Last week's combination of McKesson Corp. and HBO & Co. into McKesson HBOC represents the start of an ambitious push to make information make sense for providers.
Healthcare analysts have had three months to size up the marriage of opposites in the same industry. Some now say the important factor is not as much the companies' current businesses as it is the progress they can make together in helping manage medical costs.
The $13.5 billion acquisition of Atlanta-based HBO & Co. by San Francisco-based McKesson was approved by shareholders Jan. 12. The two companies completed their merger the same day. The combined companies have $21 billion in annual revenues.
McKesson is a leading drug and medical supply distributor. HBO & Co. is the largest supplier of healthcare information systems. Both cause truckloads of data to be generated in their respective business realms.
But the information they've long collected hasn't been mined on a large scale and packaged into useful medical insight that's understandable to physicians, providers and manufacturers, said Donald Spindel, a St. Louis-based healthcare analyst with A.G. Edwards.
The combined company now has the potential, for example, to merge information on drug-use patterns with data on the effectiveness of certain drugs and therapies in treating diseases, Spindel said.
And that's the emerging advantage being assigned to a transaction that generally met with shock and criticism when it was unveiled last fall (Oct. 26, 1998, p. 12).
"The pressures to take costs out of the system have caused companies that are more aggressive and forward-thinking to view this as an opportunity," Spindel said.
Integrating pharmaceutical information into the healthcare process can close the loop in determining whether a drug actually does what its manufacturer claims it does, said Ray Falci, a New York-based healthcare analyst with Bear, Stearns and Co.
That opportunity squares with the ambitions of both companies to become more than supply middlemen. They want to be providers of valued-added services that drive costs out of the distribution channel for their customers, Spindel said.
As an independent company, HBO & Co. had moved aggressively into managed-care service during the past two years, culminating in the acquisition last month of Access Health in a stock swap valued at $875 million.
The merger ends the solo climb of a company started in Peoria, Ill., in 1974 with $14,000 in operating capital. Founders Walter Huff, Bruce Barrington and Richard Owens used their initials to name the firm.