HBO & Co. roared into the healthcare industry's biggest forum for information technology last week on a full head of steam stoked by Wall Street's rosy assessment of the company's prospects.
The company used the Healthcare Information and Management Systems Society convention to signal a slowdown in acquisition-fed growth in favor of integrating the range of disparate information systems it acquired during the past two years.
The acquisition binge, and a related strategy of being all things to all customers, combined to push the share price of the healthcare information systems and services company to the $100 mark in the week preceding the HIMSS meeting, which was held in HBO & Co.'s home city of Atlanta.
The $100 stock price represented a threefold run-up in value since the company started its aggressive strategy by purchasing Ibax Healthcare Systems in May 1994 for $44 million. And it was double the $50 market price of 4 million shares paid to First Data Corp. for its health systems group in June 1995.
The company board authorized a 2-for-1 stock split Feb. 13, subject to shareholder approval in May.
Industry observers heaped praise on HBO & Co. and its president and chief executive officer, Charles McCall, for acquiring competitors as well as a number of small companies with cutting-edge products that will fill new business needs of providers concerned about clinical efficiency.
"They need to be commended for taking a leadership position in consolidating a supplier industry serving a consolidating (healthcare) market," said Richard Helppie, president of Superior Consultant Co., a Farmington Hills, Mich.-based healthcare consulting firm. "The acquisitions give them market share and a long list of options for their customers."
That consolidation has meant phasing out some information systems inherited through acquisition, leaving hundreds of hospitals with conversion problems ahead of them and sticking HBO & Co. with the responsibility for maintaining the systems in the interim.
But the "early-on tough decisions" to eliminate some products and lay off employees of acquired companies "drove the cost out of maintaining that market share," said Joseph DeLuca, president of JDA, a San Francisco-based healthcare information technology consulting firm.
Now the consolidation and integration take center stage, Helppie said. "The issue is going to be the digestive process of assimilating the firms and the technologies," he said.
McCall said the integration push during 1996 will be twofold. The first, which is under way, is "the cosmetic step" of creating one visual scheme and routine for using all HBO & Co. software on computer terminals. The second, which will take until year-end to accomplish, is the more difficult task of integrating the movement of data across the company's original and acquired lineup.
The goal, McCall said, is to increase the company's internal efficiency and generate operating margins of 25% during the next few years, up from 19% in 1995.