Net Nuggets - Focus on Access Health Marketing, Inc.

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Focus on
Access Health Marketing (NASDAQ:ACCS):
Information and Healthcare Management Services
(... updated October 1, 1998)

Update 9/28/98: HBOC to acquire ACCS for stock. More details at bottom of this column.

Background and History of Access Health:
According to its 1997 10K, in the past twelve years, Access Health Marketing refocused from providing health care providers with marketing support to providing products and services to health plans and payors, designed as a value added member benefit. The Company also shifted its pricing model to a recurring per-member per-month fee basis. With providers caught between price competition and rising costs, demand increased for its cost-saving "care management" products and services.

In November 1996, it merged with Informed Access Systems, Inc. ("Informed Access") and acquired Clinical Reference Systems, Ltd. ("CRS"), which develops health information and patient education software programs. During the subsequent fiscal year it increased the number of enrolled members in its care management program from 14 to 23 million.

Access Health offers several lines of products and services aimed at improving the effiency of health care delivery.

Personal Health Advisor (TM) "PHA" provides members with clinical assessment and guidance to appropriate points of care in a managed care network, using what ACCS calls its Clinical Decision Architecture ("CDA"). CDA uses four databases and a patented process to assess a patient's condition, arrive at a care recommendation, and link a patient with a provider. PHA products include programs for management of acute care, disease and chronic conditions. They include various of member welcome, information and assistance services accessible through touch-tone phone and teleservice centers, and are developing web-based service solutions called PHA Online.

Recent Business and Financial News
As an industry, healthcare issues have been "vertically challenged" during 1998. Healthcare and healthcare support issues fell hard during the Summer of '98.

Humana (HUM - news) has been a major customer of ACCS. On May 28, Humana announced a merger plans with United Health Care (UNH - news). The merger raised a specter in many minds that UNH planned to "insource" the services HUM had been buying from ACCS. But, the merger was called off August 10. A Motley Fool story that day discussed the merger conference call and highlighted systemic troubles with earnings growth among for-profit health care providers competing with non-profits like "the Blues."

For-Stock Acquisition of InterQual
Despite the spring fall in the price of its shares, on July 1, Access closed its acquisition of InterQual for 4.54 million shares of ACCS stock. InterQual develops and provides clinical decision support for health care payers and providers, including 550 health plans, insurers and some 1,700 hospitals. ACCS forecast a one-time charge of $8 to $9 million in the second quarter for the acquisition. ACCS' share price around $25 put the value of InterQual at $113 million, almost 7 times 1997 revenues. The 8K discloses InterQual's revenues, earnings and margins for its licensing and support services:

InterQual	1995	1996	1997	1998 (6 mo)
Revenues (thousands)	$6,755	$10,733	$16,315	$10,356
Operating Income (thousands)	(888)	201	708	470

Third Quarter Results:
Merger costs of exactly $9 million were included in the results for the quarter ending June 30, 1998. A comparison that excluded extraordinary charges and credits in this and the prior year's 3rd quarter showed sales up 27% to $38 million (of which 23% were for higher-margin licensing and support) and operating income up over 40%. ACCS benefitted from investment income on its over $75 million in cash and securities available for sale.

Access Health (in millions, except per share figures)	3rd Q'r 97	3rd Q'r 98
Revenues	$30.5	$38.6
Operating Income x merger	7.1	10.1
Merger costs	0	9.0
Income per share (diluted)	0.24	0.05

Enrollment rose to 27.5 million, 39% over the 19.8 million members in June, 1997. ACCS announced a strategic relationship with MEDCAN Health Management of Toronto, a provider of integrated health management solutions, in which ACCS made a minority preferred stock investment.

On August 10, ACCS announced that Blue Cross Blue Shield (BCBS) of Michigan licensed its InterQual Clinical Decision Support Criteria at an annual cost of $1.2 million. The InterQual Criteria will be used as a screening tool to manage the healthcare of each of BCBS' 3.9 million members.

On September 2, ACCS announced that Harvard Pilgrim Health Care had taken a three-year license for InterQual's Level of Care Criteria products, for use in management of its 1.4 million members.

On September 28, ACCS announced a definitive agreement to be acquired by HBO & Company (Nasdaq: HBOC - news). HBOC delivers enterprisewide patient care, clinical, financial and strategic management software solutions, as well as networking technologies, electronic commerce, outsourcing and other services to healthcare organizations throughout the world. To close during fourth quarter 1998, the deal would have ACCS shareholders receive HBOC common, in a tax-free transaction, with the exchange ratio to be determined by averaging the closing HBOC stock price for a period ending shortly before Access Health's stockholder meeting. According to the press release, if the HBOC average price during this pricing period is $30.00 or below, Access Health stockholders will receive 1.45 HBOC shares for each Access Health share. If the price is greater than $30.00 per share, Access Health stockholders will receive shares of HBOC stock to equal a value of $43.50 per Access Health share. Other recent acquisitions by HBOC include US Servis, IMNET Systems, and WebMD, Inc. Merger discussions between HBOC and McKesson ended in July.

Access Health is the subject of a message thread on Silicon Investor, and another message thread at Yahoo! Financial. Check there for breaking news and views. See the right side gutter for links.

This article will be archived at nnarc-accs.html and may be edited in the future. Check in with Net Nuggets from time to time. The information contained herein is believed to come from reliable sources, but no warranty of accuracy is expressed or implied. The author owns shares of Access Health at this time.

Doug Simpson
doug.simpson@snet.net
8/28/98

Access Health
...Home Page
...Company Background
... Product Overview

...Executive Profiles
...Financial Results: 3rd Q '98
...MD&A (3rd Q'98 10Q)
...PR Archive

Investor Relations:
Matt Plavan
Investor Relations
(303) 404-1949
mplavan@access-health.com

4-year chart
(Ask Research)

InterQual
...Home Page
...PR Archive

Access Health at Yahoo Finance:
...Profile
...News
...Messages
...Insider Trades

FreeEDGAR:
...'97 Annual Report
...Interqual Acquisition S-4

Silicon Investor Discussion Thread:
Access Health (NASDAQ: ACCS)

Customers:
Humana
Harvard Pilgrim

HBO & Company
Profile at Yahoo Finance
HBO News at Yahoo
Silicon Investor Thread

Background Reading:

"Doctor Stock":
Jim Clark's Prescription for Healthcare:
HMO + TCP = IPO
Wired 6.10 p. 122

Stephen King's
Bag of Bones
$16.80
Amazon.com