Government health IT contractor SAIC plans to split into two companies

Government information technology services vendor Science Applications International Corp., which has a significant footprint in health IT, plans to split in two and create a pair of publicly traded companies, according to a news release.

"Our two new companies will be designed so that their businesses can be more differentiated and more competitive in their own space," said John Jumper, chairman and CEO of McLean, Va.-based SAIC, in the release. "More importantly, that addressable space will expand for each as we eliminate the burden of organizational conflicts of interest. This affords both companies an excellent opportunity to combine optimized cost structures, unrestricted access to their respective markets, and the leveraging of decades of SAIC's scientific and engineering excellence to unleash the growth and value we can deliver to our customers, employees and shareholders."

One business will focus on technical services, including government technical services and enterprise IT businesses, according to the release. The other will focus on "delivering science and technology solutions in three high-growth markets that reflect high-priority, long-term global needs—national security, engineering and health."

The separation is expected to occur in the latter half of the company's next fiscal year, according to the announcement. SAIC's current fiscal year ends Jan. 31, 2013.

According to the release, the pro forma revenue for the current fiscal year for the future solutions-focused business is estimated at $7 billion. Pro forma revenue for the same period for the future technical services business is estimated at $4 billion.

Earlier this month, SAIC completed a $473 million acquisition of health IT consulting firm maxIT Healthcare Holdings. The company also has multiple government healthcare IT contracts.

In October, SAIC and the Pentagon announced they were both defendants in a $4.9 billion class-action lawsuit over a September 2011 security breach involving the health insurance and medical information of 4.9 million military personnel. The breached records, produced by the Tricare Management Activity, the Defense Department's health insurance provider, were on backup tapes reportedly stolen from the parked car of an SAIC employee.

In 1988, SAIC was awarded a $1.01 billion contract to modify the electronic health-record system developed by the Veterans Affairs Department to be used by the Military Health System. The result was an EHR called the Consolidated Health Care System, or CHCS I, which is still in use in military hospitals today.