Change Healthcare announced a pair of deals Friday that expand its pharmacy solutions business while unloading its analytics unit.
The Nashville, Tennessee-based company acquired e-prescribing company eRx Network for nearly $213 million.
The company also sold its Connected Analytics business to Chicago-based Kaufman Hall & Associates for $55 million.
Kaufman Hall runs a portfolio of software, data and consulting businesses and works with more than 3,000 health care, higher education, and financial customers.
The company plans to combine the Connected Analytics portfolio, which includes Analytics Explorer, Performance Manager, and data solutions, with Axiom Software, the financial and clinical analytics platform of Kaufman Hall Software.
The Connected Analytics business serves more than 300 healthcare clients, including many of the largest hospitals and health systems in the U.S. Its Hadley, Massachusetts, office will join Kaufman Hall’s locations in Chicago, Los Angeles, Portland, Oregon, and Fort Collins, Colorado, to serve more than 800 healthcare clients across the U.S.
In the nine months ending Dec. 31, 2019, the business generated revenue of $48.6 million, according to Change Healthcare's filing with the U.S. Securities and Exchange Commission (SEC).
As hospitals and health systems face the unprecedented damage of COVID-19 to their financial operations, the need for near real-time data and technologies to help them manage the crisis and implement recovery strategies quickly is paramount, Kaufman Hall executives said in a press release.
The combined solution will offer expanded and integrated reporting, data and analytics tools, and a more robust set of dashboards that deliver actionable insights, according to the company.
As the healthcare industry has evolved to become more efficient and patient focus, healthcare leaders are placing a greater emphasis and value on data-driven insights, according to Paula Claytore, senior vice president at Ballad Health.
"Today, as we continue to battle the COVID-19 pandemic, data and analytics are again key tools to navigating the crisis and preparing for recovery," Claytore said.
Deutsche Bank was Kaufman Hall's financial adviser for the transaction. William Blair & Co. was Change Healthcare's financial adviser.
Acquisition of pharmacy unit
In 2017, McKesson Corporation and Change Healthcare Holdings created Change Healthcare as a joint venture that combined the majority of McKesson's technology solutions segment and substantially all of Change Healthcare Holdings' legacy business.
The Rx Networks business was spun out as part of that deal to former Change shareholders, a group that included investment firms Blackstone Group and Hellman & Friedman as well as President and CEO Neil de Crescenzo.
The Change-McKesson deal included an option for the local company to buy back the business should McKesson’s stake in the combined company fall below 5%, according to Change Healthcare's filing with the SEC.
Last month the buy-back clause was triggered and Change Healthcare exercised the option and acquired 100% of the ownership interest in eRx Network for a purchase price of $212.9 million, plus cash on the balance sheet.
ERx generated approximately $67 million in annual revenue in 2019.
The company runs a network that connects about 59,000 pharmacies and processes more than 1.5 billion claims transactions a year. ERx also handles 520 million e-prescribing transactions a month. The business also markets insurance verification, e-prescribing, and claims billing services.
The deal to buy eRx supports Change Healthcare’s commitment to focus on and invest in core aspects of the business to fuel long-term growth and advance innovation, the company said.
Change Healthcare will now be able to leverage the valuable combination of medical and pharmacy data, and provide eRx customers the benefits of the Intelligent Medical Network with scalable cloud-based technologies, the company said in a press release.
“Bringing eRx back into the fold will enable us to leverage our combined scale, breadth of solutions, and network capabilities to increase market penetration, advance innovation, and create new opportunities,” Crescenzo said.