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May
6

Xerox’ acquisition of Stratacare and Bunch; done deal

Minutes ago, Xerox officially announced it is acquiring ISG Holdings, parent of Stratacare and Bunch, for $225 million.

In its announcement, Xerox claimed that the company is now the “leading provider” of work comp bill review services; that looks like a reasonable claim as the combined entity processes around 23 million bills via outsourced bill review and SaaS (where the payer does the actual processing using Xerox’ application).  There’s no question adding Stratacare to the company’s current CompIQ platform makes it a much more formidable competitor.

It also further consolidates a business in dire need of consolidation.  There are now four significant players; mcmc, Medata, Mitchell, and Xerox.  (what’s with all the “M” names??)

(I don’t include Coventry in the mix as their BR 4.0 application is rapidly approaching obsolescence.)

As I noted last week, “While Xerox will now own two platforms, I’m thinking we will see current CompIQ customers converted to Stratacare.  CompIQ has not been having all that much success of late, so this may well rejuvenate what was becoming an also-ran in the bill review space.” I’d add that it makes no sense for X to continue to support two applications, however they will have to do so until their contractual obligations expire, and perhaps a bit longer if customers demands are firm enough.

Xerox is reaching out to customers today, and my educated guess is they are discussing:

  • if and when customers can expect to be converted to one or the other platforms;
  • other benefits that X can bring to the party, such as document management and off-shore processing;
  • staffing and account service plans, although it is likely too early to say anything definitive, so expect something along the lines of “business as usual”.

What I find interesting about this is Xerox’ decision to not only stay in the work comp service business, but to invest a couple hundred million now, and likely millions more in transition costs.  It makes sense; comp is an industry crying out for automation and streamlining of business processes, which is precisely what Xerox does.  There’s a lot of opportunity, especially when comparing work comp to other health-related businesses such as insurance, Medicaid, and Medicare.

Xerox can take much of what it learned there and use it to strip cost and inefficiencies out of work comp – and we all know there’s a LOT of both.  We’ll see how this develops, and if  they really make a push in this sector or are content to just muddle along.  I’d bet they make the push…

I’d be remiss if I didn’t touch on Bunch.  What used to be a leading light in the managed care space has dimmed appreciably.  The purchase by ISG some years back was puzzling, and the rationale didn’t get any clearer as time went on.  Bunch has lost business in its target market and failed to replace those lost customers with new ones.  I just don’t get why they bought Bunch; there may well have been some sound strategic reason, but the follow-thru was noticeably absent.

What does this mean for you?

Wait and see.  The next couple of months will tell the tale; as always actions are credible, words are (much) less so.


4 thoughts on “Xerox’ acquisition of Stratacare and Bunch; done deal”

  1. I agree that the Xerox purchase of ISG is part of a larger trend. Larger organizations like Xerox and Maximus bring several needed strengths to the workers’ comp market including experience in both the broader health marketplace and in newer technologies. Perhaps just as important, these big folks are adept at working the halls of government to make big sales. In a recent article in Work Comp World, industry expert David DePaolo observed that this is part of trend of “big government (relying) on big business to resolve big issues.” For more on Maximus and workers’ comp, go to:
    http://www.mobilehealthmarketplace.com/maximus-brings-needed-technology-skills-to-workers-comp/

  2. On another acquisition note, what can you say or have you heard about Apax buying genex services from stone point?

  3. In the light of our current economy, does the term “outsource” indicate utilizing resources outside of our country, resulting in job losses to Americans?

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Joe Paduda is the principal of Health Strategy Associates

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