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Healthaxis Writes Off $277 Million In Goodwill

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NU Online News Service, Aug. 2, 3:55 p.m. – Healthaxis Inc., Irving, Texas, a company that develops software for selling and administering benefits on the Web, is reporting a $289 million net loss for the second quarter on $12 million in revenue, compared with a net loss of $13 million on $10 million in revenue for the second quarter of 2000.

The net loss includes $5 million in cash restructuring charges, and $277 million in non-cash charges for reducing the value of goodwill carried on the books.

Healthaxis is cutting the stated value of its goodwill to $19 million, from $296 million.

The goodwill figure represents the difference between the price the company paid for other companies it acquired and the value of the underlying assets.

The latest reduction in goodwill and other reductions in goodwill have sharply reduced the stated value of the assets of the company, to $65 million June 30, from $711 million a year earlier.

Excluding the cash and non-cash restructuring charges, Healthaxis recorded $7 million in operating losses.

But Healthaxis executives say they still believe the company has a chance to become a long-term player in the health care industry.

The Blue Cross Blue Shield Association, Chicago, has picked Healthaxis to develop a consumer referral Web site, and 28 carriers are now selling products through a Web site HealthAxis has licensed to another company.

Healthaxis also established four marketing alliances during the second quarter; developed a new health privacy and compliance product; reduced the rate it is using up its $12 million in cash to $250,000 a month, from $1.7 million a month at the beginning of the year; and moved its headquarters to Texas, from East Norriton, Pa.

James McLane, the chief executive of the health insurance unit at Aetna Inc., Hartford, from 1991 to 1996, took over as chairman June 21, after joining the company as president in February.

“I believe that many of the necessary hard steps required to change the company’s focus, performance and profitability have been taken,” McLane says in a statement commenting on the latest earnings. “We are making appropriate investments on the origination side of the business to enable us to achieve our revenue growth targets. The pipeline is stronger and deeper.”

But the company is setting modest targets for near-term growth, because potential customers have been slow to adopt Web-based delivery and payment systems, McLane says.