Strategic Maneuvering in Healthcare Technology Markets: The Case of Emdeon Corporation

Strategic Maneuvering in Healthcare Technology Markets: The Case of Emdeon Corporation

Kirill M. Yurov (University of Illinois at Chicago, USA)
DOI: 10.4018/978-1-60566-154-4.ch009
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Healthcare technology markets have been recently identified as potential investment targets. Having survived a major environmental shock, the bust, firms in the healthcare technology industry are presently experiencing an impressive revenue growth. In this study, we investigate the strategies of Emdeon Corporation, a healthcare technology firm whose e-business model provides clues for achieving a sustained revenue growth and profitability. We trace the current sustainability of Emdeon’s e-business model to a related diversification strategy that the firm’s upper management has pursued via mergers and acquisitions (M&As). We also address the motivation behind current restructuring of Emdeon’s ebusiness model. We argue that maturation of diversified e-business models leads to the transformation of individual segments into distinct entities focusing on specific technology markets.
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A growing specialization of e-business models has offered a variety of new services that create business value for the healthcare industry (Parente, 2000; Payton, 2003; Singh, O’Donoghue & Soon, 2002). These diverse services can encompass online execution of medical transaction processing, health information retrieval, and/or online enrollment to health plans, to name a few examples. Recent publications in the trade press have reflected a growing sense of optimism on the part of investors in e-business firms that serve niche technology markets. In particular, healthcare technology markets have been praised as potential investment targets (New York Times, 2006; Wall Street Journal, 2006). Investors presently focus on funding start-up companies that provide access to health-related information as well as offer Internet-based capabilities to compare quality and outcomes of healthcare services.

The gigantic size of U.S. healthcare industry presents many opportunities for technology firms that have a potential to improve value chains. According to the National Coalition on Health Care, the total healthcare spending in the United States reached $1.9 trillion or about 16% of the gross domestic product in 2004. The fact that healthcare is a data-rich industry creates opportunities for technology firms to make health data exchanges more efficient and reliable. The other distinctive characteristic of healthcare is that it is strictly regulated. In this regard, the value proposition of technology firms is evident in their capability to decrease complexity of medical-transaction processing and reduce the number of data-related medical errors.

U.S. healthcare organizations first began to build proprietary information systems in the 1960s (Collen, 1991). At that time, hospital networks were most prolific adopters of information systems given that they possessed sufficient capital bases to do so. Only recently has it become cost-effective for physician practices to embrace medical software systems. Mass adoption of broadband Internet and decreasing costs of worldwide delivery of digital materials offer opportunities for technology firms to interconnect hospital information systems and connect to software systems of physician practices.

In addition to improved affordability of information systems and technological advancements, healthcare institutions could potentially benefit from incentives offered by the regulatory agencies to digitize the exchange of health-related information. In the mid-2000s, the U.S. government intensified efforts to raise the adoption rate of electronic health record (EHR) systems. This technology enables caregivers to collect and circulate digitized patient data across the network of authorized healthcare providers (Goldschmidt, 2005; Ford, Menachemi & Phillips, 2006). The U.S. government plans to link individual EHR systems in a centralized network, allowing access to patient data on a national basis (Office of the National Coordinator for Health Information Technology, 2005). The planned centralization of EHR systems would be a massive undertaking on the part all the stakeholders of the U.S. healthcare industry. The increased quantity of digitized patient data would fuel further demand for medical-transaction processing services. Such a scenario indicates greater revenue-growth opportunities for the healthcare technology industry. Firms that are capable of building EHR systems, processing digitized data, and facilitating health-related decision-making would benefit from proliferation and centralization of EHR systems.

Complete Chapter List

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International Advisory Board
Table of Contents
In Lee
Chapter 1
Keith F. Ward, Erik Rolland, Raymond A. Patterson
Proponents of Customer Relationship Management (CRM) suggest that a firm can develop a value creation relationship, such that an increase in... Sample PDF
Managing the Customer Relationship: A Framework for E-CRM Analysis
Chapter 2
Soumaya Ben Letaifa
This chapter examines how e-CRM has affected both organizational and individual behavior in a leading Canadian bank. The innovative and... Sample PDF
A New Conceptual Framework for Greater Success with Integration of E-CRM
Chapter 3
Tim Coltman
Most sectors of industry, commerce, and government have reported variation in the performance payoff from electronic customer relationship... Sample PDF
Managerial Discretion and E-CRM Performance
Chapter 4
Patricia T. Warrington, Elizabeth Gangstad, Richard Feinberg, Ko de Ruyter
Multi-channel retailers that utilize an e-CRM approach stand to benefit in multiple arenas by providing targeted customer service as well as gaining... Sample PDF
Multi-Channel Retailing and Customer Satisfaction: Implications for E-CRM
Chapter 5
Veronica Liljander, Pia Polsa, Kim Forsberg
Not until very recently has mobile phone technology become sophisticated enough to allow more complex customized programs, which enable companies to... Sample PDF
Do Mobile CRM Services Appeal to Loyalty Program Customers?
Chapter 6
Michael Shumanov
While the managerial rationale for adopting customer relationship management (CRM) has been fairly well articulated in the literature, research on... Sample PDF
Developing a Global CRM Strategy
Chapter 7
John Gallaugher
This article synthesizes and leverages two strategic frameworks when analyzing the true nature of strategy and the Internet: (1) the concept of... Sample PDF
Strategic Positioning and Resource-Based Thinking: Cutting Through the Haze of Punditry to Understand Factors Behind Sustainable, Successful Internet Businesses
Chapter 8
Savvas Papagiannidis
This chapter covers the concept of e-business models and how they relate to the music video and television environments. After identifying the value... Sample PDF
A Tale of E-Business Models: From the Music to the Television Industry
Chapter 9
Kirill M. Yurov
Healthcare technology markets have been recently identified as potential investment targets. Having survived a major environmental shock, the... Sample PDF
Strategic Maneuvering in Healthcare Technology Markets: The Case of Emdeon Corporation
Chapter 10
Olli Kuivalainen
The aim of this chapter is to provide a holistic exploration of the development of the business model of a magazine Web site, and of the factors... Sample PDF
Complementary Role of Website in Business Model Development
Chapter 11
Tobias Kollmann is a German B2C platform for different kinds of service and handcraft orders. Based on the concept of reverse auctions, demanders... Sample PDF
A Reverse Auction-Based E-Business Model for B2C Service Markets
Chapter 12
Denis Caro
The 21st century continues to witness the transformation of organizational systems globally through the deployment of Information and Communication... Sample PDF
Evolving E-Health Systems: Symbiotic Constructs Between Corporate and E-Healthcare Worlds in International Space
Chapter 13
Karl Knapp, Sushil K. Sharma, Kevin King
Offshore information technology (IT) outsourcing has been becoming mainstream alternative to inhouse operations. While offshore development is a... Sample PDF
Socio-Economic Impacts of Offshore Outsourcing of Information Technology
Chapter 14
Indrit Troshani
The eXtensible Business Reporting Language (XBRL) is an emerging XML-based standard which has the potential to significantly improve the efficiency... Sample PDF
Towards Theory Development for Emergent E-Business Innovations: Using Convergent Interviewing to Explore the Adoption of XBRL in Australia
Chapter 15
Bill Vassiliadis
Copyright protection is becoming an important issue for organizations that create, use, and distribute digital content through e-commerce channels.... Sample PDF
An Introduction to the Management and Protection of Intellectual Property Rights
Chapter 16
Tagelsir Mohamed Gasmelseid
The unprecedented advancements witnessed in the field of information and communication technology over the last couple of years are significantly... Sample PDF
Intelligent Contracting: An E-Supply Chain Management Perspective
Chapter 17
Jaeki Song, Eric A. Walden
In this work, we examined the boundary of the applicability of network effects theory. We theorized that when adoption is cheap, the cognitive... Sample PDF
The Applicability of Network Effect Theory to Low-Cost Adoption Decisions: An Investigation of Peer-to-Peer File Sharing Technologies
Chapter 18
Wen-Jang Jih
Two mutually reinforcing forces currently are at work to propel an upward spiraling in the business arena. As wireless communication technology... Sample PDF
An Empirical Analysis of Cellular Phone Users' Convenience Perception and Its Impact on Shopping Intention in Mobile Commerce
Chapter 19
Fang He
Along with the exponential increase in online business transactions, the online payment system has gained in popularity because vendors and... Sample PDF
The Effects of System Features, Perceived Risk and Benefit, and Customer Characteristics on Online Bill Paying
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