(Reuters) - Inovalon Holdings Inc (INOV.O) said on Wednesday it would buy privately held Ability Network for $1.2 billion, as the healthcare data analytics company seeks to reduce its dependence on insurers and add more clients.
The company has been expanding its customer-base to include healthcare providers, and the deal could help it add acute care facilities such as hospices, emergency rooms, hospitals and ambulatory centers.
Inovalon will get access to the 44,000 healthcare facilities in which Ability’s cloud-based software platform provides management and other administrative services.
“We grow significantly in pharma, life sciences, and have been decreasing the dependency on just the payer space as a result,” Chief Executive Officer Keith Dunleavy said on a conference call.
Bowie, Maryland-based Inovalon’s technology uses data about medical incidents stored in its registry and analyzes them using predictive algorithms to suggest health conditions.
The deal comes at a time when various players in the healthcare space have been looking at deals and mergers to cut soaring healthcare costs.
“As we look to combine the capabilities of the company on a pro-forma basis, we would be about half payer, 34 percent provider, and 11 percent in pharma,” Dunleavy said, adding that a small percent of the company’s capabilities would be focused on medical devices.
The transaction is comprised of $1.1 billion cash and $100 million in restricted Inovalon stock. The company, which expects to close the deal next month, is also using funds from a term loan.
Morgan Stanley Senior Funding Inc will provide the financing for the deal, the company said.
Inovalon’s shares were up 1 percent at $12.52.
Reporting by Arjun Panchadar and Manas Mishra in Bengaluru; Editing by Bernard Orr