117. mc k part 6 amex

H.I.S.-tory

by Vince Ciotti

© 2013 by H.I.S. Professionals, LLC, all rights reserved.

Episode #117:

McKessonPart 6 = AMEX

Recapitulation• The acquisition of IBAX in 1994 greatly expanded (complicated?)

HBOC’s product line, as illustrated in the time line below:

• The second deal a year later added even more products, and vaulted HBOC into the top of the HIS market in annual revenue.

HIS Vendor Revenue in the 1980s• HBOC had grown well in the 1980 through indigenous products, but

as the chart below shows, they had a long way to go to catch up with #1 SMS, and yet stay ahead of #3 AMEX and #4 IBAX…

If You Can’t Beat ‘Em…• New CEO Charlie McCall was just warming up with the acquisition

of IBAX in 1994. A year later, he pulled a second coup by buying a 2nd major competitor with large revenue & client base: AMEX!

• And just what does a monster credit card company have to do with the HIS industry? Well, like so many giants over HIS-tory, they bought their way into the business figuring IT and healthcare are an unbeatable combination to make money, just like:– Revlon buying TDS– McAuto buying CRASH– Tymshare buying MDS– GE buying IDX– AllTel buying TDS– Baxter buying DCC/JS DataThis 1989 ad sums it up well:

A Saint Among Vendors…• AMEX started its foray into HIS acquiring Systems Associates, Inc.

(SAI), formed originally by John Weil in the 1970s (see episode #20 at hispros.com). SAI’s “SAINT” system ran on Point Four minis in about 300 small client hospitals, mostly under 100 beds.

Minnow Swallows Whale• As this table from Sheldon

Dorenfest’s Guide attests, McAuto 3rd in annual revenue in the mid 1980s, with $200M, right behind leaders IBM and SMS.

• Look way down the list, and you can barely make out SAI in 15th place with a paltry $33M in revenue.

• Sadly, McAuto only shrunk over time, with their 1987 revenue down to $165M, and Mac’s HSD division was soon put up for sale.

Honestly…• Compared to all of the denials

from IBAX about their ever being on the market, McAuto was amazingly “open” about their status in this 1988 ad. We’ve never seen such openness in HIS since…

• Thanks to AMEX’s deep pockets, SAI bought McAuto’s HSD division, on April 1, 1989 (that’s no April Fool’s joke!). McAuto’s St. Louis operations brought over a thousand clients and 1,100 employees to SAI, whose ≈300 FTEs stayed in their Charlotte HQ offices.

Saint + and ++• The combined firms did fairly well

over the next few years, although McAuto’s confusing product line of competing shared and mini-based systems sold far less than SAI, who morphed the Saint product into SAINT/Plus, then SAINT Express in the 90s, before the next big deal...

Second Mega-Merger• AMEX formed an IT subsidiary entitle First Data Corporation

(FDC), and SAI and McAuto became their Health Systems Group.• In June of 1995, HBOC did it’s second mega-merge in as many

years, acquiring FDC’s HSG to add to its burgeoning product line. Like most HBOC acquisitions, it was technically a stock deal, whereby AMEX received 2,000,000 shares of HBOC stock, at the time, valued at about $200M. That’s twice what AMEX paid for SAI & McAuto (so why are their annual fees so high today?).

• HSG became a separate subsidiary under HBOC VP James Gilbert. Chuck Miller of McAuto ran day-to-day operations of the new business entity, which had gradually moved its data center and key employees from St. Louis to SAI’s Charlotte. Total # of clients and FTEs had dropped precipitously by 1995 to “only” 500 out of a peak of about 1,300 when SAI (with 300) bought McAuto (with ≈1,000). So now you know why McKesson has two major offices: Charlotte with the SAI/McAuto products and HQ in Atlanta .

Irony…• Walt Huff’s graciously sent

this picture scanned by his wife (you don’t expect we old folks to master new technology do you?)

• It’s a wonderful tribute Bill Child’s “Computers in Healthcare” paid to the founders of pioneering HIS CEOs. How ironic for Chuck Barlow, who acquired CRASH & SHIS from OSF in 1970, to stand next to Walt, whose HBOC had acquired McAuto in return in 1995!

HIS Vendor Revenue by 1999• The acquisitions of IBAX and AMEX vaulted HBOC to the top of

vendor annual revenue figures by 1999 as the chart below illustrates, a position they have never given up since…

Next Week• Charlie McCall consummated over a dozen more “minor” mergers

during the second half of the 1990s - we’ll cover only the biggees next week. Here’s how HBOC’s product line had evolved to date: