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AIS's Health Business Daily
Featured Story July 2, 2008 Revolution Health Group Expects to Become a Consumer-Directed Health Care Leader, but Observers Say Strategy Remains UnclearReprinted from INSIDE CONSUMER-DIRECTED CARE, a biweekly newsletter with timely news and insightful analysis of benefit design, contracts, market strategies and financial results. By Steve Davis, Managing Editor, (sdavis@aispub.com) It's been nearly three years since America Online co-founder Steve Case announced the formation of Revolution Health Group, an organization he predicted would become the nation's first comprehensive consumer-directed health care (CDH) company. Revolution's strategy to meet that goal, however, remains unclear. Despite sustained enrollment growth in CDH and increased financial responsibility for people enrolled in more traditional health coverage, Revolution still hasn't found its niche, industry observers say. But a Revolution board member tells ICDC that the company remains optimistic that it can become "the most well-organized and useful site for health care information of any kind." This month, Revolution cut its work force by 50 employees (about 20%) just eight months after it trimmed 60 employees from its Health Networks division. The company says the latest round of reductions was due to a reorganization following its December acquisition of HealthTalk, an online source of chronic-care information and programming. Information about Revolution's annual revenues is not publicly available. "We had some natural synergies that made sense to consolidate," Revolution spokesperson Brad Burns says. Despite the most recent staff reduction, he adds, the company has 200 employees — about 20 more than it had after the first round of cuts. While Burns declined to discuss the company's business strategy, he confirms that Revolution is no longer pursuing its direct-to-employer Web portal business and is shifting its focus to place more attention on consumers. However, he adds, the company continues to sell its portal capabilities through licensing partnerships with distributors such as Medco Health Solutions, Inc. According to Steve Wiggins, a member of Revolution's board, the company had a difficult time selling its Web portal services directly to large employers because it requires too much Web-site customization. Instead, Revolution will target health plans that want to improve the services they offer to members. "Revolution's assets are a natural fit for health plans seeking to improve the online experience of their membership," Wiggins tells ICDC. "Every plan should have 'Revolution Inside.' [Revolution] will continue to seek ways that their assets can be integrated with health plans." The recent reduction in staff, he adds, will mean all of Revolution's acquired businesses will have a single sales force, one content group and one marketing team. Wiggins founded Oxford Health Plans and HealthMarket, Inc., a CDH firm acquired in October 2004 by MEGA Life and Health Insurance Company, a subsidiary of UICI, Inc. UICI has since changed its name to HealthMarkets, Inc. Revolution Is Still Less Than Sum of Parts Case committed $500 million from his own pocket toward Revolution. Since its launch, the company has gained controlling interests in a variety of consumer-focused health care companies that target health information, health finance management, personal health records and other related areas. Carlton Doty, senior analyst at Forrester Research, Inc. in Cambridge, Mass., tells ICDC that he's not surprised by Revolution's recent layoffs. "They have some interesting companies under their wing [e.g., CarePages, Extend Health, RediClinic], but in my opinion they have yet to show a really cohesive and compelling business strategy." "It's hard to get a clear read on what they are trying to become," adds John Moore, managing director of Chilmark Research, another Cambridge-based firm that focuses on trends related to consumer-facing health care information technology. "They have acquired some interesting [firms], and they could probably do some interesting things, but it doesn't seem like they've thought it through." Plans, Employers Eye Personal Portals Fueled by growth in CDH plans and increased financial responsibility among consumers, health plans and employers have become increasingly interested in "profile-driven" Web portals, says Ray Herschman, chief operating officer at WebMD Health Services in Portland, Ore. By integrating with a Web vendor, health plans and employers can reach out to employees with targeted messages based on demographics or a specific medical need. These portal solutions, he explains, are becoming especially important to health plans as enrollment in CDH products grows. Health plans are looking for ways to provide a richer consumer experience and a higher level of engagement. Rather than simply offering information about an illness, health plans are increasingly searching for ways to target specific subsets of their population. A health plan, for example, might send a targeted message about health risks for all women of child-bearing age or middle-age men who can benefit from stress management, Herschman says. Such portals also could be used by an employer as part of a campaign to encourage employees to complete a health risk assessment. Moore adds that both health plans and employers are interested in any strategies that can help lower their medical loss ratios through behavior modifications toward healthier habits. "But it's getting tougher to play in that space. There is a lot of plumbing, there is a lot of integration and the implementation is complicated," Herschman says. "My basic understanding is [Revolution] had a good start, and has established their name. However, they haven't been able to penetrate the private-portal employer or carrier markets due to the depth and breadth of the requirements."
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