WebMD accounting practices come under SEC scrutiny

Analysts aren't sure that an announcement earlier this month that the Securities and Exchange Commission is investigating WebMD Corp. will have an impact on physicians, but doctors are concerned that it may affect them in the future.

In a document filed Feb. 6 with the SEC, WebMD disclosed that the securities agency has joined the U.S. Justice Dept. in investigating the Elmwood Park, N.J.-based firm. WebMD is the market leader in the physician practice-management software market and dominates the medical transaction processing services market.

On Sept. 3, 2003, federal agents raided three offices of WebMD in connection with a probe by the U.S. Attorney for the District of South Carolina. WebMD thinks that investigation is related to revenue recognition practices and a $5.5 million financial restatement in 1999 by Medical Manager, which it acquired in 2000.

The SEC investigation is related to the existing investigation of those accounting issues, WebMD said. "The SEC's involvement in these investigations is customary, and we do not view their involvement as an expansion of the initial investigation in any way," said WebMD CEO Roger C. Holstein in a statement.

Some industry analysts also believe that the SEC's involvement is routine and will not impact physicians. "It doesn't appear that the investigation has become any wider in terms of its scope," said David Francis, managing director at Jefferies & Co., a brokerage in Nashville, Tenn. "It's simply that the SEC has joined the Justice Dept. in looking at these revenue recognition issues from five years ago."

If that's the case, physicians don't have anything to worry about. "I think the only way [the investigation] could impact physicians is if there is something found that is so large as to put the company at risk," Francis said. "Right now, it's hard to see how ... this [investigation] would put physicians at risk of having diminished services or anything like that."

Even so, some physicians are concerned.

"I'm worried about how it will affect the health of the company because if they are not healthy [and go belly-up], they certainly will not be able to fix my [claims processing] problem," said Theresa Bartos Holladay, DO, a solo obstetrician and gynecologist in Ludington, Mich. "All their promises of being able to fix my problem, well, they are not going to be kept."

Dr. Holladay is waiting to be paid about $100,000 because WebMD's clearinghouse -- WebMD Envoy -- has had problems transmitting HIPAA-compliant claims to her major insurers since October 2003. Dr. Holladay switched to paper claims in January. And she also has had to draw on a line of credit to pay for expenses.

Two-doctor Vaughns Family Clinic in Rosenberg, Texas, is not concerned about the investigation because it does not use the Medical Manager practice management system, said Michael J. Tyler, the group's administrator. "I won't unless [the SEC investigation] starts bleeding over to Envoy," he said.

Still, the group has put plans to potentially replace its existing billing system with the Medical Manager system on hold. "I'll wait to see what is going on before I decide to do anything," Tyler said.

Like Dr. Holladay, other physicians around the country also have experienced similar HIPAA-related claims problems with WebMD. As a result, on Jan. 8, the AMA and seven other national and state medical societies filed a formal complaint with the company. The parties met Feb. 13 and plan to continue discussing the issue further, the AMA said.

"The AMA, and representatives from several medical associations, recently met with WebMD to discuss physician concerns with claim submission issues," said William G. Plested, MD, chair, AMA Board of Trustees. "The AMA appreciates WebMD's willingness to continue to devote resources that enhance the processing and delivery of claims transactions for physicians."