The nation's largest outsourcer of healthcare billing services can now claim a new superlative: world's largest "client/server-based systems integration company."
With its recent acquisitions of Columbia, Md.-based Rapid Systems Solutions and Austin, Texas-based BSG Corp., Medaphis Corp. believes it's poised to dramatically improve healthcare data processing.
"They will be able to do things with quantum leaps in efficiency," said Kamal Hamid, an associate director in the healthcare equity research group at Bear, Stearns & Co. in New York.
The fact that the acquisitions fall outside the Atlanta-based company's healthcare business management bailiwick is "absolutely a positive," Hamid added. The acquisitions give Medaphis the "ability to cross-pollinate cutting-edge technologies to healthcare."
Client/server systems distribute data storage and processing capabilities throughout a hospital, health network or corporation. Such systems link computer "servers" to "client" workstations, allowing data to be processed more quickly, cheaply and easily than using traditional mainframe-based computer systems.
With its acquisition of Imonics in December 1994, Medaphis began restructuring its computer systems processing procedures. The company is seeking to consolidate more than 300 processing centers. Last year, it closed 25 centers and hopes to concentrate most of its bill-processing activities at eight or 10 centers nationwide by mid-1997, said Michael R. Cote, the company's chief financial officer.
Imonics, which continues to provide services to outside companies, has experienced tremendous demands on its resources, growing to 300 employees, up from 80 since the acquisition in December 1994, Cote said. As a result, Medaphis began to search for other large technology companies that could expand its capacity to process large volumes of transactions, he said.
On March 13, the company announced it signed an agreement to acquire all the outstanding stock of Rapid Systems Solutions, a privately held computer systems integration company, for 1.14 million shares of Medaphis stock, worth $42.8 million. Rapid Systems last year posted revenues of $14.5 million and pretax earnings of $1.5 million, Medaphis said.
Two days later, Medaphis announced a definitive agreement to acquire another computer systems integration company, BSG, for $350 million. The deal involves the purchase of all of BSG's outstanding stock for 7.5 million shares of Medaphis common stock. Medaphis also will assume BSG stock options and stock rights worth 2.66 million Medaphis shares.
On news of the deal March 15, shares of Medaphis jumped 12% to $44 from $39.25 in NASDAQ trading. The stock continues to trade in the high $40 range, near its 52-week high of $53.25
In 1995, Medaphis recorded revenues of $467.7 million, an 85% increase from the previous year. With the latest acquisitions, the company expects to generate more than 60% of its profits from technology operations.