Change Healthcare and Relay Health displayed new products at the 2016 HFMA Annual National Institute in Las Vegas. (Photo: Henry Powderly)
Healthcare giant McKesson Corp. on Tuesday said it will spin off its Technology Solutions unit and merge it with revenue cycle company Change Healthcare, creating a yet-to-be named healthcare services firm that could generate more than $150 million in savings by its second year of operations.
Overall, the companies saind the combined company will pull in $3.4 billion in annual revenue.
Earlier this month The Wall Street Journal said McKesson was considering separating its information-technology unit as it dealt with pricing pressure in its core drug-distribution business.
The new company will be able to offer health plans and providers a comprehensive suite of end-to-end financial and payment solutions and technologies, according to a McKesson statement.
"The combination of these two entities comes at a transformational time in U.S. healthcare," said Neil de Crescenzo, president and CEO of Change Healthcare, in a statement. "Together we will create significant value by bringing together complementary capabilities from both organizations to deliver innovative new solutions for customers, create opportunities for team members at a leading healthcare technology company, and drive advancements that address the three critical areas of cost, quality and outcomes across the healthcare sector."
A name has yet to be released for the new company. It is being created with $3.4 billion in combined total annual revenues for the fiscal year ended March 31, 2016, McKesson said.
Change Healthcare, formerly Emdeon, is majority owned by Blackstone Group.
McKesson and Change Healthcare will own approximately 70 percent and 30 percent of the new company, respectively, and will receive cash proceeds of approximately $1.25 billion and $1.75 billion, respectively, following the close of the transaction, McKesson said.
On Monday, McKesson launched RelayAssurance Appeals Assist, a new automation tool that company executives say gives providers a way to identify, create, file and track appeals for denied claims.