and the Internet: Myth, Reality, and Implications


Ensuring Cost-Effective Access to Innovative Pharmaceuticals:

Do Market Interventions Work?

A report by The Boston Consulting Group and Warner-Lambert, April 1999

The Pharmaceutical Industry into Its Second Century:

From Serendipity to Strategy


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obtain copies, please visit our Web site at www.bcg.com.

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