Use of the Internet, and particularly of the World Wide Web, has created — and continues to create — many opportunities for efficiency in health care. Insurance companies can provide eligibility checks in real time, and claims can be adjusted in milliseconds. For physicians, referrals can now be accompanied by treatment guidelines; pharmacists can make patient histories and drug-interaction information follow prescriptions; and laboratories can provide real-time reporting of test results. The role of the health care consumer has expanded considerably because of improved access to medical information, and many patients are now prepared to conduct their own disease management and to preview the care choices available to them.

The suppliers of goods and services to the health care industry can now control, online, the chain of operations that brings the product to the user. Hospitals can take advantage of the efficiency increases offered by online preadmissions. Physicians in independent practice associations (IPAs) and group practices can receive faster payment for the services that they provide. Health care purchasers can provide their employees with the ability to compare and choose their health-coverage options on the employer’s Web pages.

Given the expanding capabilities of Internet applications, the line between Web site hosts and users is blurring. Today, the providers and users of Internet information on a given Web site may well be the same, especially since individuals have gained the ability to manipulate and add to Web-site data (and site owners have learned to capture and make profitable use of the information provided by those individuals). The hosts of, and visitors to, any Web site are all Internet customers. In health care, these customers now include:

  • fiduciaries (managed care organizations, IPAs, preferred provider organizations, and indemnity insurers);
  • suppliers (providers of pharmaceuticals, supplies, hospital equipment, disposables, and home health care products);
  • providers (physicians and physician groups, hospitals and other types of inpatient and outpatient facilities, health systems, and home health agencies);
  • purchasers (employers, business consortia, and state and federal agencies);
  • consumers (patients, potential patients, and their families); and
  • insurance brokers.


The establishment of an Internet entity can provide health plans and health care delivery systems with critically important next-generation Internet capabilities. In turn, these Internet abilities create efficiency (and the resulting profitability) through Internet-driven economies to be found at multiple levels of transaction processing. For example, far fewer clerical employees may be needed to process reimbursement claims if a health plan maintains a well-designed Web site that both captures claimant information and prevents the submission of incomplete claims. An Internet presence can also make a health plan or health system more desirable as a potential partner to beneficiaries, employers, and other health care purchasers through the innovative use of Internet-based content and service applications. A health plan or system can become more accessible to its customers in the presence of robust, value-based connectivity within the plan or system. Toward this end, there are three models used to establish and maintain an Internet entity: electronic commerce (ecommerce), content/service, and connectivity.

The ecommerce model, like the others, is built around a small, cross-platform software component (a thin client) that can be distributed readily to potential customers at little or no cost to them. This Internet presence is a transaction-based product for health care administration. Its market potential includes the approximately 25 billion health care transactions (at an estimated five transactions per claim) processed each year in the United States alone. The advantage of Internet use for this purpose is that payment to all parties can be expedited, manual processes can be minimized, and claim accuracy and compliance can be enhanced. Users of ecommerce systems are typically charged on a per-transaction and/or subscription basis.

Ecommerce users benefit in several ways. Fiduciaries will see a significant reduction in transaction costs for reimbursement claims, eligibility queries, and referrals. Claims batching may be possible, and the Internet entity can act as a clearinghouse for information of many kinds, including data for population management, case management, and other forms of coordination within health plans. Data used for purposes of management between plans, such as coordination of benefits, can also be exchanged.

Health care providers and medical suppliers can benefit from ecommerce through the ease of Internet claims submission; through a reduced need to return inadequate claims (because they are unlikely to be accepted in the first place, prompting staff members to provide complete data); through decreased accounts-receivable time; and through the availability of a data loop for their internal management purposes, such as improving accuracy in claims submission or streamlining other operations. The purchasers of health care can, using ecommerce systems, take advantage of the real-time management of health care expenses such as payment for employee coverage and of the ability to coordinate provider payments. Consumers may be able to use the health plan’s management systems for payments, co-payments, and deductibles, and their burden of paperwork will obviously be reduced.

The size of the ecommerce market may be estimated on the basis of the Internet’s current pharmacy sales of $300 billion, medical equipment and supply sales of $100 billion, and alternative health product sales of $60 billion, according to figures reported by Hambrecht & Quist, LLC, San Francisico, earlier this year. The key strategy of ecommerce is the building of brand-name recognition, accompanied by superior customer service, in order to increase transaction volume.


The content/service model of Internet presence is intended to allow consumers and health care providers to obtain access to general information with user-specific customization. The market potential of this model, in health care, includes 18 million adults and several hundred thousand physicians who regularly search for online health information. Entities employing this model can also fulfill the desire of health plans and physicians to gather information in real time. That real-time information can be driven by transactions from health plans, health care providers, medical suppliers, and beneficiaries, with additional information readily available either linked to real-time data or independently. Content/service providers typically provide access to some information free with Internet access and then charge subscription and/or inquiry fees for more in-depth use of the Web page., as well as selling advertising space on their Web sites. Their usual strategy is to develop and compile content quickly while providing the user with the added comfort of a recognized expert’s name; the sale of add-on services (for example, offering information in greater depth in return for a fee) is also a common component of this strategy.

Fiduciaries such as HMOs benefit from the use of content/service Internet entities that provide patient-management data and tools, as well as by hosting beneficiary information sites to relieve query pressure on customer-service staff. Medical product/service suppliers will find it helpful to use entities incorporating contract information, their formularies, and product information intended for the use of providers. Health care providers can benefit from access to protocols, medical information, and the findings (and staff) of centers of excellence. The purchasers of health care can enhance the satisfaction of their employees with the care purchased for them, and may also be able to improve employee health, through the use of health-management sites meant for consumers.

Medical libraries and online help will also be useful to health care consumers. US users of health care content/service sites are expected to number 140 million by 2002. Health care is now a frequent topic of online research giving an Internet entity the potential to affect disease management.


The connectivity model of Internet presence expands on both transaction entities and content/service networks to create real-time, online communication among all parties in the health care continuum. Connectivity’s market potential is driven by ecommerce and by the content/service delivery of both general and specialty products; there is also an undefined additional market in the form of physician networks. This link to other models is an advantage because it provides an automatic adjustment to control the scope and magnitude of services. Advertising may be sold to support a connectivity entity, or a subscription or inquiry fee may be charged.

Fiduciaries can benefit from connectivity capabilities both for network-management purposes and through the real-time, online transfer of clinical information. Medical suppliers could provide special disease-specific information support, could market their products and services directly to health care providers, and could supply prescribing advice or warnings. Health care providers could be helped by site and provider coordination; by diagnostic service integration; by real-time, online clinical information transfer; and by hosting bulletin-board discussion groups for patients. The purchasers of health care should be able to make use of real-time monitoring of population health and of the ability to track disease trends and care costs. Consumers can extend support services (including the use of each other as support resources) and can be given enhanced access to clinical information.

The market size for connectivity is currently $6 billion to $8 billion for transactions, and information services in health care have created a $120 billion industry. In addition, there are billions of health care transactions per year. For these reasons, the strategy pursued by connectivity suppliers is, in essence, to connect everyone to everything. The basic component of the service is usually made available free of charge, but the connectivity provider then charges a transaction fee and sells applications.


The challenge faced by health care is that overnight, information technology has moved from a proprietary infrastructure platform, focused on managed care needs and on hospital and practice management, to a completely different approach based on broadly available Internet client software. Instead of having highly sophisticated hardware and software developers provide systems that send medical information across different proprietary systems, organizations can use thin clients to allow that information to be exchanged across platforms that are relatively ubiquitous (such as personal computers). Granted, the most widely available platforms typically involve communication via telephone lines, which are much slower at information transfer than expensive broad-band networks. Even at the slow telephone-line level, however, the ability to move text information across various Internet capability platforms is quite useful (with picture transmission typically calling for higher-speed transmissions). Companies that were formed to help physicians share information through the use of proprietary networks now are being challenged by a number of other companies that need no proprietary networks; all that these companies need are Internet connections.

Nonetheless, Internet applications still require working partnerships among physicians, hospitals, and payors, and the aim of a good application should be to make the most of those relationships. For years, it was expected that proprietary systems would eventually connect everyone in the health care industry. There were reasons, though, that this connection never happened. Beyond the cost, complexity, and technical challenges involved, there was no economic interest for the end user in becoming connected. It was possible to gain some useful features; a physician might, for example, be able to obtain patient information, a referral, or medical records. Connection, however, did not accelerate payment (nor was it generally able to affect the bottom line in any other way), so it was not pursued as avidly as expected.

Internet use changes this lack of enthusiasm by removing technical and cost hurdles while extending the usefulness and financial effect of becoming connected. When a physician, hospital, or integrated delivery system is offered more rapid payment by a health plan if it will submit its claims via Internet, compliance with that request is likely to be swift. For a service industry such as health care, accounts receivable function as inventory, and few businesses would overlook an opportunity to turn inventory into revenue. The ability to manage accounts receivable with an improved efficiency of as little as 15% will have a major effect on profitability. Physicians and hospitals can also benefit from Internet dissemination of protocols, exchange of medical information, and broad distribution of best practices, particularly as centers of excellence continue to determine them.

It should be remembered, though, that the financial incentive to use the Internet will ultimately be the most powerful influence. Despite the advantages available, connectivity rarely drives business. Instead, business drives connectivity. As a result, it is the health plan (with its ability to provide revenue-stream management and real-time reimbursement) that has become a critically important driver favoring connectivity.


As health care information systems move further from proprietary standards, it becomes more important to expand their oversight beyond the information technology department of an enterprise. Internet involvement is a response to business issues, and the same administrators and trustees responsible for an institution’s strategic planning should be responsible for its Internet strategies. Senior managers and board members should become as familiar with the Internet questions that they need to answer as they are with today’s product/service-line and health-system questions. Physicians and practice managers need to know what the Internet can help them accomplish and how they can obtain full use of those capabilities. Both hospitals and physicians must also set Internet priorities, since, as applications and their uses expand, it may be difficult to implement all possible activities simultaneously. Earnings improvement and incremental revenue should be kept in mind when projects are being chosen for the earliest implementation.

The key elements of success in Internet use are understanding that the process of incremental management never stops; that the revenue streams drive the cost structure (which drives the incentives, which drive auditing and accountability); and that the Internet is one tool within a larger business model. That model should also include maximizing revenue streams through better product and service strategies and using managed care and network strategies to ensure the institution’s place in its environment.


The challenge, where the Internet is concerned, is knowing what tools to employ, and when to employ them, in order to maximize the opportunities available to the enterprise. At one time, discussions of strategic planning in health care involved concepts such as vision and creativity. Those are still important ideas, but there is so much change now occurring in the health care industry that it is very difficult to track all of these influences, let alone respond to them with vision and creativity. Instead, it has become necessary to focus on specific strategies, whether these concern the Internet, managed care, or product/service-line partnerships. Physicians and hospital executives should have a complete understanding of their Internet strategies, and they should communicate that understanding to the individuals reporting to them, as well as to the senior officers representing them. Those strategies should be sufficiently detailed to cover the organization’s intent to proceed from one step to the next until its Internet goals have been reached — not at the end of a 5-year plan, but in real time.


Jacque J. Sokolov, MD, is chairman and senior partner of Sokolov, Schwab, Bennett, a Los Angeles-based national health care consulting company. This article has been excerpted from Maximizing Physician/Hospital Alignment Strategies, which he presented at the Annual Symposium on Governing Integrated Healthcare Systems on August 30, 1999, in Aspen, Colo.