Transactions

June 2005

HSS Acquired By UnitedHealth Group

Company Description

HSS, Inc. develops solutions that streamline the coding, regulatory and reimbursement processes for provider and payer organizations. HSS’ experience with providers and payers enables it to provide the tools and methodologies for organizations to evaluate financial and operational performance, target areas of performance improvement and balance risk-assumption with profit opportunities. These solutions combine technology with HSS’ nationally recognized healthcare expertise. HSS solutions are used by more than 900 hospitals and 160 managed-care organizations. HSS products are also embedded in health information management applications offered by 27 of the industry’s major software vendors.

 

Objectives

HSS is a highly-specialized healthcare content and software company and is committed to helping the healthcare industry improve techniques for managing the finance and delivery of medical care. In an effort to enhance its long-term position in the Coding, Compliance & Reimbursement Management market (CCRM) market, HSS retained TripleTree as an advisor to evaluate various strategic growth alternatives.

TripleTree has performed extensive research in the healthcare revenue cycle – the processes and enabling technologies that coordinate the collection of payments for healthcare services. These processes span a broad range of functional activities, from the initial registration of new patients to the processing of insurance claims and final payment to the healthcare provider.

TripleTree research revealed that there are very few “end-to-end” players in the revenue cycle sector, but there are more than 80 companies offering narrowly-focused point solutions aimed at a particular segment of the market.

After an extensive analysis and understanding of HSS’ market niche, TripleTree presented HSS with two viable strategic development and growth opportunities:

- Recapitalize the business with an outside investor and use HSS as the platform for a build-out strategy focused on acquiring a few key target companies; or

- Consider an outright sale to a strategic partner. The recommended partner would not necessarily need to provide the same core business offerings as HSS, but would be complementary in that it would present an opportunity to build a market leading solution.

As a market leader with a very unique business model and distribution strategy, it was evident that HSS would be a highly attractive acquisition for a wide range of market players. However, it was important that HSS not enter into an auction process as the business was experiencing impressive growth and management was focusing on growth in revenue and profits to ensure that viable exits would exist. Although plans were underway, an exiting timetable had not been set.

Results

Upon TripleTree’s recommendation, HSS decided to pursue a strategic buyer: Ingenix, a subsidiary of UnitedHealth Group.

As a part of its ongoing research, TripleTree spent significant time with UHG/Ingenix and gained a solid understanding of the unique value proposition HSS represented to Ingenix. In particular, TripleTree was able to articulate for both HSS and Ingenix that while the companies were extremely complementary, there was very limited customer overlap. As a result, there existed a solid basis for leveraging content and services across respective customer bases to drive substantial revenue growth.

One of the industry’s leading health information companies, Ingenix provides products and services to a diverse customer base within the healthcare community. Organizations rely on Ingenix’s innovative technology to improve the delivery and operations of their business.

Ingenix helps employers and their employees understand and manage escalating healthcare costs; assists pharmaceutical companies to bring drugs to the market more quickly and safely; improves the quality of care by advancing the best forms of treatment; invents tools that help health plans manage their physician networks; and educates physicians about clinical care.

TripleTree’s extensive understanding of the revenue cycle market allowed the firm to articulate how HSS products were woven into a complex and fragmented marketplace of complementary software and service vendors on both the payer and provider sides of the revenue cycle workflow.

This, along with HSS’ stellar strategic, operational and financial profile, motivated Ingenix to make a very compelling offer to the shareholders of HSS.

As exclusive financial advisor to HSS:

- TripleTree worked with HSS in preparing detailed materials that verified the Company’s unique business/financial model and its impact to Ingenix going forward.

- TripleTree was persistent in managing a complex negotiating process and ultimately in driving the process to closure.

- TripleTree’s engagement team consisted of its most senior professionals and its network of senior advisors who were exceptionally committed to the HSS engagement and were frequently responsible for finding creative solutions to issues that would have otherwise made it difficult to close the transaction.