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HCIA, Datis conclude acquisition talks


HCIA Inc. concluded negotiations yesterday to acquire a California health care information company for $14.25 million in cash, part of a strategy by the Baltimore-based firm to increase its market share in the fast-growing industry of data collection for hospitals and others.

HCIA's purchase of the privately held Datis Corp. is expected to close at the end of this month, after a vote by Datis shareholders. Roughly 70 percent of the San Mateo, Calif., company's shareholders have already approved the pending sale, HCIA said.

The Datis purchase represents the first major acquisition by HCIA since it sold one quarter of the company to the public with a $24.5 million initial offering in February. The balance of the company is controlled by Ambac Indemnity Corp., a New York-based municipal bond insurer.

HCIA intends to finance the purchase with proceeds from the stock offering, said Jean Chenoweth, an HCIA vice president.

"The acquisition increases HCIA's share of the health care provider market, and since many of the operational components of the business will be consolidated, we expect to realize immediate synergies from the combination," said George D. Pillary, HCIA's chairman and chief executive.

Like HCIA, Datis specializes in analysis, databases and computer software systems to hospitals and hospital systems. The company has contracts with hospital associations in California, Georgia, Tennessee and Virginia. In all, it has links with more than 1,000 hospitals in 13 states.

For HCIA, Datis is expected to provide an entrance into markets such as Tennessee, Virginia and Georgia, areas that the 10-year-old company hasn't penetrated.

The only overlap between the two is in California, where HCIA already maintains an office.

HCIA, which said it analyzes medical data and manages the cost and delivery of health care for 7,000 customers nationwide, counts the Johns Hopkins Hospital, Greater Baltimore Medical Center, CIGNA Corp. and California-based biotechnology firm Amgen Inc. among its clients.

HCIA hopes to increase the level of service Datis clients now receive, which is expected to generate additional revenues for the company, Ms. Chenoweth said.

The Datis purchase will contribute 2 cents per share to HCIA's earnings per share this year, and 10 cents per share in 1996, according to analysts' expectations.

In 1994, HCIA generated net income of $1.02 million, 55 cents per share, on sales of $30.7 million. The earnings figure was a nearly fivefold increase from the year before.

Datis, by contrast, had a net loss of $900,000 on revenues of $9 million in its fiscal year ended May 31, 1994. At least a portion of Datis' net loss was attributed to business it lost to HCIA, however.

The purchase will add 75 employees to HCIA, which now has roughly 350 employees in Baltimore, Michigan, Britain, South Carolina and California.

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