McKesson Corp. has announced plans to roll the majority of its Technology Solutions business into an independent organization, combining the assets with those of Change Healthcare. McKesson will co-own the new company with Change. Once the deal is complete, execs plan to take the new company public, probably sometime next year.
According to McKesson CEO John Hammergren, the two companies came together to offer a better range of options to providers. “The new company will establish a more efficient suite of end-to-end payment and claims solutions, as well as clinical capabilities,” Hammergren said in a company announcement.
The new entity, which combines most of the Technology Solutions assets with the bulk of the former Emdeon, will have combined total annual revenues of $3.4 billion. When the deal is done, McKesson will own about 70% of the new company, with the remainder held by Change Healthcare stockholders.
McKesson will still hold on to RelayHealth Pharmacy and its Enterprise Information Solutions division for now, but is looking at “strategic alternatives” for the EIS division. Change Healthcare, for its part, is keeping its pharmacy switch and prescription routing businesses, which will continue to be held by the current Change stockholders.
The deal could wring new profits out of a McKesson division which has seen better days, observers say.
The last few years have been tough for McKesson which, as HIStalk notes, has seen a growing number of customers going is technology aside in favor of Epic and Cerner solutions. Four years ago, the vendor began shifting resources away from its Horizon Clinicals product line in favor of its Paragon suite. Horizon had been serving several hundred large facilities of 300 beds and up. Since then, McKesson has struggled to convert Horizon customers to Paragon, as gossip heated up that the Atlanta vendor was dialing down Horizon support to force customers onto Paragon.
Now, execs hope the combined company will offer the resources, scalability and integration hospital customers are after. The question is whether even such a large player can challenge Epic and Cerner’s stranglehold on the hospital market. If nothing else, it will have to battle perceptions that it can’t offer the best tool for the larger hospital systems, HIStalk points out.
Still, even if it doesn’t win Epic or Cerner shops, leaders of the news spun-off entity expect to cast a wider net. Execs hope combined set of financial and payment solutions the attractive to help plan as well as providers.