Healtheon/WebMD

(HLTH)

demonstrated Friday it still has a knack for getting the market's attention with good PR, even if savvy investors weren't convinced.

The Atlanta-based company, which wants to get everyone in the medical business connected, said board members Jim Clark and John Doerr intend to spend some $220 million buying company stock on the open market. Healtheon shares surged 7 1/2, or 35%, to close at 29 3/16.

Even so, the shares are more than three-quarters off their highs of last year. And some investors, dubious about an unproven business plan in a highly competitive field, haven't heard anything to change their minds.

Setting Sail

Clark, a founder of Healtheon as well as

Netscape

and

Silicon Graphics

(SGI)

, said he was willing to do the bulk of the insider buying by ploughing up to $200 million into Healtheon stock, adding to the 11.7 million shares he and his family own. And Doerr, a partner at the famed

Kleiner Perkins Caufield & Byers

venture capital firm, said he may buy an additional $20 million worth.

Faced with such enthusiastic buyers, the company asked for an exemption from

Securities and Exchange Commission

rules governing closed periods for buying and selling shares. It also put out a bullish revenue forecast, just to be safe.

So let's forget for a minute that most buyers don't announce they are buying shares before they do, as this has obvious consequences for the share price. Better to sneak up on the market and buy at a lower price before anyone finds out. Or that the company said Clark and Doerr said only that they

intended

to buy the shares, not that they

will

buy them or had bought them. A company representative couldn't say whether any purchases had been made.

The fact is, the announcement had its desired effect: It reversed a share price that was trending downward. Maybe they were hoping to grab the attention of momentum buyers? Or ward off takeover worries? Who knows.

The Cut of Healtheon's Jib

But Healtheon has a longer-term problem. It has an untested business strategy in a new market and lots of potential competition. It now provides a closed system for doctors, pharmacists, consumers, insurance companies and others to communicate through the Internet. But with hundreds of interactive Internet health sites and email becoming as prevalent as phone calls, investors are dubious about the business plan over the long term.

"Their business model changes so fast it's hard to quantify the exact market or revenue model," said Tim Bepler, manager with

Orbitex Health and Bioscience

fund, who hasn't bought Healtheon shares. "Basically, it's difficult to determine how these guys are going to make money."

Right now, its losses far exceed its revenue. Healtheon said Friday it expects revenue of $62 million in the first quarter, compared with $33 million in the fourth quarter of 1999. Most of that is from a few big corporate customers like

SmithKline Beecham

(SBH) - Get Report

.

The company's losses, however, will approach $90 million in the first quarter -- and that's before amortization and depreciation for giant purchases in the last year, such as all-stock purchases of WebMD for $3.6 billion and

Mede America

for $387 million.

Confusion

While the purchases may have looked good on paper, they clouded financial forecasting. "The numbers are extremely confusing right now," said an analyst who asked not to be identified. "People believe they did too much, too fast."

Over the long term, Healtheon has much to prove. Still, it's not like the company didn't warn anyone. In a 10-Q filed last year, it released the standard boilerplate that has become almost a badge of honor among companies in the New Economy these days.

"It's difficult to evaluate our business and prospects. Our revenue and income potential is unproven and our business model is still emerging," said Healtheon. "We expect that we will continue to lose money through 1999 and we may never achieve or sustain profitability."

Caveat emptor

.