The sale of a care-management services company will provide the American Hospital Association a holiday financial bounty and also eliminate the appearance that the association could influence federal officials when the company bids on government contracts.
Boston-based Health Dialog Services Corp. announced last week that its largest shareholder, British not-for-profit BUPA, was buying out other shareholders, including the AHA, to take full control of the company. BUPA owns 17% of Health Dialog pending the expected closing of the deal in mid-January 2008, said George Bennett, Health Dialogs chairman and chief executive officer. The deal, which values Health Dialog at $775 million, requires a Hart-Scott-Rodino antitrust ruling from the Federal Trade Commission, but Bennett said he does not expect any difficulties in obtaining clearance for the deal.
The AHA invested $2.5 million in Health Dialog in 1997, representing about a 7% stake in the company at the time (Jan. 30, 2006, p. 8). When Health Dialog raised $170 million in December 2005, the AHA sold half of its stake and that salecombined with the new investment in the companyreduced its stake to about 1%. Under the pending deal, a 1% stake would be worth nearly $7.8 million, in addition to a $7 million gain that the AHA recorded on the first sale of shares (Aug. 20, p. 8).
Richard Umbdenstock, president and CEO of the AHA, said the association is not likely to invest in a startup company again. This has been a very unique experience, Umbdenstock said. Its not an area of investing that weve pursued. We have no such considerations under way. I think it would really have to be extraordinary to do it again.
Health Dialog was one of eight companies the CMS chose to participate in a pilot program on managing care for chronically ill patients (July 16, p. 8). The company never asked the AHA to lobby on its behalf regarding that program or any others, and the association never used its influence to win any business for the company, AHA spokesman Richard Wade said. Before the companies were chosen for the chronic-care program, Wade said, the AHA was not even aware that Health Dialog was one of the bidders.
Umbdenstock acknowledged, however, that the appearance of a conflict between the AHAs advocacy role and its investments is a factor to be weighed when considering any future investments. Another consideration is that investing in startup companies is not central to the mission of the AHA.
BUPAs buyout of Health Dialogs other shareholders wont change the management team or a key licensing deal that underpins its products, Bennett said. The management team includes David Wennberg, who is president and chief operating officer of the companys analytics subsidiary. Wennbergs father, John Wennberg, is co-founder of the not-for-profit Foundation for Informed Medical Decision Making, which licenses its research to Health Dialog.