HBO & Co. took its biggest step into healthcare information services last week when it agreed to pay more than $1 billion in stock to acquire Access Health, a telephone-based healthcare information service.
With 500 registered nurses at interlinked national call centers, Broomfield, Colo.-based Access Health has contracts with 115 healthcare organizations to field calls on medical intervention, advice and education from their enrollees.
Access Health collects a monthly fee per enrollee to perform 24-hour triage of medical complaints, make doctor appointments, pre-approve hospital visits and dispense guidance. It manages 28 million enrollees.
The deal, subject to regulatory and Access Health shareholder approval, is expected to close during this year's fourth quarter.
Originally known for its Ask-A-Nurse physician and hospital referral service, Access Health moved into telephone counseling with its Personal Health Advisor triage service and solidified its care-management business after merging with Informed Access Systems in 1996, said Amy Gustafson, a company spokeswoman.
The acquisition greatly expands HBO & Co.'s capacity to manage payer expenses, an area it entered one year ago with the acquisition of National Health Enhancement Systems, said Bruce Hochstadt, a Chicago-based healthcare analyst with Jefferies & Co., Los Angeles.
Phoenix-based National Health was Access Health's much smaller rival, but its acquisition launched HBO & Co. into the arena and brought to its attention the "ace" of the call-center niche, Hochstadt said.
National Health mainly sold software to hospitals and other providers for their own in-house call centers, said Beth Dalton, a spokeswoman for HBO & Co.
After acquiring National Health, HBO & Co. nurtured a staffed call-center business to 1 million enrollees. The two call-center companies will be merged into one operation, Dalton said.
HBO & Co. over the last two years has expanded from its original hospital software business to acquire several varied companies that sell technology and services to payers and managed-care operators. It also entered the physician and home-care management areas.
HBO & Co.'s four previous payer-market acquisitions together totaled about $900 million-less than the cost of Access Health. But the Access Health deal computes to about the same multiple of price to revenues as five of HBO & Co's last six acquisitions, said Raymond Falci, a healthcare analyst with Bear, Stearns & Co. in New York.
"This company has more revenues than any company HBO has ever bought, by a long shot," Falci said. Access Health's projected revenues for fiscal 1998 ended Sept. 30 are $170 million, he said. Revenues were $120 million a year ago and have grown 76% a year for the past three years.
HBO & Co.'s overall strategy is to provide both information and business solutions to payers to assist them with decisionmaking and operational efficiency, said Charles Trafton, a healthcare analyst with Adams, Harkness & Hill in Boston.
According to Trafton, the drain for payers has been the overutilization of healthcare services by enrollees, which erodes fixed monthly premium revenues.
For example, he cited a recent Harvard University study concluding that more than half of all emergency room visits are not justified by the medical problem presented.
"The real money (for payers) comes in triaging people to the most appropriate care site and to the most appropriate caregiver at the right time," Trafton said.
To keep costs down further, Access Health has established a disease-management business, Dalton said. The nurses who take incoming calls also telephone people at risk for such diseases or conditions as diabetes and asthma. This way, costs of chronic care are better managed: Patients with such conditions are monitored and receive early intervention, and thus make fewer visits to the emergency room, D