MEDICAL INFORMATION SYSTEMS: Healtheon To Acquire ActaMed
"In a deal merging two hot upstarts in the burgeoning market for online health care services, Healtheon Corp. today will acquire ActaMed for $150 million in stock," the San Francisco Chronicle reports (Swartz, 2/25). Palo Alto, CA-based Healtheon was co-founded in 1996 by James Clark, who previously co-founded both Netscape Communications Corp. and Silicon Graphics Inc. Healtheon's initial business plan outlined its intention "to use the Internet to overhaul the confusing and fragmented medical-data industry," the Wall Street Journal reports. Growth to date has been slow; "Mr. Clark said Healtheon isn't currently profitable and is experiencing negative cash flow as it spends heavily on technology development" (Anders, 2/25). Healtheon's purchase of Atlanta, GA-based ActaMed, "a fast-growing supplier of sophisticated data networks for health care giants United HealthCare, SmithKline Beecham's Clinical Laboratories and CIGNA," gives Healtheon "legitimacy in the health care business," said Morgan Stanley's Mary Meeker. She said, "This is a market with huge sales potential." ActaMed's networks already reach "more than 60,000 physicians" (San Francisco Chronicle, 2/25).
Terms And Potentials
According to the Wall Street Journal, the deal calls "for existing Healtheon shareholders to own nearly 60% of the combined company, while ActaMed holders would own the remaining 40%" (2/25). Clark's hope is that the combined entity, with operations in Atlanta, Minneapolis and California, will have broad national presence and increased clout in reducing the "nearly one-fourth of the $1 trillion spent on health care in the United States each year [that] is wasted on inefficiencies and poor communications within the industry." Healtheon CEO Michael Long said "the merger is the first for Healtheon, but may not be the last." Meeker predicts the online health care industry "will emerge as one of the low-hanging fruit industries on the Internet, along with selling books and PCs" (San Francisco Chronicle, 2/25). Clark predicts that ActaMed and Healtheon each will generate approximately $40 million in revenue this year. He said, "Together ... they might be able to reach $100 million" (Wall Street Journal, 2/25).