The acquisition of Ibax Healthcare Systems by HBO & Co. brings together a base of 1,000-plus hospital clients, $300 million in annual revenues and a combined effort to develop heightened computer capacity for integrated healthcare demands.
Atlanta-based HBO's pending purchase, set to become final on June 1, continues a trend toward consolidation in the healthcare information technology sector that parallels that of its customers, healthcare institutions. The purchase price wasn't disclosed.
Like drug companies that merged several years ago, software vendors are looking to preserve and increase their ability to pay for research and development, consultants said.
Companies with larger capital bases can build new products, said Steven Rushing, a partner with the healthcare division of Andersen Consulting. With a market fragmented by more than 100 software companies, "they now have duplicative R&D forces, all working on the same visions," Mr. Rushing said.
HBO and Ibax will combine for more than $30 million in annual research funding. Last year, Ibax, an International Business Machines Corp. and Baxter International partnership, devoted $12 million of its $68 million in revenues to R&D; HBO's total was $22.3 million on revenues of $237 million.
In October 1993, TDS Health Systems Corp. secured a development base through its acquisition by Alltel Corp., a Little Rock, Ark.-based telecommunications company with more than $2 billion in annual revenues. Atlanta-based TDS said it plans to spend about $20 million, or 22% of its revenues, on research and development in 1994.
HBO is building its own deep pockets and market share by acquiring healthcare clients. "Ibax brings 475-plus new customers into the HBO & Co. family," said James A. Gilbert, the HBO vice president who's managing the transition of the Ibax business. "A lot of them are just what we want and need."
Both companies have a sizable client base of large teaching hospitals that rely on older mainframe computer technology-either HBO's HealthQuest line or Ibax's Series 5000. But those are prime candidates for HBO's emerging line of integrative software offerings that are designed to complement and connect with an institution's core computer system, whatever the make or model, said Mr. Gilbert.
Besides providing potential for future HBO sales, the Ibax acquisition provides a product for medium-size hospitals that runs on a powerful IBM computer that HBO's software doesn't serve. Ibax's development of software for the AS/400 minicomputer increases opportunities for HBO to bid on business that it's had to pass up because customers specified that hardware platform, said Mr. Gilbert.
HBO can then sell its Pathways 2000 integrative packages, based on client/server computer technology, to new IBM-wired customers as well as the 240 hospital clients now operating the Ibax Series 4000 for the AS/400.
Wall Street viewed the HBO-Ibax deal favorably. On May 2, the first trading day on the NASDAQ market after the April 29 announcement, HBO's stock finished up nearly $3 to $29.19, a 52-week high.