Positioning itself to serve accountable care organizations, McKesson agrees to buy a company specializing in medical billing and physician practice management
McKesson Corporation (NYSE:MCK) announced an agreement to acquire MED3000 of Pittsburgh, Pennsylvania, earlier this week. One aspect of this transaction will be of particular interest to anatomic pathologists and pathology practice administrators.
When it closes the sale, McKesson’s ownership of MED3000 will increase its overall national market share of pathology billing and collection contracts. Dark Daily readers may recall that McKesson and MED3000 each have a sizeable number of anatomic pathology laboratories and groups as clients for their billing and collections business divisions.
Contract Pathology Billing and Collection Services
In the case of MED3000, contract pathology billing services are handled by PSAPath, LLC, of Florence, South Carolina. PSAPath was itself acquired by MED3000 in August, 2007. PSAPath serves more than 80 independent pathology practices representing approximately 400 pathologists in 27 states. While pathology is PSAPath’s primary focus, the company also serves radiology practices.
For McKesson, pathology billing services are handled by its Revenue Management Solutions (RMS) division. Within this division is the pathology contract billing business that came to McKesson when it acquired Per-Se Technologies, Inc., for $1.8 billion in January 2007. At the time, it was believed that Per-Se was the nation’s largest provider of billing and collection services to pathology groups, when measured by the number of pathology labs and pathology groups it had as customers.
Thus, it is believed that the combined pathology billing/collections businesses will make McKesson the largest provider of such services to the anatomic pathology profession. It should be noted that both McKesson’s RMS and MED3000’s PSAPath also provide contract billing/collections services to clinical laboratory organizations across the country.
National news coverage of McKesson’s agreement to acquire MED3000 focused on how the deal will position McKesson to serve accountable care organizations (ACOs) that physicians and hospitals are developing under the Affordable Care Act. McKesson is a major player in healthcare. Based in San Francisco, California, McKesson is ranked 14th on the Fortune 500.
In purchasing MED3000, McKesson gets a range of service lines. These include physician group management and billing/revenue cycle management in all specialties. MED3000 also offers third-party administrator and other services. Its 2,700 employees serve more than 10,500 physicians in all specialties and more than 100 hospital customers.
If they obtain regulatory clearances, the two companies expect to complete the acquisition within months. Once complete, MED3000 will complement McKesson’s medical billing and practice management service offerings in its RMS division, the company said. In this division, McKesson has 4,500 employees.
ACOs Will Spend $500 Million in Information Technology
Regarding the move to serve ACOs, McKesson has its eyes on a lucrative market sector. Dot Med News reported that the McKesson deal follows the release of survey results by Black Book Rankings. The survey estimated that newly formed ACOs will spend about $500 million on information systems in their first year. The Black Book 2012 ACO IT Yearbook also reported that McKesson and Med300 were among the approximately 40 vendors serving this market.
MED3OOO employs 2,700 employees and has been recognized by Inc. magazine on its Top 5,000 List for five years as one of the fastest growing companies in the nation. Inc. magazine said MED3000 had $155.5 million in revenue last year (ranking it 4,220th out of 5,000 companies), and a 30% growth in revenue over the previous three years. Founded in 1995, MED3000 sells practice management software and other technical services to group medical practices and hospital-employed physicians, Inc. said.
More Consolidation Expected in Healthcare
Another aspect of McKesson’s agreement to acquire MED3000 is the fact that this is one more example of consolidation within the American healthcare system. This pending acquisition is also reminder to medical laboratory managers and pathologists that eager buyers continue to look for acquisition opportunities within the clinical laboratory industry.