HMS Holdings to acquire HealthDataInsights for $400 mn
08 November 2011
HMS Holdings Corp, a US healthcare services provider, yesterday said it had signed a deal to acquire privately held HealthDataInsights Inc (HDI) for about $400 million.
Las Vegas-based HDI is a technology-enabled healthcare services company that provides fraud and abuse prevention services and recoups improper payments for health plans and government payers like Medicare and Medicaid.
HDI, which is the exclusive medicare recovery auditor and contractor in 17 states and three US territories covering approximately 22 per cent of all Medicare claims in the country, reviewed more than $300 billion in paid claims last year.
HDI is backed by venture capital firms that include Redhills Ventures, GRP Partners and Ticonderoga Capital.
HMS will pay a total of $400 million for HDI consisting of $384 million in cash to be paid at closing and around $16 million in the form of assumption of unvested options.
HMS said that the cash component of the transaction will be financed in part through a $350 million bank term loan facility and in part through corporate cash and HDI will become a wholly-owned subsidiary of HMS Holdings post closing.
The acquisition will result in financial leverage of approximately 2.5 times debt to adjusted EBITDA at the end of 2011.
HMS is the largest coordination of benefits and programme integrity services for healthcare payers in the US. HMS's clients include health and human services programmes in more than 40 states; commercial programmes, including commercial plans, employers, and over 130 Medicaid managed care plans.
HMS claims that through its services, clients recovered over $1.8 billion in 2010, and saved billions of dollars more through prevention of erroneous payments.
After acquiring HMS's revenue recognition methodology, HDI is projected to contribute approximately $85 million of revenue to HMS in 2012. "HDI is one of the few strategic opportunities we have seen with revenue growth rates and profitability comparable to our own," said Bill Lucia, HMS's CEO.
"Fraud, waste and abuse losses account for approximately $200 billion, or 10 per cent, of all US healthcare expenditures," said Lucia.