A recent report in The Wall Street Journal raises the possibility of a sale of the company’s health IT unit Technology Solutions in order to focus on its business as a drug and medical supply distributor, an unnamed source familiar with the matter told WSJ reporters.
Earlier this year, McKesson offload a sizeable portion of its ambulatory EHR technology to EHR vendor e-MDs, increasing the latter’s number of ambulatory EHR providers to 55,000. The announcement specifically mentioned six products as part of its expanded health IT lineup McKesson Practice Choice, Medisoft, Medisoft Clinical, Lytec, Lytec MD, and Practice Partner.
A sale, however, isn’t an eventuality. The report indicates that the end result could be a merger or no activity whatsoever. Compared to the company’s core drug-distribution business which had sales of $188 billion, its health IT division saw $2.9 billion in sales in its most recent fiscal year ending in March, so it is that McKesson Corporation is contemplating an exit:
McKesson has already pared the unit in recent years, chipping away at revenue but also boosting its profit margins. Chief Financial Officer James Beer told analysts last year that McKesson is “prepared to re-look at the portfolio on a continuing basis to figure out what fits and what doesn’t fit.”
The report includes a valuation of Technology Solutions at more than $5 billion. The sale would likewise mark an unsuccessful acquisition of a software firm to stand out in the health IT marketplace.
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Recently, Black Book named two McKesson as the highest rated EHR vendor the ambulatory specialties neurosurgery and oncology & hematology and at the same time noting the growing interest in specialty-specific EHR replacement.
“The finding is that specialty-driven, not necessary specialty-specific EHRs are on the fast track for specialist system replacements,” Managing Partner Doug Brown said. “Notably, well-constructed multi-specialty EHRs with strong market presence have accommodated dozens of specialties through flexible functioning and incorporated plugins.”
One year to the day ago, Black Book recognized McKesson as a leader in EHH, practice management, and revenue cycle management industry leader in 2015 but not more recently in 2016.
Also back in March, McKesson revealed plans for consolidation and expansion in Texas, the state having invested $9.75 million via a Texas Enterprise Fund grant to entice McKesson to ensure its role as a major employer in the area.
“I am proud that McKesson has chosen to expand their operations in the Lone Star State and create nearly a thousand new jobs,” said Governor Greg Abbott. “This expansion is yet another testament to the power of Texas’ low-tax, low-regulation economic climate that continues to attract industry leaders, innovators, and job creators from around the globe. I am confident McKesson’s leadership in the pharmaceutical and healthcare technology sectors will serve as an invaluable contribution to the Texas economy.”
The company purchased a 525,000 square foot office building office to expand, a facility that was reported to include work on health IT.
Yet it was at the time that the company revealed that it would be cutting 1600 jobs, 4 percent of its US workforce, in response to fluctuation in generic drug pricing and consolidation affecting its core business, The Wall Street Journal reported at the time. The move was expected to cost the company more than $300 million in severance and payments to employees but save the company north of $170 million before taxes.
Date: June 08, 2016