Healtheon to Buy CareInsite and Parent
Healtheon/WebMD Corp., the biggest Internet company linking doctors, patients and insurers, said Monday that it has agreed to buy rival Care-Insite Inc. and its parent, Medical Manager Corp., for about $5.4 billion in stock.
The proposed acquisition would eliminate Healtheon’s largest rival in providing doctors with online links to check insurance coverage, process claims, buy supplies, read new medical studies and access lab reports. Adding Medical Manager, the largest maker of software used to run doctors’ offices, would link the combined company to about 455,000 physicians.
Under the agreement, holders of Medical Manager would get 1.65 shares of Healtheon, or $90.75, a premium of 40% based on Friday closing prices. Medical Manager owns 69% of CareInsite, whose other shareholders would get 1.3 Healtheon shares, or $71.50, a 5% premium.
Shares of Healtheon, founded by Internet pioneer Jim Clark, have more than doubled since the company’s stock was listed a year ago. Healtheon rose $1.63 to close at $56.63 in heavy Nasdaq trading.
Medical Manager shares soared $21.75, or 33%, to close at $86.75, and CareInsite rose $4.13, or 6%, to close at $72, both on Nasdaq.
The combined company will have access to about 80% of U.S. doctors, including 90% of those who write the most prescriptions, said James Kumpel, a Raymond James Financial Corp. analyst with a “buy” rating on Healtheon.
“They’ve just picked off the biggest conceived threat in the space,” Kumpel said. “For payers who want to communicate with physicians and to influence the prescription writing of doctors, they’re going to deal with Healtheon.”
Although there are about 20,000 Internet sites providing information to doctors and consumers, the Healtheon-CareInsite combination could bring scrutiny from the U.S. Federal Trade Commission because it involves such a large portion of doctors.
Healtheon’s chief executive, Jeff Arnold, said he didn’t anticipate antitrust hurdles holding up the purchase, which should close sometime mid-year.
Government antitrust enforcers will consider whether the combined company would have so many links to doctors and insurance companies that it would be difficult for others to start a competing network.
Antitrust enforcers will have to determine “whether there is a network effect, specifically whether higher volumes and lower cost and greater efficiencies of the combined network will create such entry barriers that there will never be another competitor,” said Washington antitrust lawyer Robert Burka.
Competition to the combined companies would probably come from other software makers, such as McKesson/HBOC Inc. and Shared Medical Systems Corp., rather than Internet companies.
