HMS Holdings will acquire HealthDataInsight for $400M

 In Industry News

HMS will acquire HMI for $400M

HMS Holdings Corp. “HDI” (New York, NY, USA) has announced a definitive agreement to acquire privately held HealthDataInsights, Inc. “HDI” (Las Vegas, NV, USA) for approximately $400 million.

HDI is a company that helps to recover money for the US government or private insurers who have been incorrectly billed or fraudulently charged. This is critical because at the US federal level Medicare is billed about $500 billion/year and it estimates that up to 9% of its billings are over-billed or fraud. That’s $45 billion just in federal billings. HDI also focused on state Medicaid programs as well as private insurers.

The company, on behalf of its clients, employs sophisticated, proprietary software tools and database queries to retrospectively analyze 100% of a payor’s claims data. HDI currently reviews annually more than $300 billion in paid claims.

After applying HMS’s revenue recognition methodology, HDI is projected to contribute approximately $85 million of revenue to HMS in 2012.

Bill Lucia, HMS’s Chief Executive Officer

“HDI is one of the few strategic opportunities we have seen with revenue growth rates and profitability comparable to our own,” said Bill Lucia, HMS’s Chief Executive Officer. “We believe this acquisition aligns perfectly with our long-term plan and is significantly positive for HMS and all our stakeholders,” added Lucia. “The HMS/HDI combination will create the nation’s premier provider of improper payment identification services for Federal, State, and commercial health benefit programs. We expect that HDI’s assets will accelerate our multi-year strategy of investing in new but related products and markets, and program integrity in particular. As the Medicare RAC with the highest recoveries and highest accuracy scores, HDI has best-in-class processes and technology, purpose-built for recovery auditing. Like HMS, HDI’s services are primarily offered on a contingency-fee basis. In addition to expanding our Medicare business, the acquisition of HDI will provide us with expertise we can leverage in our state Medicaid RAC business.”

“I’m delighted that HDI is joining HMS,” said Andrea Benko, the President and CEO and founder of HDI. “Together we can build on our proven track record in performance-based claims integrity and our excellent relationships with healthcare payers and the provider community. We look forward to the opportunity for our employees to become part of this fast growing company in healthcare claims integrity and cost containment.”

Deal Structure and Timing

HMS will pay a total of $400 million for HDI. The $400 million will consist of $384 million in cash paid at closing and approximately $16 million in consideration in the form of assumption of unvested options. The cash component will be financed in part through a $350 million bank term loan facility that will be established in connection with the closing of the acquisition, and in part through corporate cash. The assumed options will be adjusted as to exercise price and number of shares to convert them into options for HMS stock. In connection with the closing, the Company also plans to establish a $100 million bank revolving credit facility. The Company anticipates cash balances in excess of $100 million at the end of 2011. The acquisition will result in financial leverage of approximately 2.5 times debt to adjusted EBITDA at the end of 2011.

HDI will become a wholly owned subsidiary of HMS Holdings Corp. Andrea Benko will continue in her current role and will join the HMS executive team. HDI employs approximately 400 people located at their headquarters in Las Vegas, Nevada and facilities in California and Florida.

Sources: HMS HoldingsBoth Side of The Table


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