Credit reporting and marketing services firm Experian, which has dabbled in the health information technology arena for about five years, now has jumped in with a definitive agreement to buy revenue cycle management vendor Passport Health Communications for $850 million.
The price tag is high considering Experian expects Passport Health will have 2013 revenue of $121 million with earnings before interest and tax of $30 million, and revenue increasing to $145 million in 2014.
London-based Experian, with U.S. headquarters in Costa Mesa, Calif., enables organizations to assess the risk of extending credit, and use data analytics to access marketing campaigns and other business metrics. It also offers credit/identity protection services to consumers, as well as the ability to check their credit score and the accuracy of their credit report.
Franklin, Tenn.-based Passport operates a claims clearinghouse offering a variety of transactions processing capabilities, with a specialty in insurance eligibility verification. The company also offers patient demographics verification, orders management, patient bill estimation and payment, and enterprise scheduling software, along with physician/patient Web portals.
The acquisition is Experian’s third health I.T. buy and by far the largest. The company in 2008 acquired SearchAmerica, which sells software to verify patient demographic information, predict the likelihood of payment, screen patients for eligibility for insurance coverage or charity care, and direct patients to financial counseling. The company also brought to Experian its data breach response services that include credit/identity protection for individuals affected by a breach of protected information.
Experian in 2011 bought Medical Present Value, which sells software enabling providers to monitor the performance of health insurers’ compliance with their own contracts. The software enables analysis of expected reimbursement and actual payment to flag underpayments or overpayments. This evaluation of payer compliance can be used when renegotiating contracts. Other modules enable providers to analyze the financial effect of proposed insurance terms and calculate expected patient responsibility at or before the time of service.
Between SearchAmerica and Medical Present Value, Experian presently serves about 500 hospitals and 350 other providers. Passport Health will bring 2,500 more hospitals and about 9,000 other providers. The addition of Passport Health will give Experian much broader cross-selling opportunities among customers and expanded services--such as increasing its health care databases from one billion records to four billion--that also will attract new clients, according to Experian.
Experian is not done in health information technology by any means, says Dan Buell, general manager of the health care unit, but don’t expect another deal soon. “You never know, but we like to swallow things one at a time.” With its previous acquisitions, the company took its time to learn the business, then brought in existing services such as analytics capabilities, and that strategic approach will continue, he adds.
Experian actually began talking with Passport in 2006, he notes, as the company began looking at how to offer the industry a one-stop shop for revenue cycle services. Passport was a larger organization at that time than Experian was comfortable buying, and later the timing wasn’t right because Experian has recently made an acquisition and wanted to stabilize, but the conversations continued. “What we like about Passport is they really do a good job in the front office.”
Asked how a $121 million company is worth $850 million, Buell says Passport will immediately contribute to earnings and is a stable business with a strong standalone growth path before adding the additional services that Experian and its health I.T. firms offer. With Search America, the focus was on hospitals and analytics, and Medical Present Value brought in larger physician practices and academic centers. Now, Passport brings thousands of new hospital clients along with thousands of other providers, primarily smaller practices.
Other segments of the health information technology industry that interest Experian include fraud/waste/abuse services and data analytics benchmarking, which would complement services the company already offers, Buell says. Buying ambulatory practice management/electronic health records vendors is not in the short-term strategic focus, he adds.
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