Inside SAIC's $500M health IT acquisition

There are several things Science Applications International Corp.’s acquisition of maxIT Healthcare is not.

It is neither a desperation move to add revenue nor a push deeper into the trendy health care market. It’s not about diversification as more traditional markets shrink.

No, it’s actually part of a strategy with roots back to SAIC’s original mission.

“We’ve always prided ourselves on taking on problems of national significance and finding solutions; health care is no different,” said Steve Comber, general manager of SAIC’s health solutions business.

Traditionally, problems of national significance fell in the areas of defense and intelligence work for SAIC. But several years the company began formulating a strategy to broaden its health care business because of critical national needs in that area.

The focus of the company’s strategy zeroed in on electronic health records. Last year, SAIC acquired Vitalize Consulting Solutions as step one. Step two is the planned $493 million acquisition of maxIT, another provider of electronic health record implementation and optimization services and solutions. The maxIT deal is expected to close in August.

With the addition of maxIT’s 1,300 employees, SAIC’s health business will grow to about 6,000 employees. The company doesn’t break out its revenue, but Comber said percentage-wise it is growing by double digits.

But SAIC’s strategy doesn’t end with simply adding new capabilities in the electronic health record field, he said.

“The electronic health record is the heart of how we view the market but it isn’t ERH unto itself. We view it as a system resource,” he said.

Electronic health records are a data platform that will bring more analytics and business intelligence capabilities to health care providers, said Clement Chen, SAIC senior vice president and senior strategist.

“EHRs are the landing pad clinical data initially, but over time the life sciences aspects of the equation will flow through EHRs as well,” he said.

Today, the means aiding in the formulation of new drugs but “in the future it’ll impact the delivery of care,” Chen added.

With the addition of Vitalize last year and now maxIT, SAIC says it has built the nation’s largest commercial consulting practice in EHR implementation and optimization.

But adding commercial capabilities also was critical to SAIC government health care strategy, the executive said.

For more than 20 years, SAIC has supported the Defense Department’s Military Health System. It also supports the Veterans Affairs Department. Currently, the company is working on pilot programs to build a unified health record.

“SAIC’s move into the commercial ERH environment is very much tied to our ability to continue to support military health, VA and other government agencies,” Comber said. “As these agencies develop their strategies, they will want the best of breed and they are going look at commercial applications.”

At the Coast Guard, for example, SAIC is working with Epic Systems, a provider of commercial electronic health record systems, to implement a new ERH system there.

Understanding commercial health record systems also will be important for work at agencies such as the Centers for Disease Control and Prevention. “To carry out their biosurveillance mission, they have to tie into hospitals around the country and those systems are using commercial EHRs,” Comber said.

The acquisitions of Vitalize and maxIT are as much about the evolution of the health care market in general as they are about bringing commercial technology to the government, the executives said.

“This was not a standalone move; the two markets are coming together,” Comber said. “The challenges aren’t federal or commercial challenges. They are health challenges.”

The challenges include improve access to care, the quality of care and getting better information to doctors, nurses and other health care providers, he said.

The timing of the deal, just two weeks after the Supreme Court upheld President Obama’s health care reform law, was a just a coincidence, the executives said.

“The momentum for heath IT has been taking shape over a number of years,” Chen said, describing the health care industry as information intensive but not well adapted at leveraging IT.

“Our timeline was independent of the Supreme Court ruling but it is icing on the cake,” he said. “With the reaffirmation of the health care act, it furthers the laser-like focus on the application of IT.”

The cost equation of health care is unsustainable, Chen said. “Improvement has to happen regardless of what is happening on Capitol Hill or in government policy.”