This document summarizes the history of healthcare IT company acquisitions and mergers involving McKesson. It details how McKesson grew through acquiring other companies like IBAX in 1994 and AMEX in 1995. AMEX had previously acquired Systems Associates Inc. and part of McAuto, combining them. McKesson then acquired AMEX's health systems group in 1995. As a result of these acquisitions, McKesson vaulted to the top position in annual revenue in the healthcare IT industry by 1999, a spot they have maintained since.

1. H.I.S.-tory
by Vince Ciotti
Episode #117:
McKesson
Part 6 = AMEX
© 2013 by H.I.S. Professionals, LLC, all rights reserved.

2. Recapitulation
• The acquisition of IBAX in 1994 greatly expanded (complicated?)
HBOC’s product line, as illustrated in the time line below:
• The second deal a year later added even more products, and
vaultedHBOC into the top of the HIS market in annual revenue.

3. HIS Vendor Revenue in the 1980s
• HBOC had grown well in the 1980 through indigenous products, but
as the chart below shows, they had a long way to go to catch up
with #1 SMS, and yet stay ahead of #3 AMEX and #4 IBAX…

4. If You Can’t Beat ‘Em…
• New CEO Charlie McCall was just warming up with the acquisition
of IBAX in 1994. A year later, he pulled a second coup by buying a
2nd major competitor with large revenue & client base: AMEX!
• And just what does a monster credit card company have to do
with the HIS industry? Well, like so many giants over HIS-tory,
they bought their way into the business figuring IT and healthcare
are an unbeatable combination to make money, just like:
– Revlon buying TDS
– McAuto buying CRASH
– Tymsharebuying MDS
– GE buying IDX
– AllTelbuying TDS
– Baxter buying DCC/JS Data
This 1989 ad sums it up well:

5. A Saint Among Vendors…
• AMEX started its foray into HIS acquiring Systems Associates, Inc.
(SAI), formed originally by John Weil in the 1970s (see episode
#20 at hispros.com). SAI’s“SAINT” system ran on Point Four minis
in about 300 small client hospitals, mostly under 100 beds.

6. Minnow Swallows Whale
• As this table from Sheldon
Dorenfest’s Guide attests,
McAuto 3rd in annual
revenue in the mid 1980s,
with $200M, right behind
leaders IBM and SMS.
• Look way down the list,
and you can barely make
out SAI in 15th place with a
paltry $33M in revenue.
• Sadly, McAuto only shrunk
over time, with their 1987
revenue down to $165M,
and Mac’s HSD division
was soon put up for sale.

7. Honestly…
• Compared to all of the denials
from IBAX about their ever
being on the market, McAuto
was amazingly “open” about
their status in this 1988 ad.
We’ve never seen such
openness in HIS since…
• Thanks to AMEX’sdeep
pockets, SAI bought McAuto’s
HSD division, on April 1, 1989
(that’s no April Fool’s joke!).
McAuto’s St. Louis operations
brought over a thousand
clients and 1,100 employees to
SAI, whose ≈300 FTEs stayed in
their Charlotte HQ offices.

8. Saint + and ++
• The combined firms did fairly well
over the next few years, although
McAuto’s confusing product line of
competing shared and mini-based
systems sold far less than SAI, who
morphed the Saint product into
SAINT/Plus, then SAINT Express in
the 90s, before the next big deal...

9. Second Mega-Merger
• AMEX formed an IT subsidiary entitle First Data Corporation
(FDC), and SAI and McAuto became their Health Systems Group.
• In June of 1995, HBOC did it’s second mega-merge in as many
years, acquiring FDC’s HSG to add to its burgeoning product line.
Like most HBOC acquisitions, it was technically a stock deal,
whereby AMEX received 2,000,000 shares of HBOC stock, at the
time, valued at about $200M. That’s twice what AMEX paid for
SAI &McAuto (so why are their annual fees so high today?).
• HSG became a separate subsidiary under HBOC VP James Gilbert.
Chuck Miller of McAuto ran day-to-day operations of the new
business entity, which had gradually moved its data center and
key employees from St. Louis to SAI’sCharlotte. Total # of clients
and FTEs had dropped precipitously by 1995 to “only” 500 out of
a peak of about 1,300 when SAI (with 300) bought McAuto (with
≈1,000). So now you know why McKesson has two major offices:
Charlotte with the SAI/McAuto products and HQ in Atlanta .

10. Irony…
• Walt Huff’s graciously sent
this picture scanned by his
wife (you don’t expect we
old folks to master new
technology do you?)
• It’s a wonderful tribute Bill
Child’s “Computers in
Healthcare” paid to the
founders of pioneering HIS
CEOs. How ironic for Chuck
Barlow, who acquired
CRASH & SHIS from OSF in
1970, to stand next to Walt,
whose HBOC had acquired
McAuto in return in 1995!

11. HIS Vendor Revenue by 1999
• The acquisitions of IBAX and AMEX vaulted HBOC to the top of
vendor annual revenue figures by 1999 as the chart below
illustrates, a position they have never given up since…

12. Next Week
• Charlie McCall consummated over a dozen more “minor” mergers
during the second half of the 1990s - we’ll cover only the biggees
next week. Here’s how HBOC’s product line had evolved to date: