Eighteen months after the splashy launch of a "total solution" to healthcare-related information needs, Atlanta-based Equifax said last week it's selling a key component of that solution and will "re-evaluate" its remaining healthcare businesses.
Equifax decided to accept Atlanta-based National Data Corp.'s offer to purchase the healthcare claims processing subsidiary rather than continue to pump capital into it, said Equifax spokesman Norman Black.
Neither of the publicly traded transaction-processing giants would disclose the purchase price, but the value placed on Equifax Health EDI Services appeared to be a pivotal consideration.
"We have been surprised by the healthcare information marketplace and by the prices that are being demanded and paid for companies in this kind of business," Black said.
In April, for example, National Data agreed to acquire CIS Technologies of Tulsa, Okla., a claims processing and business office management company, for stock valued at nearly $100 million.
And last week, Access Health agreed to issue stock valued at $291 million to shareholders of a similar information services company that currently generates roughly $30 million in annual revenues (See story below).
In March 1995, Equifax used an all-day show at an Atlanta conference center to lay out a strategy for providing a range of information services through a single entry point, from administrative and data-interchange services to database construction and outcomes measurement (March 20, 1995, p. 10).
The Health EDI Services subsidiary, one of four operating units under Equifax's Health Information Services group, has been growing at a double-digit pace, Black said, but it wasn't growing fast enough for Equifax.
"Size is important here," he said. The company had reached the point where it had to "either do what it takes to get to that size or re-evaluate and get out," taking its capital elsewhere, he said.
"We have concluded that we can't achieve the scale we need to assume economic leadership in this market in the time frame we projected," said Daniel McGlaughlin, Equifax president and chief executive officer. "We also are finding many opportunities in the financial and insurance areas that appear particularly promising."
Equifax refused to rule out the possible divestiture of two other healthcare units, Health Administrative Services and Health Analytical Services, but did not appear likely to dispose of a third remaining unit, Medical Credential Verification Service.
Equifax said its EDI subsidiary processes more than 40 million transactions a year for more than 40,000 customers. National Data said the acquisition, combined with its existing hospital and pharmacy claims business, would increase its transaction volume to nearly 1 billion claims annually.