Tenet Healthcare Corp.'s plan to buy Vanguard Health Systems creates new opportunities for the vendors that work with the two companies.
One of the clear winners would be Tenet subsidiary Conifer Health Solutions. On a conference call to discuss the deal, Tenet President and CEO Trevor Fetter noted that Vanguard's 21 hospitals would become revenue-cycle management clients for Conifer.
He anticipated a 28% increase in Conifer's revenue, which would bring it to more than $1.14 billion, from $890 million estimated for 2013 without Vanguard.
“The combination with Vanguard will add substantially to Conifer's size and scale,” Fetter said. “We think this will be very helpful in growing Conifer and attracting new clients, and it really solidifies our leadership position in that market.”
For Vanguard, working with Conifer is expected to improve collections and therefore cash flow, executives from both companies said on the call.
But Vanguard will also lend its own expertise in health plan operations to help build Conifer's growing population health management business.
Analysts also saw new opportunities as well as potential risks for other vendors used by each company.
Tenet uses several of MedAssets' technologies, including ChargeMasterManagement, Contract Manager and CarePricer, Richard Close of investment bank Avondale Partners wrote in a note to clients. He added that the hospital giant also has a supply chain contract with MedAssets that runs through 2016.
Executives singled out revenue-cycle management and supply chain as two of the key areas where they expect to see synergies after the deal closes.
Fetter also highlighted both companies' relationships with Cerner Corp., pointing to it as an example of the “very thorough integration” it plans to make in information technology systems and other areas.
“There's a degree of complementary strategy and overlap with respect to the selection of the systems,” he said.
One question mark, analysts said, is what the deal means for Vanguard vendor Athenahealth, which provides electronic health records, medical billing and practice management software. Tenet uses competing services from McKesson Corp.
Close pointed out that Vanguard has delayed moving Detroit Medical Center to Athenahealth's medical billing product, AthenaCollector, which it was supposed to do in April 2012—signaling that Athenahealth's relationship with Vanguard could be a casualty of the deal.
Yet analyst Sean Wieland of Piper Jaffray wrote that Athenahealth could enjoy another $10 million a year in revenue if Tenet chooses its ambulatory-care offerings, which he saw as superior to McKesson's product. Athenahealth stands to lose $5 million if Tenet sticks with McKesson, Wieland said.
Follow Beth Kutscher on Twitter: @MHbkutscher
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