SaaS has sizzle in digital health media M&A

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WebMD's non-sale may be the story of the day in digital health media, but the buzz in the space is all around software-as-a-service firms, says media banker Berkery Noyes, which represented Healthx, Inc. in its majority recapitalization by a private equity firm last week.

Indianapolis-based Healthx offers cloud-based provision of portals to 12.8 million health plan members and 425,000 physicians, giving them an online repository for real-time benefit claims, plan design and eligibility data, among other things. Like other software-as-a-service (or SaaS) firms, its product is updated continuously, with learnings from one client benefiting many.

“SaaS providers are constantly updating their systems to reflect knowledge learned from one customer and making it available for all customers,” said Berkery Noyes managing director Jon Krieger. “So their services are constantly updated for regulatory compliance, health insurer benefit and plan design information, which evolves very rapidly. You're basically putting your system in the hands of someone who focuses on this little niche and they've created a platform that learns.”

SaaS firms also offer affordability to cash-strapped practices and hospitals, with small implementation fees and monthly recurring costs in place of the big upfront lump-sum payments of the traditional license-and-maintenance model.

Driving the M&A frenzy around these firms is a massive proliferation of electronic data due, in part, to adoption of electronic medical records and picture archiving and communication systems.   

Another selling point for Healthx, said Krieger, is that instead of a custom-built system requiring months to design and implement, customers buy into an existing system that takes 60-90 days to put in place.

“Their platform is flexible, open and modular,” says Krieger. “It's very cost-efficient and flexible technology.”
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