Information processors are coming at healthcare from different directions but toward the same goal of efficiency, and the acquisition of Health Data Sciences by Medaphis Corp. beats yet another path to that goal.
Medaphis, a publicly traded company based in Atlanta, has built a $500 million business around economies of scale and cutting-edge computer efficiency in the billing and accounts-receivable end of healthcare management.
The acquisition of HDS, a privately held patient-care information system company based in San Bernardino, Calif., will complete the healthcare information picture by introducing patient data in ways that promote clinical efficiency as well, said Randolph Brown, Medaphis chairman and chief executive officer.
A definitive agreement to acquire all the outstanding capital stock of HDS was executed late last month. The exchange for 6.1 million shares of Medaphis common stock is valued at more than $240 million at the recent $40-per-share level at which the stock was trading on the NASDAQ system.
Medaphis also agreed to assume or issue stock options representing an additional 556,000 shares, making the total stock transaction worth nearly $270 million at current share prices.
That price is more than 11 times HDS' 1995 revenues of $24 million. But Brown said the integrated clinical system was just what Medaphis was looking for to advance the company's goal of squeezing inefficiency out of the entire healthcare operation.
On the administrative end, Medaphis has focused on streamlining the fundamental process of submitting and resolving bills, a process that was costing 50 cents to $1 per payment just to post cash receipts, Brown said.
Through a re-engineering and computerization campaign, the company has been able to reduce that cost, he said. Medaphis now provides remote billing transaction processing to nearly 20,000 physicians and 875 hospitals.
It's also marketing systems integration and work-flow engineering systems and services to hospitals and to emerging integrated delivery systems.
The addition of HDS will enable Medaphis to tackle inefficiencies in the patient-care process by leveraging the system's emphasis on capturing patient data at the point where it's created and making the information immediately available throughout the medical operation, Brown said.
Besides quickening the pace and enhancing the factual basis of medical decisionmaking, the HDS system will allow clinical rules and protocols to be implemented and instantly available at bedsides and in examination rooms, he said.
HDS, established in 1983 as a bedside clinical information system company, has 53 patient-care installations, including seven in 1995, according to the latest industry figures kept by R.L. Johnson & Associates, a Danville, Calif.-based healthcare software consulting firm.
"They're not normally on the radar screen," said Richard Helppie, president of Superior Consultant Co. The $24 million in 1995 revenues are about what industry leaders such as HBO & Co. and Shared Medical Systems would post in a month. Still, "they do have their fans, and they've had some innovations over the years," Helppie said.
The company's early emphasis on networkwide availability of data to and from the bedside helped it get a $60 million contract in 1990 to computerize the clinical operations of New York City Health and Hospitals Corp. (Oct. 22, 1990, p. 62).
More recently, the HDS system became the centerpiece of a medical information management system launched by managed-care company Health Systems International at a 30-physician independent practice association serving a Philadelphia-based HMO subsidiary (March 4, p. 60).
Helppie said the proposed acquisition gives HDS market viability to go with its innovation, easing fears of multibillion-dollar healthcare companies about entrusting crucial computerization to a small company.
Medaphis, on the other hand, has been growing rapidly. "They've been tearing up the turf with their acquisitions, and the public markets have been very kind to them," Helppie said.
Recent acquisitions include a scheduling and resource management information system company, and companies involved in the technical redesign of computer networks.
Since 1988, Medaphis has acquired 42 businesses for a total transaction value of $1.3 billion. For calendar 1995, the company posted revenues of $552 million, including $84 million derived from two acquisitions made during the year.