A British information technology company is securing a beachhead in U.S. healthcare by agreeing to plunk down nearly $1 billion in cash for Medic Computer Systems, a physician practice management information systems company.
The deal, expected to close in October, is the biggest yet in the consolidating healthcare software industry. And it introduces a different blueprint for developing the mass and muscle to compete for the business of large physician practices and healthcare delivery networks.
United Kingdom-based Misys last week said it will acquire Medic for $35 in cash per share, a transaction valued at about $923 million.
Misys, a holding company traded on the London Stock Market, markets software for banking, insurance and other industries including healthcare. In fiscal 1997 ended May 31, it earned $99 million before taxes on net revenues of $477 million. About half those revenues come from outside the United Kingdom; Misys is established in 50 countries.
Medic earned $39 million before taxes on 1996 revenues of $192 million.
Just like the healthcare organizations they serve, information systems companies have engineered numerous mergers and other consolidations in the past several years. Consolidation helps them broaden the range of computerization they can sell to providers and attain the corporate size needed to withstand competition and attract capital.
But the prevailing strategy has been consolidation of products serving different areas of healthcare delivery, said Raymond Falci, an analyst with Piper Jaffray, a Minneapolis-based investment brokerage.
For example, Medic competitor IDX Systems Corp. last March agreed to acquire Seattle-based Phamis in a $150 million stock swap that brought together complementary systems for ambulatory and inpatient operations.
And in 1996, industry giant HBO & Co. acquired CyCare Systems, another competitor of Medic in the medical-group software niche, for stock valued at about $250 million. HBO & Co. has been acquiring companies to round out a product line that once served mainly hospitals.
But as healthcare networks amass an array of software for diverse operations, "the technical side of the network is getting more important," Falci said. Misys has a track record of developing software to run a business, and it's looking for new markets such as healthcare to flex its expertise, he said.
Besides technical muscle, Misys will help Medic attract capital for new acquisitions and provide access to a worldwide distribution network for clinical software, said John McConnell, president and chief executive officer, who co-founded Medic in 1979.