Online medical content provider and e-health conglomerate WebMD said yesterday that it would slash 1,100 jobs, about 18 percent of its work force, by the end of next year to consolidate the company after its acquisition of a string of e-healthcare companies.
WebMD, Atlanta, said it is trying to focus on its core business — providing software and connectivity to the healthcare industry — and predicted that it would save $250 million by the fourth quarter of 2001 as a result of the restructuring. WebMD has 6,000 employees before the layoffs.
The shakeup came in the wake of WebMD's merger last year with e-health services provider Healtheon Corp. and this year's purchase of several e-healthcare companies. Since January, WebMD has acquired Envoy, Nashville, TN; OnHealth Network, Seattle; and Medical Manager Corp., Tampa, FL, and its subsidiary, CareInsite.
WebMD President Marv Rich said in a statement that the company was eliminating redundant operations to streamline the organization. Employees will be offered severance packages and outplacement counseling, he said.
The cutbacks came as no surprise in light of the company's recent buying spree, said Josh Fisher, e-health analyst at W.R Hambrecht, San Francisco. WebMD is trying to cut costs and accelerate its profitability.
Nevertheless, uncertainty clouds WebMD's future, Fisher said. The industry and investors will be looking for the company to outline its long-term plans at an analyst/investor meeting scheduled for Oct. 12 in New York.
“We still don't know what the new company is going to look like,” Fisher said. “We don't know what's driving the new business.”
At the Oct. 12 meeting, WebMD will reveal its restructuring plan in more detail and will discuss its plans for generating revenue, said Jeff Arnold, WebMD co-CEO.
“The consumer is an important part of our business model,” Arnold said. “Today, they're going to the Internet for content. We're putting together the infrastructure that's going to let them take action.”
Jobs were eliminated across the board wherever the company found redundancies, with no single operation taking the brunt of the cuts, Arnold said. WebMD cut people from its sales, legal, finance, human resources and engineering forces.
In addition to the layoffs, the company announced that former Medical Manager Senior Vice President Anthony Vuolo was named executive vice president, treasurer and chief financial officer, replacing the retired John L. Westermann III. Charles A. Mele, former Medical Manager general counsel, was named co-general counsel at WebMD.
In addition, WebMD plans to sell its plastics and filtration manufacturing subsidiaries, which came under WebMD in the Medical Manager acquisition, a company spokeswoman said. The company also said it may change or terminate some of its business relationships but would not go into detail.
The past month has seen trouble at another big name in e-healthcare, content provider drkoop.com, Austin, TX, which in late August laid off a third of its staff and named an entirely new management team. But there are few comparisons between drkoop.com, which had a 120-member staff prior to the layoffs, and WebMD, Fisher said.
While the struggling drkoop.com remains dedicated solely to providing health content, much of which is available all over the Internet, WebMD has become a strong, diverse company, Fisher said.