HealthContentAdvisors

Buy versus Build at HealthGrades

• Posted May 20th 2008
• by Russell

HealthGrades, a publicly-held healthcare information company, initially rose to prominence on its tremendous success with an improbable business model: selling background reports on physicians to the consumer market. What made the model improbable was the relatively sparse content in most of its physician reports (with the exception of occasional sanction data, it was pretty much name, address, board certification and med school bona fides) and the fact it could sell them at all in an online environment drowning in free health-related information. But sell reports it did, in vast quantities. And HealthGrades continued to innovate, now offering a limited number of physician reports for free where a hospital has agreed to cover the cost for its physicians. Another nice upside of this approach: it links its successful consumer offering to its hospital rating and marketing offerings. Smart.

Arguably, the key to HealthGrade’s success is its ability to get products to market fast, and adapt them rapidly to changing market demands. The key to this agility is that HealthGrades elects to buy rather than build its content, content that HealthGrades then integrates and markets. This preference for content licensing is true of its physician profile product, and it’s true of its newest offering, a prescription rating and comparison tool for consumers.

This offering, just launched a few weeks ago, draws on content licensed from IMS Health and Hearst’s FirstDataBank unit. Integrate the content, feed it into its remarkable online marketing machine, and a successful new product is the likely result.

And lest you think HealthGrades views licensing as a one-way street, consider its announcement yesterday that it is licensing its physician and hospital content to Google Health. It’s a wonderful move to build even more traffic to HealthGrades content, which makes HealthGrades more important to hospitals to which it sells both ratings and consulting services. At the same time, the HealthGrades cash register continues to ring with sales of physician profile reports to consumers. It’s a powerful virtuous circle that favors content marketing over content creation. That’s not a formula for everyone, but it certainly seems to be the right formula for HealthGrades.