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Aetna and Medicity: Creating a Health Insurer-HIE Technology Connection

December 7, 2010
by Mark Hagland
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Interview: James K. ‘Kipp’ Lassetter, M.D., Chairman and CEO, Medicity

Coming less than four months after the Eden Prairie, Minn.-based Ingenix announced its acquisition of the San Jose, Calif.-based Axolotl (with that acquisition quickly following Ingenix’s acquisitions of Picis and Executive Health Resources), on Tuesday, executives at the Hartford, Conn.-based Aetna and the Salt Lake City-based Medicity announced plans for the health insurer to acquire the healthcare IT firm, which specializes in health information exchange (HIE) technology.

The two companies have valued the purchase price at approximately $500 million, with Aetna expecting to finance the acquisition with available resources.

In making the announcement, Mark T. Bertolini, Aetna’s CEO and president said, “This acquisition will enable Aetna to offer a set of convenient, easy-to-access technology solutions for physicians, hospitals, and other healthcare providers. That in turn can help improve the quality and efficiency of patient care. Strategically, we believe this acquisition will enhance Aetna’s capabilities and accelerate our growth in the health information technology and health information exchange space,” he added.

Medicity’s technology reaches more than 760 hospitals, 125,000 physician users, and 250,000 end-users, via about 118 customer organizations, and the company has the largest installed base of enterprise HIE systems for hospitals, physicians, and other providers. It has just under 200 employees.

Immediately following the announcement, HCI Editor-in-Chief Mark Hagland interviewed James K. ‘Kipp’ Lassetter, M.D., Medicity’s chairman and CEO, regarding his perspectives on the transaction, and his outlook on the industry going forward. Below are excerpts from that interview.

Healthcare Informatics: This is an interesting business combination, and a bit unusual in certain ways, don’t you think?

James K. ‘Kipp’ Lassetter, M.D.: Actually, when you see what’s going on in terms of the convergence of clinical and administrative information in healthcare, it’s more natural than may seem so on the surface. And I really believe that the execution of healthcare reform will involve the convergence of clinical and administrative data on the same platform; and historically, as you know, those have been very isolated worlds. And when you look at the changes in payment around ACOs [accountable care organizations, as provided for in the federal healthcare reform legislation passed in March], it’s impossible to believe you could create an ACO without a fully deployed HIE platform. And what we’re really doing is building something like what Kaiser has done, but without that same organizational structure.

There are plenty of downsides of the Kaiser model, and the biggest one is that it doesn’t scale very well. But if you give up the idea of implementing an ownership-based model, and work towards connecting all the providers in a community, leveraging an affiliation with a health plan, then the model looks very different.

HCI: Will your ownership by Aetna create any constraint on business for you?