Carol.com cuts jobs, changes strategy

  • Article by: CHEN MAY YEE , Star Tribune
  • Updated: November 11, 2008 - 9:24 AM

The start-up failed to draw enough shoppers or providers to its online medical marketplace.

Carol.com, a Twin Cities start-up that drew national attention for its efforts to create an online medical marketplace, has cut 25 jobs, or a quarter of its workforce, a sign that consumers may not be ready for the trend known as consumer-driven health care.

Bloomington-based Carol has struggled to attract users to its year-old website, which it bills as a Travelocity for health care.

Medical providers never got comfortable with the idea of posting their services online for comparison shopping and consumers "didn't know what to do with us," said Carol's chief marketing officer, Marcia Miller. The economic downturn and the pressure to produce results finally forced a shift in direction.

The staff cuts were across the organization, Miller said.

Carol's two consumer websites -- in the Twin Cities and Seattle -- will remain up. But the company will now focus on consulting and software services aimed at hospitals, clinics and physicians.

It will help providers repackage services in ways patients can understand, rather than in the current system organized around insurance payments. It may also rent the Carol software platform for hospital and clinic groups to include on their own websites -- backing off from the original goal of allowing users to compare directly among providers.

"We are taking a step back," Miller said. Carol will now concentrate on "how do you engage at an earlier level and how do you do something that isn't threatening."

CEO is a pioneer in the field

Carol's chief executive, Tony Miller, is a nationally known evangelist for consumer-driven health care, a movement based on the notion that patients empowered with the right price and quality information will shop for health care the way they shop for airline tickets. In 1999 Miller founded Definity Health, a pioneer in the field of health reimbursement and savings accounts, now owned by UnitedHealth Group.

Carol raised just under $30 million from Lemhi Ventures, also headed by Miller.

Carol attracted excitement and skepticism in equal measures and was closely watched by health reformers around the country as a model that might be replicated elsewhere. As the company grew, it moved from an office in Plymouth to a bigger space in Bloomington.

The theory was that the growing number of people with high-deductible plans and health savings accounts would be motivated to shop for care, and that ensuing competition would lower prices and raise quality. HealthPartners and Park Nicollet Health Services were among the early participants. But the company never succeeded in attracting a critical mass of either sellers or buyers.

In September, Carol said it would start offering health care packages -- diabetes care for a year, for example -- directly to employees of some of the biggest self-insured companies in Minnesota.

Marcia Miller said the company wasn't running out of money yet and had enough cash to roll out its new strategy.

But, she added, "We need to prove the business model faster and ramp up the results."

For a time earlier this year, Carol.com advertisements were ubiquitous around the Twin Cities. Billboards blared: "You shop for this [a necktie]. Why not this [a stethoscope]?"

The why not, as it turned out, was people were simply not ready.

Chen May Yee • 612-673-7434

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