HBO & Co. is paying big bucks to add a cost-control component to its software line for healthcare networks struggling to integrate efficiently.
The Atlanta-based healthcare information systems and services company earlier this month signed a definitive agreement to acquire Enterprise Systems, a Wheeling, Ill.-based developer of information systems for materials management and resource scheduling.
The stock transaction, expected to close in late June, is valued at about $245 million, or nearly five times the $52 million in revenues posted by Enterprise Systems in 1996.
The company has about 700 customers for its materials management information system. It also has about two dozen customers for an information system that schedules personnel, patients and healthcare resources for hospitals and healthcare networks.
HBO & Co. had been looking for a "full-bodied" materials management product to fill a gap in its market strategy of offering software across the continuum of healthcare delivery, said spokeswoman Monika Brown.
The acquisition will "bring together the cost side and quality side of healthcare," said Glen Tullman, Enterprise's chief executive officer. The company's systems "help users understand all resources required to deliver care." The care process itself is facilitated and monitored by existing HBO & Co. software systems, he said.
Consumables in a hospital or healthcare network account for 50% of operating expenses, according to Meta Group, a Stamford, Conn.-based company that researches and advises on healthcare information technology.
Materials management systems, typically hospital-based, usually zero in on the operating room, which has a voracious appetite for costly materials. But now the definition of materials management is expanding to encompass resource management across a diverse healthcare network.
Enterprise spent $10 million in 1996 on research and development of a more sophisticated technological system that could handle the expanded territory, Tullman said. Another $15 million is slated in 1997 to continue the effort.
The company projects a total expense of $35 million to convert the products to a network-accessible structure, he said.
The acquisition would immediately give HBO & Co. about 30% of the market for materials management information systems in hospitals, said Dan Vogel, senior research analyst with Meta Group.
The deal creates a problem as well as an opportunity. HBO & Co. already has a competing scheduling product called Pathways Healthcare Scheduling.
Tullman said the acquisition would be an opportunity for product teams from both companies to identify the best features and functions of each scheduling system and come up with a new generation of products.
But Brown of HBO & Co. said decisions on the Enterprise scheduling product won't be made until after the acquisition closes.