Two hospital organizations have cashed out of their investments in PHNS, a Dallas-based information technology outsourcing company, while a hospital system that was an early investor also received cash but rolled over some of its equity into the acquiring company.
Two investors exit PHNS
One system to be shareholder in new owner
ConJoin Group, an IT and business-process outsourcing company with offices in Mumbai, India, Boston and Toronto, announced last week that it had purchased PHNS for $250 million. PHNS was co-founded in 1999 and quickly formed alliances with three “corporate partner” hospital organizations. The first, in January 2000, was McLaren Health Care, Flint, Mich.; followed by General Health System, Baton Rouge, La.; and later by Adventist HealthCare, Rockville, Md.
All three sold their IT departments to the startup company, then known as Provider HealthNet Services, which in effect bought its initial hospital clients by offering cash and stock in return for taking over their IT departments and entering into long-term IT service contracts with them.
As a startup, the new company traded a piece of itself to quickly obtain the intangible asset of visibility in the market as well as hard assets of equipment and a future stream of income, company co-founder Rick Kneipper said. “You need to have a breadth of customers, so in a very short period of time, we were up and running a $100 million business with three hospitals systems and a lot of credibility,” he said.
By 2006, PHNS announced it had made a total of $95.5 million in annual cash payments to “hospital partners” as their share of costs savings produced by the company in the first six years of their relationship. At the time, PHNS said the three hospital organizations owned 20% of its stock and held 40% of the seats on its board. Kneipper, who previously served as chief administrative officer of PHNS, will remain on the board and become chief strategy officer for the new company.
Kneipper said PHNS paid cash to all three of its initial hospital investors as part of the sale, but declined to specify the amounts. A General Health System spokeswoman declined to comment on its payout.
An Adventist HealthCare spokesman said in an e-mail that the system owned less than a 2% interest in PHNS stock. “Our shares were redeemed in cash” in a transaction that “had no significant impact” on the system’s finances, and that Adventist will be a ConJoin customer.
Kevin Tompkins, a spokesman for the seven-hospital McLaren system, said it “will continue to be a large shareholder in the new company, ConJoin. It will be less than a majority but it will be in the double digits.” Tompkins said, “The final nuts and bolts are still being worked out, but we are extremely pleased with our investments in PHNS.”
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