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MedicaLogic: Has Its Time Finally Come?
By Soula Jones
3.2.2000

In all the hoopla about Healtheon/WebMD's buying spree, one little Oregon company has not gotten much notice: MedicaLogic (NASDAQ: MDLI).
   MedicaLogic is a major player in a niche that Healtheon does not yet have a presence in: the electronic creation of patient medical records. Despite the problems with paper records (poor access, losses, misreads), only 3% of doctors use computers to maintain patient files.
   Why? It costs a lot. MedicaLogic, one of the major providers of medical-record software, charges $25,000 per doctor for its Logician system, which is an add-on to the computer network of hospitals and other big institutions. The 450,000 U.S. doctors in private practice can't afford this.
   But since last October, MedicaLogic has been selling a "lite" version of the Logician that's tied to the Internet (the Logician Internet). Doctors each pay $99 a month for the service (assuming they have an Internet-connected computer). The docs don't have to be online to input or access data. They can upload/download onto a secure web server whenever it's convenient.
   Logician Internet fully incorporates the federal reimbursement guidelines for medical care (the HCFA guidelines), so docs can maximize how much they charge. While it still lacks some of the features of the desktop Logician, MedicaLogic plans to add these over the coming year. These features include ordering a prescription (via alliances with Drugstore.com and CVS.com) and dealing with insurance coverage (via Envoy, which was recently bought by Healtheon/WebMD). MedicaLogic will also have a consumer site (see below), where patients can access their records, order drugs and receive health news.

Two Recent Buys
Investors are still pretty dubious about MedicaLogic. They need to hear that more doctors are using Logician Internet. But those numbers have not been forthcoming (the company refuses to breakout its Internet revenue). To attract more docs, MedicaLogic announced two acquisitions in late February--Medscape (NASDAQ: MSCP) for 14.5 million shares and Total eMed for 8 million. But Wall Street didn't seem to like these, either.
   The reason for the snub is probably Total eMed, a privately held Tennessee company that offers web-based transcription services to 1,000 doctors. Logician Internet, after all, was supposed to do away with transcription.

MedicaLogic
Websites:
Medicalogic.com
98point6.com
Slated to acquire: Medscape.com, Totalemed.com, CBSHealthwatch.com
20500 NW Evergreen Parkway
Hillsboro, OR 97124
(503) 531-7000
1999 Revenue: $19.7 million
1999 Loss: $28.3 million
52-Week High/Low: $54.00/$18.25
Biggest institutional investor: Soros Fund Management (1.6 million shares)
Shares issued: 31.4 million (before recent acquisitions)
% Owned by institutions: 19%
Shares actively trading: 6.1 million
Lock-up period ends: June 2000 (when insiders can start selling their shares)
Source: US Bancorp Piper Jaffray, MedicaLogic, Fool.com
It's HIPAA
The impetus to create easily-accessed electronic medical records comes, in part, from the 1996 Health Insurance Portability and Accountability Act. Among other things, it says that all external transactions between hospitals, doctors and insurers must eventually be in standardized electronic language (with safeguards to ensure privacy), and that patients must be allowed access to their medical records.
Other NW Internet Healthcare Companies
Asterion.com
Elixis
eSurge.com
Oralis.com
PointShare (IPO filed)
eCareConnect (formerly Cancerfacts.com)
OnHealth Network (being bought by Healtheon/WebMD)
 

   But Total eMed may actually help to attract oldtimers who refuse to type. A doctor, for example, could talk into his computer's microphone (or even phone-in his notes), and eMed's 350+ transcriptionists will type out the info and e-mail it back to him for approval. This halfway approach at least gets the doctor using the Internet.
   The benefit of the Medscape purchase is more obvious. Medscape is one of the most authoritative medical news site on the web. Editor-in-Chief George Lundberg is the former editor of JAMA (Journal of the American Medical Assoc.), and there are some bigwigs on the board, like Internet guru Esther Dyson.Medscape brings with it 1.7 million registered users: 280,000 doctors (worldwide), 860,000 healthcare professionals and 630,000 consumers. Also, Medscape creates websites for doctors (some 9,000 sites to date), and it owns CBSHealthWatch.com (1 million registered users), which MedicaLogic can use as its consumer portal.

Will It Succeed?
MedicaLogic's products certainly don't have catchy names. But the company just might succeed in its quest because:

  1. Logician desktop software is being increasingly used by large institutions. In February, MedicaLogic signed four major New York hospitals--New York Presbyterian, Columbia and Cornell--which account for about 25% of the New York City market. Some 3,500 U.S. doctors now use Logician software to work on 8 million patient records.

  2. Aggressive marketing of Logician Internet to doctors (expected to spend $50 million on marketing in 2000). MedicaLogic is giving Logician Internet to all the major residency-training programs in the U.S.--3,775 programs representing nearly 100,000 doctors. The goal is to get future docs to incorporate Logician Internet into their workflow so they'll use it at their own practices. Also, MedicaLogic can provide an entire package to doctors' offices (Dell laptop, ISP account and Logician Internet).

  3. Very focused on privacy safeguards and product improvements. Last year, MedicaLogic spent $13 million on R&D, and this is expected to rise to $20 million in 2000. CEO, Chair and founder Mark Leavitt is a medical doctor with a Ph.D. in electrical engineering from Stanford. Other top execs have come from Netscape, Qualcomm, Network Associates and Mentor Graphics.

Soula Jones is Content Chief at Seattle24x7.com