McKesson, Change Healthcare Merge
By Christine Kern, contributing writer
Move will lower healthcare costs, improve outcomes, and simplify the transition to value-based care.
McKesson Corporation has announced it will combine a majority of McKesson Technology Solutions and revenue cycle management outfit Change Healthcare to form a new, separate company. The new venture will deliver a broad portfolio of solutions designed to lower healthcare costs, improve patient access and outcomes, and simplify the transition to value-based care.
According to a press statement, “As a separate entity singularly focused on healthcare technology and technology-enabled services, the new organization will be positioned to better respond to customer needs and deliver next-generation innovations.”
“This is a bold, innovative transaction that creates a company with an enhanced ability to help customers address their increasingly complex financial and clinical challenges,” said John H. Hammergren, chairman and chief executive officer, McKesson Corporation. “The new company will establish a more efficient suite of end-to-end payment and claims solutions, as well as clinical capabilities, while unlocking the value of our MTS businesses in a tax-efficient manner. We look forward to partnering with Change Healthcare’s management team and employees to create this new enterprise and to help customers reduce complexity, lower costs and ultimately provide better care.”
The move is expected to generate more than $150 million of synergies by the second year following the completion of the deal, and McKesson states it will unlock value through the “singular focus on healthcare technology and technology-enabled services.”
“The combination of these two entities comes at a transformational time in U.S. healthcare,” commented Neil de Crescenzo, president and chief executive officer, Change Healthcare. “Together we will create significant value by bringing together complementary capabilities from both organizations to deliver innovative new solutions for customers, create opportunities for team members at a leading healthcare technology company, and drive advancements that address the three critical areas of cost, quality and outcomes across the healthcare sector.”
The merger also supports current trends in healthcare by avoiding waste and streamlining administration; outsourcing and automating processes for scale and specialization; and leveraging content, connectivity, and analytics to support the transition to value-based care payment models.
McKesson and Change Healthcare will own approximately 70 percent and 30 percent, respectively, of the new company and will receive cash proceeds of approximately $1.25 billion and $1.75 billion, respectively, following the close of the transaction. The new company would have $3.4 billion in pro forma combined total annual revenues for the fiscal year ended March 31.