Healthcare Outsourcing Business May Be Ripe For Consolidation

[DuctapeFatwa]

Increased pressure on managed care to lower costs and new data demonstrating the effectiveness of disease management is drawing attention from potential acquirers, according to Ben Dunn, partner at Covington Associates. The Boston M&A boutique advised disease management company Landacorp on its recent sale for $56 million to SHPS Holdings, a Louisville, Ky.-based healthcare company owned by buyout firm Welsh, Carson, Anderson & Stowe.

SHPS, which combines disease management and benefits administration, will likely make two more acquisitions over the next 12 months, said Merle Ryland, its cfo. Ryland added that SHPS has clients with global operations as well, and the company might expand outside the U.S. as soon as two years from now.

Estimates at the number of sizeable disease management companies range from as few as 15 to as many as 50. The business is not easily quantified and opinions differ about how to define it, said Mary Chaput, cfo of American Healthways, which she claims is the largest "pure play" company in the industry. The Nashville-based company saw revenue last year of $167 million, and forecasts $245-255 million for 2004. Chaput estimates that between Medicare and commercial managed care companies, there are 40 million people under 65 years old who have chronic diseases for which American Healthways has programs in place. American Healthways currently treats about one million people, and estimates that it has just 25% penetration among its existing clients. "That means there's a pretty large untapped market," she said.

http://www.institutionalinvestor.com/default.asp?page=1&SID=328490&ISS=8583&type=3

[bemildred]

1. I can remember when we actually used to make stuff in this country.

:puke:

[DuctapeFatwa]

2. Hey, stuff is still made here. The Madrid bombs were made in USA!

:evilgrin: