McKesson, Change Healthcare partner for new healthcare IT company
McKesson Corp. and analytics company Change Healthcare are joining forces to create a new health IT entity. McKessson will combine its information technology business with Nashville-based Change, formerly known as Emdeon.
The new company combines annual revenues of $3.4 billion. It's projected that the combined new company will generate $150 million in annual synergies by the second year after the transaction.
The new company merges the majority of Change Healthcare's business (except its pharmacy switch and prescription routing business) and most of McKesson Technology Solutions – with the exception of RelayHealth Pharmacy and its Enterprise Information Solutions division.
McKesson will own about 70 percent of the new company. The two companies are expected to work toward the launch an initial public offering in the coming months, after which McKesson says it will exit its investment.
"The combination of these two entities comes at a transformational time in U.S. healthcare, Neil de Crescenzo, president and chief executive officer of Change Healthcare, said in a statement.
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"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," he said.
Officials say the partnership combines the strengths of McKesson's IT unit and Change help clients lower healthcare costs and improve access and outcomes, helping them simplify the transition to value-based care.
The new company will offer payers and providers a suite of end-to-end financial and payment technologies. The company will also provide patient platforms to inform healthcare decisions.
"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, CEO of McKesson, in a statement.
"We look forward to partnering with Change Healthcare's management team and employees to create this new enterprise," he added. "And to help customers reduce complexity, lower costs and ultimately provide better care."
The new company received commitments for $6.1 billion of funded debt for the transaction, which the companies plan to use as repayment for the $2.7 billion of existing Change debt. $1.25 billion will go toward cash payments to McKesson and $1.75 in cash payments to Change; the remainder will be used for the transaction's expenses.
In a separate announcement, McKesson said it will explore alternatives for its Enterprise Information Solutions division.