Unrestrained excitement over the Internet’s potential to change healthcare spawned a string of companies with bubbly, frothy business models that since have burst.
But Jeff Graves, chief executive of Costa Mesa-based UltraLink Inc., is staking out a niche he hopes will transcend the dot-com phenomenon. He’s not looking to wire notoriously unwired doctors or bring reams of patient records to the Internet.
UltraLink, he says, is focusing on something businesses use,employee health and welfare benefits.
“This is not a sizzly, sexy business model,” Graves said. “It’s not a business model that is tough to figure out.”
The company is looking to make it easier for human resources managers to shop for healthcare, enroll workers and streamline administration. UltraLink employs some 300 people, including 150 in OC, and has about a dozen offices around the country, according to Graves. The company has gained some big-name clients, including IBM Corp., Time Warner Inc. and Kraft Foods Inc.
But UltraLink has felt the fallout from the dot-com shakeout. In July, UltraLink LLC merged with El Segundo-based iBenefits Inc. Prior to that, privately held iBenefits saw its valuation drop by $50 million to $100 million last year as Internet stocks continued to fall on Wall Street. Graves, a Marine who served in the Persian Gulf War and who hails from iBenefits, called it “a really black period in my life.”
Still, UltraLink landed $41 million in funding from New York-based Capital Z Partners and others in July. A month earlier, the company hired Richard Kish, a former technology executive with General Motors Corp., Ingram Micro Inc. and Barnes & Noble Inc., to serve as chief information officer.
Then in August, UltraLink started a health maintenance organization Internet exchange for American Airlines’ plans in California and Texas. Company officials say the e-commerce program helped American save 2.2% on its premiums in the two states.
Health plans that took part in UltraLink’s test included Santa Ana-based PacifiCare Health Systems Inc., Kaiser Permanente, Health Net and Maxicare. Plan representatives downloaded bid documents, completed information and uploaded those documents back through an UltraLink Web site for consideration by American.
UltraLink’s products include online reverse auctions that are meant to decrease the time that goes into procuring benefits. Other offerings include a benefit administrator/broker service for managing and monitoring benefits via the Internet, and an application for employees to select and receive benefits information online.
UltraLink’s target customers are companies ranging in size from 200 workers to those with thousands of employees. Participating companies pay between $2.40 and $5 a month per employee for UltraLink services, with smaller businesses paying more per person.
One challenge UltraLink could face is from insurance brokers, who may see the company’s online offerings as a threat to their services. That’s not UltraLink’s intent, according to Graves.
“We want to be a broker-friendly company,” he said.
The company has hired field representatives that either have worked for or had relationships with brokers, he said. It also has created application packages for USI Administrators Inc. and Willis North America Inc., two large insurance brokerages.
UltraLink traces its roots back more than a decade. The company originated as a part of FHP International Corp., which was acquired by PacifiCare.
The company has about $10 million in annual revenue and enough funding to get profitable by a target date of early 2002, Graves said. In all, UltraLink has raised $53 million in private financing.
“That’s a big war chest and it’s now a competitive advantage,” Graves said.
An initial public offering may be considered this year, said Graves, who isn’t put off by the misfortunes of Internet-related companies on Wall Street.
“The market correction is absolutely a wonderful thing,” he said, adding the correction would keep out companies that haven’t raised enough capital to be competitive.
Other companies, however, also have used Internet benefit auctions as part of their business models. Elmwood Park, N.J.-based WebMD Corp., for one, has a product called BenefitsCentral. The company says BenefitsCentral automates enrollment, ongoing benefit administration and distribution of eligibility data to insurance carriers. It touts BenefitsCentral as allowing organizations to focus on other objectives like cost containment, plan management and worker productivity.
In 1999, Chicago-based Hewitt Associates Inc., a consulting firm with a Newport Beach office, created a pilot HMO auction for three large clients that incorporated the Internet. Last year, Hewitt expanded the auction to nine clients.
Under the Hewitt auction format, selected health plans were invited to compete with others online for the clients. A Hewitt fact sheet calls the auction a supplement to the HMO negotiating process.
Tonya Keusseyan, a Hewitt consultant who worked on the auction, said a Wired magazine article about online sourcing for companies inspired the idea.
“I thought, wow, what a really neat thing to do with our negotiations,” she said.
Hewitt’s first auction, she added, saved its clients a collective $1.2 million in HMO premiums. n
