The merger of two fast-growing information services companies, proposed last week, would create a broad range of telephone-accessible coaching for consumers on what their medical problems could be and where best to go for treatment under their health coverage.
Access Health of Rancho Cordova, Calif., and Broomfield, Colo.-based Informed Access Systems signed a definitive agreement to merge in a deal valued at $291 million.
Publicly traded Access Health agreed to issue 5.4 million shares of stock to shareholders of privately held Informed Access Systems. On Sept. 3, the day the deal was announced, shares of Access Health closed at $54.25, up $3.50, in NASDAQ trading.
The deal puts a dollar value on the power of information in a proliferating market for managed-care and cost-control solutions.
Access Health was willing to pay about 12 times what Informed Access currently generates in annual revenues, gaining 6 million new users of information at a cost of about $50 per patient, said Seth Frank, an analyst with Nashville, Tenn.-based Equitable Securities.
Frank commended the company for using the leverage of its stock value as "a strategic asset in growing the business."
The multiple of price to annual sales is not much more than Access Health's own price premium supported on Wall Street. Its market capitalization of $750 million is about 10 times projected sales of $72 million for calendar 1996, Frank said. Analysts predicted $100 million in sales for the two companies combined in 1996.
The nearly 40% increase in shares resulting from the deal did not dilute per-share value in trading reaction to the announcement. At that value, the combined company tops the $1 billion mark in market capitalization.
The combined companies serve about 16 million people, mainly through 42 contracts with insurers, HMOs and self-insured employers. Another 2 million are served through licensing agreements.
Access Health's main service, called Personal Health Advisor, has grown from fewer than 500,000 users in 1994, when the company went public, to more than 10 million today. About 1.5 million are employees of General Motors Corp., and the list of clients also includes a dozen Blue Cross and Blue Shield plans.
Through call centers in Rancho Cordova, Arlington Heights, Ill., and Phoenix, consumers can get advice from a registered nurse around the clock, choose from 430 taped messages on medical problems or order printed information and advice, said Jan Emerson, director of corporate communications.
Informed Access, founded in 1991, concentrates on helping providers and health plans control overutilization by routing patients to appropriate medical services through structured questions asked by registered nurses when contracted members call, Emerson said.
Frank said the two services are complementary in managing health responsibilities for clients while reducing the need for face-to-face communications with covered members.
But Access Health plays to patient satisfaction and access to health information while Informed Access directly manages initial entry to a healthcare system, he said.
Because of differing approaches to the same management imperative, the combined company will be more likely to offer what potential clients prefer and also may be able to "cross-sell" a combination of both services to each other's existing client base, Frank said.
Based on current growth and the potential to boost each other's sales, analysts are forecasting the combined company "could on average have 25 million enrolled lives in 1997," Frank said. "That's 10% of the American population."