SF BUSINESS TIMES
NOVEMBER 1-7, 2002
Oakland HMO plowed $12 million into CareTouch spinoff
BY MEG WALKER
Kaiser Permanente, ending its foray into commerce, is shutting down CareTouch, an commerce and store venture launched two years ago to target the home health-care market.
With former Kaiser Permanente CEO David Lawrence’s backing, Kaiser Permanente spun out CareTouch and invested $12 million in the Concord-based startup in 2000. The spinoff raised another $5 million from IBM. CareTouch provided support and products through its web site, Carepanion.com, a catalog and eight retail sites. The products were items not typically covered by insurers that could be used to care for patients at home. They ranged from special bandages to pillows to motor scooters.
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The service was popular, said Jim Simpson, a financial manager for Kaiser Permanente, but the market was too small. To date, it had an average of about 5,000 customers a month. To break even, the venture needed an additional investment of at least $7 million.
“Our members and physicians loved it, but the volume was low and we couldn’t sustain a business,” Simpson said. Kaiser’s board and CEO George Halvorson decided not to make the additional investment, said J. L. Jordan III, vice president of administration and operations for CareTouch.
Initial plans called for rolling out CareTouch’s services to all 8 million Kaiser Permanente members. The idea was that Kaiser patients would be a test market before offering CareTouch’s service commercially.
But the service was only rolled out to Kaiser members in Northern and Southern California and parts of the Northwest, Jordan said. A small number of patients outside of Kaiser who heard about CareTouch from friends or family had started to purchase items.
Customers were alerted that CareTouch stopped taking orders on Oct. 8. Phased layoffs are in progress and all 45 employees will ultimately lose their jobs, Jordan said.
CareTouch’s first CEO was Dr. Peter Juhn. He resigned last spring and was replaced by John Robinson, a CareTouch vice president. Lawrence was the chairman of the board until he resigned about a month ago, Jordan said.
Walter Kopp, president of Medical Management Services, a consulting firm, said he thought CarePanion was an idea ahead of its time.
Patients are accustomed to health products being covered by insurance so they could be hesitant to buy the products, especially over the Internet, Kopp said. But, he said, as employers begin to shift health-care costs to patients, they will be faced with higher copayments and out-of-pocket costs. In that kind of environment, a venture like CareTouch might have more success, Kopp said.
He also credited Kaiser Permanente with investing in information technology — something that health-care organizations typically don’t do. Kaiser has more online savvy than most health systems because Kaiser patients can make appointments and buy drugs online and Kaiser is working to outfit all its offices with a complete electronic medical record. Meg Walker covers health care for the San Francisco Business Times.