Caremark Buys Health Cost Control Firm : Acquisition Gives Firm a Corporate ‘Window’
Calling it an “unbeatable combination,” Caremark Inc., formerly Home Health Care of America, Thursday said it acquired a Newton, Mass. health care cost-management company for an undisclosed amount of cash and stock.
The purchase of Health Data Institute is the second acquisition this year for Caremark, a Newport Beach company specializing in home health care services for seriously or chronically ill patients. In January, Caremark acquired a mail-order pharmaceutical company.
The Health Data Institute, which reported revenues of $5 million for the year ended March 31, uses computer systems to help insurance companies and major employers manage health care costs. Revenues for the company, which employs about 100, have nearly doubled every year for the past four years, according to Health Data officials.
“In years to come, I believe that this acquisition will be seen as the catalyst for our emergence as a major, defining force in the health care industry,” said James M. Sweeney, chairman and chief executive officer of Caremark.
Good Reputation
He said Health Data’s cost control and health care management systems have earned “an unparalleled reputation” with insurance carriers, government agencies and Fortune 100 companies. Health Data’s clients include Pacific Mutual Life Insurance Co. of Newport Beach, the Equitable Life Assurance Society and several major Blue Cross and Blue Shield insurance carriers.
Health Data’s computer data base contains detailed health care information on 25 million Americans. The company analyzes data submitted by companies and also sells some of its computer software products directly to customers.
“We felt we either had to build a national health care delivery system or find a partner who had a system,” said Dr. Paul Gertman, chairman and chief scientist at Health Data, in a phone interview. Gertman is a physician who, for most of the ‘70s, headed a major health care research organization at the Boston University School of Medicine. He described the business combination with Caremark as “a natural fit” and one negotiated in just a few weeks.
“Caremark was looking for a window on the insurance carriers and corporate world,” said Gertman. “They are premiere in providing high-technology home care but unknown in the corporate world.” He said Health Data will remain an independently operated company with its own board of directors.
According to Gertman, a critical issue for most major U.S. corporations is that a very small percentage of their employees and families--less than 2%--account for more than 50% of the company’s total health care expenses. Managing these costs by finding the best and most cost-effective treatments available are among the services Health Data provides.
“Health Data Institute’s systems can make a solid contribution to a corporation’s earnings,” said Caremark’s Sweeney. He said the newly acquired company played a key role in developing a plan that helped a major manufacturer reduce its health care costs by $600 million in three years, while improving the care employees and retirees received.
