Healtheon Confirms Talks With WebMD

Healtheon Corp., which connects doctors, patients and insurers via the Internet, said Wednesday that it is in merger talks with online medical resource WebMD in a deal that could make it a dominant player in the emerging online health-care market.

Healtheon would provide no additional details. Healtheon board member Richard Kramlich, however, told Reuters the board of the Santa Clara, Calif.-based company approved the deal Monday and that WebMD’s directors were slated to vote on the plan Wednesday.

“Both managements have been engaged in the negotiating process. We expect them to approve the terms,” Kramlich said.

Atlanta-based WebMD declined to comment.

Kramlich also said that software giant Microsoft Corp. would take a major stake in the new company. He said under the deal there would be a group of strategic partners, including pharmaceutical supply company McKesson HBOC Inc., computer chip maker Intel Corp. and Internet portal company Excite Inc.

The stock swap deal is structured as a 50-50 merger and should conclude in about four months, he said. Industry estimates have valued the merger at $5.5 billion.

Healtheon was started in 1996 by Jim Clark, a founder of Silicon Graphics Inc. and Netscape Communications Corp. Through its Internet portal, doctors can share information, perform administrative tasks such as determining eligibility for care, and authorize clinical procedures such as lab tests.

WebMD, which was formed in October, offers information and discussion forums on health topics. Although it sells ads on its site, analysts see its revenue potential as limited without additional services.

Healtheon’s confirmation of the merger talks sent its stock soaring. It gained $24.38 to close at $80.25 on Nasdaq.