MedEcon Services, a Louisville, Ky.-based group purchasing organization, is expected to change hands soon, MODERN HEALTHCARE has learned. The buyer is MHA, of Florham, Park, N.J.
The sale was expected to be completed last week but hit a last-minute snag, confirmed William Wooldridge, founder and chairman of MedEcon.
Sandy Irene, chairman of MHA, said late last week that the deal is "imminent."
People familiar with the situation said MedEcon could fetch between $6 million and $15 million.
Privately held MedEcon specializes in building regional buying cooperatives for hospitals and has closely guarded its total purchasing volume.
Privately held MHA, which stands for Managed Healthcare Associates, is a purchasing group for nursing homes and alternate-care facilities. MHA has annual purchasing volume of about $2 billion, Irene said. The company has a particularly strong reputation in managing pharmaceutical purchasing.
If the MHA purchase of MedEcon goes through, which is not guaranteed, it would mark another step in the continuing consolidation of the group purchasing industry. In January, University HealthSystem Consortium and VHA combined purchasing operations. Then, in July, Catholic Materials Management Alliance and Sisters of the Sorrowful Mother-Diversified Health Services merged to form a $2 billion purchasing organization.
Sources said MedEcon has seen its business slide in recent years as competition from other groups and hospital consolidations have taken a toll on its customer base. This spring Med-Econ restructured its operations and laid off more of its headquarters staff. At its peak several years ago, MedEcon employed more than 100 people, but its current staff is about 40.
In contrast, MHA has been growing rapidly, although Irene declined to disclose how many people the company employs. Last year Advent International, a Boston-based venture capital fund, "invested heavily" in MHA, Irene said, although he declined to specify the amount. The sizable cash infusion is allowing MHA to speed up previously laid expansion plans.
MHA has launched a purchasing operation for veterinary offices, called MVA, and also is eying the assisted-living market.
The deal for MedEcon would mark MHA's first step into the acute-care hospital segment, Irene said-but not its last.
The move into hospitals is part of a vertical integration strategy for MHA that will let it serve the full spectrum of healthcare providers.
Irene said the MedEcon deal is one of several the company has in the works for hospital-focused GPOs.
The MHA purchase of MedEcon would be a bit of a business twist. Last year Irene was said to be shopping MHA around, seeking as much as $50 million to cash out of the business, according to a source familiar with the proposal.