A day after completing one federally scrutinized acquisition, Healtheon/WebMD disclosed last week that the U.S. Justice Department is investigating its pending acquisition of a chief rival.
Federal regulators issued a second request for information on Atlanta-based Healtheon's stock-financed acquisition of Medical Manager Corp., an Elmwood Park, N.J.-based vendor of physician practice management information systems, and its healthcare Internet portal subsidiary, CareInsite.
A second request for information on the heels of a company's application for federal antitrust clearance typically signals a full-blown investigation of a merger's possible anti-competitive effects. Although no closing date for the merger has been announced, an investigation no doubt would delay the deal.
Healtheon went through the same scrutiny with the Justice Department before getting clearance for its $925 million purchase of Envoy Corp., a Nashville-based healthcare electronic claims clearinghouse, from Quintiles Transnational Corp. of Research Triangle Park, N.C. The deal, announced Jan. 24, was completed May 30. The Justice request for additional information was disclosed March 31.
Justice investigators were fully aware of Healtheon's merger plans involving CareInsite during the time they investigated implications of the Envoy deal, said Risa Fisher, a CareInsite spokeswoman. She said the scrutiny was expected and would be weathered.
But some industry analysts said the timing of the new antitrust probe right after Envoy's joining Healtheon's roster of acquisitions could be more than a coincidence. "The ink isn't even dry and here comes this other thing," said Bruce Hochstadt, M.D., a healthcare analyst with San Francisco-based Thomas Weisel Partners.
Envoy is the dominant conduit of electronic data interchange between physician offices and 900 payers, including nearly 50 Blue Cross and Blue Shield plans, and 40 Medicaid and nearly 60 Medicare plans.
Healtheon and CareInsite are both in the business of linking physician offices to payers and other key transaction partners such as laboratories.
Through the contractual arrangements of its parent company, CareInsite has access to 185,000 physicians at 33,000 sites that are using Medical Manager as their practice management information system.
Since announcing the deal Feb. 14, Healtheon's stock value has declined nearly 75%, reducing the value of the CareInsite acquisition to $1.5 billion, down from $5.4 billion.
The Envoy cash-and-stock deal was worth less than $1 billion at closing compared with an original $2.5 billion valuation.
