In the large enterprise space, I would estimate that adoption sits at around 300 or so enterprises of 5,000 or more employees. The 650-700 firms you discount due to high turnover I would lower to about 400-450. Just look at Marriott, a company with high turnover, mostly blue collar workforce who is rolling out ActiveHealth. If they show good results, will see more of these types of companies adoption PHR solutions. Taking your other assumptions and correcting for above and we have an uptapped large enterprise market of ~1,000. That’s a lot of customers.

The mid-tier is also starting to pick-up. If value/ROI can be shown, this is a very lucrative market. A PHR-lite like A.D.A.M. may take hold, but I am also seeing some of the novel health & wellness PHR plays like HealthString and SimplyWell doing very well here with their highly focused offerings. And I do believe that will be the critical ingredient for success in this market. Mid-tier companies will not have the luxury of experimenting with a wide range of potential tools/offerings ala WebMD. Instead, they’ll seek solutions that address a specific problem extremely well.

There are only about 1700 firms in the US with 5000 or more employees (about 85-90% of these self-insure based upon several data sources/conversations I have had). This is really the sweet spot for vendors to target for a robust PHR offering right now.

Based on the conversations I have had with a couple of HR consulting firms and others, only about 15-20% of large employers have adopted a robust PHR offering from an external vendor like a WebMD. This numbers seems a little low given the conversations I had with Optum Health, WebMD, ActiveHealth, and a few others. Even being pretty aggressive lets says that it is at 30-35% adoption rate among firms with 5000+ employees . Means that 500-550 or some firms have already adopted it.

Seems like there would be pretty of play in this space yet but it is important to point that a small yet sizable portion of these firms won’t adopt a PHR because of their characteristics (e.g., employee turnover rates, etc.). Let’s assume it matches rates for disease management adoption which means that about 25%-30% of firms of this size won’t ever likely consider adopting an external PHR solution. If you also figure that the employers in this segment who don’t self-fund aren’t going to purchase an external PHR solution either. Basically means that about 35-40% (maybe slightly higher) of this segment will never/high unlikely to purchase an external PHR solution.

So if you already have about 500 firms (on the high end) who have adopted and another 650-700 firms that won’t likely ever purchase an external PHR solution, the untapped portion shrinks to less than 500 firms or so. Good opportunity but a drawn out progress that will take 12-18 months likely to bring them on convince them and bring them on board.

The real opportunity then is in the mid-size employer market (say 1,000-5,000 employees) that self-fund. There are nearly 5900 firms in the US that fall into this bucket and about 70-80% either partially/complete self-fund. I just don’t know if these firms are going to be able or willing to afford a more robust PHR solution from a vendor like Optum Health, Revolution Health, WebMD, or the myriad of PHR vendors. Kind of wonder if a “PHR-lite” concept like A.D.A.M. is rolling out in this space might get a bit more traction since the pricing point isn’t as expensive as a more robust solution.

And even in the payer market, yes, WebMD has landed some of the big fish like WellPoint and CIGNA. TriZetto does dominate in the broader software market for this sector, and offers a modest PHR solution, so they are not impervious. But there are quite a few other players out there and HealthTrio for one is capitalizing on the mid-size payer market and doing OK.

My main point of the post is that WebMD is NOT investing in their PHR platform at the level necessary to accelerate future growth and may be vulnerable to attach by upstarts. It appears that they are more focused on straight ad revenue, which may be a case of the old 80/20 rule as ad rev does represent over 72% of their total rev.

They already landed the big whales on the payer side and with a few exceptions they are largely blocked out of the payer market by TriZetto or a few other vendors.