Change Healthcare IPO: Neil de Crescenzo describes the company's next steps

The CEO says cash raised by the stock offering will help broaden the analytics and data capabilities it can offer its payer and provider customers – and drive innovations in AI, blockchain, robotics and more.
By Mike Miliard
03:44 PM

The long-expected initial public offering for Change Healthcare took place June 27, nearly three years to the day since the merger was announced between Change and McKesson's information technology business, creating the company as it's known today.

Shares of the IPO were first priced at $13 this week, which was substantially lower than the $16-$19 target set by the Nashville, Tennessee-based company earlier this month. But by the close of trading on Thursday, shares of Change Healthcare (CHNG) had risen to $15.

With the IPO, the joint venture is hoping to raise money to pay down some of its substantial debt – about $5.8 billion, according to its S-1 filing – and pave the way for further innovations in the data analytics and exchange offerings it develops for providers, payers and other organizations trying to find their way forward in a fast-changing healthcare market.

Change's Intelligent Healthcare Network enabled some 15 billion data transactions worth about $1 trillion of adjudicated claims – good for one-third of all healthcare expenditures in the U.S., it said – in the 2018 fiscal year, according to the company's SEC filing. Its customers include about 5,500 hospitals, 900,000 physicians, 118,000 dentists, 2,200 government and commercial payers, 33,000 pharmacies and 600 laboratories.

In an interview the day its stock first began trading, Change Healthcare's CEO Neil de Crescenzo offered his perspective on the IPO – which capped a week of other news for the company, including a new AI tool to help reduce denials, and a new multiyear contract to deliver clinical data exchange capabilities to the CommonWell Health Alliance.

On why the company went public (which had first been discussed back in 2016), and why now.

We've spent the past couple years really building the foundation for the joint assets that came together in that merger, and really reached the point where we've got the right culture the right set of assets – to have the kind of company with the financial stability, visibility and growth prospects that you want to have before you go out invite public investors to join you on the shareholder rolls.

So we did that. We've accomplished that. And then we've spent a lot of time talking to some of the most prominent investors in the industry, and it's really been great to see the faith that they've exhibited in our vision.

On what Change Healthcare is hoping to accomplish with a new infusion of cash.

To make sure everybody understands the capabilities that we have to help the system reduce costs improve efficiency and help patients and members have a better experience with the U.S. healthcare system.

We have a particularly unique degree of pervasiveness across the health care system, are really embedded in a lot of the operational procedures – in some of the biggest, but also some of the smallest, payers and providers across the industry.

Given the assets that we've put together and the customer and partner relationships we have, this just really gives us a turbo boost, and the ability to bring those capabilities to organizations of all sizes across the industry.

On why there haven't been too many major health technology IPOs in recent years.

I think the industry is just beginning to consolidate. And we've obviously been a consolidator. We've gotten to a decent size now with $3 billion in revenue and over $900 million in EBITDA.

And the industry as it's evolved, really had a lot of very smaller vendors selling kind of point solutions – often sometimes almost exclusively for providers versus payers, or vice versa. We're really the only company at our scale that sells into both payers and providers.

It's a lot of work putting that together, honestly. And, you know, we're fortunate to work with 14,000 team members every day and we've worked pretty hard to get to this stage. But it's not something that's easy.

On the challenge of continuing to bring value to customers, while also pleasing shareholders on a quarterly basis, in a fast-evolving healthcare space.

There's a trust that's been exhibited by our customers and channel partners in working with us. We have a very broad customer and channel partner base. We've been doing work with them, in many cases, for decades. They're actually equally as heavily invested in our success as we are in theirs.

So it's a very stable company that has a lot of great growth prospects, building upon a very broad foundation. We take advantage of the fact that we're balanced in terms of our different services solutions – analytics and data network capabilities – and also across our customer base, with a balance between payers and providers and channel partners.

The breadth of it really gives us the kind of path and foundation to be confident about not only moving into the public markets but to continue to invest heavily in AI, blockchain, robotic process automation – all these areas where I think we've been pretty demonstrable leaders, even prior to this IPO.

On the promise of emerging tech such as AI and blockchain

I think we're still the only healthcare company that's on the board of the Hyperledger Foundation, which is the main organization for blockchain standards in the world.

And we've talked about the fact that we process over 20 million blockchain transactions a day. I don't know how many the rest of the rest of the industry processes, but I suspect that's maybe more than the rest of for all the rest of the industry rolled together.

As you're probably aware, we acquired PokitDok last year. And also recently we've announced a number of new AI-based solutions where we take the data – the breadth and longevity of the data we have – and build these deep learning models around helping people deal with claims denials, a number of different areas.

So we continue to focus quite a bit on new technologies. I think what's been great is that we're not only talking about the importance of this in healthcare, but very specific practical solutions that our customers are using.

On next steps going forward.

What's going to be important for us is that our team keeps focusing on taking the breadth of our solutions, and these longstanding relationships we have with customers and partners, and continuing to innovate with them.

This IPO is really just a milestone on a journey that we're on: to continue to help hopefully improve U.S. healthcare and make it more efficient help our payer and provider customers use data and analytics to make better decisions at the lowest possible cost – and, obviously, to help America's healthcare consumers make more informed choices about how to maintain or improve their health.

Twitter: @MikeMiliardHITN
Email the writer: mike.miliard@himssmedia.com

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