HBO & Co. bought a $33 million ticket to the British healthcare information systems market last week, positioning the patient-care software and services company for what some see as an inevitable business surge there.
The Atlanta-based company acquired two businesses from AT&T Corp. that are involved in routine but ubiquitous data-processing chores.
Those businesses can help make the HBO & Co. name and its faces in the field more familiar to British healthcare executives, said Charles Trafton, an analyst with Adams, Harkness & Hill, a Boston-based investment management firm.
That will give the company a foot in the door to sell comprehensive patient-care software to United Kingdom customers when the economy picks up and the nation tackles shortcomings in its nationalized health system, Trafton said.
The acquisition, for about $33 million in cash, includes AT&T's healthcare electronic commerce network, which serves all 479 trusts and healthcare authorities-the units that make up the National Health Service.
The acquisition also includes AT&T's remote payroll processing business, which competed with a processing business HBO & Co. already operates in the U.K. Combined, the two processing operations account for 60% of the payroll checks issued by British hospitals, said HBO & Co. spokeswoman Beth Dalton.
Since the health system is government-run, its 820,000 employees include physicians, nurses and other professionals in addition to rank-and-file workers, Dalton said.
Compared with the company's major concentration on sophisticated administrative and clinical software, the U.K. operation "is about as low-tech as you get," Trafton said. But the payroll operation hits hundreds of healthcare institutions where they live. And all British hospitals depend on the other acquired service to transmit financial information to the NHS, Dalton said.
HBO & Co. plans to encourage expanded use of that service, called ClearNET, to include clinical information, Dalton said.
Trafton predicted the company would consolidate the two processing businesses, boosting the prevailing 10% operating margins to the high teens by reducing overhead and unused computer capacity.
He said the unit will add $40 million to $45 million to the company's business in the U.K. next year-most of it locked into multiple-year contracts that provide stable annual revenues, a contrast to HBO & Co.'s main business of one-shot software implementations.
The company has a presence in the U.K. for sales of software for such operations as radiology and nursing, Dalton said, but it amounts to less than 5% of total company revenues of nearly $1 billion.
For now the European market is soft, and economies are bending under the strain of government single-payer healthcare systems, Trafton said, adding that those systems will have to find "something akin to managed care" to get costs and operations under control.
HBO & Co.'s new acquisitions are "just another way to get their foot in the door for when the European market turns," he said. "Having an installed base cannot be underestimated in this business."