Now that its merger with the technology division of San Francisco-based McKesson Corp. (NYSE: MCK) has closed, Nashville-based health IT giant Change Healthcare may be moving its headquarters to Atlanta.
The company, known as Emdeon prior to a 2015 rebranding, has yet to make a decision on a headquarters location, a spokeswoman told the Atlanta Business Chronicle,a Na shville Business Journal sister publication. But sources say it could take between 150,000 and 200,000 square feet of office space in North Fulton County.
Change could keep its headquarters in Nashville. The company has toured buildings here, real estate sources said.
Change's merger with McKesson's division, announced last summer, closed March 2, and creates a new company with combined annual revenue of $3.4 billion and 15,000 employees. The new firm, which retains the Change Healthcare name, provides software and analytics, network solutions and technology-enabled services.
Change, majority-owned by private equity giant The Blackstone Group L.P., is Nashville’s largest health IT company, according to NBJ research. At the time of the merger announcement, Change had 7,000 employees, with more than 900 in Nashville and McKesson Technology Solutions (MTS) had 11,000, according to The Tennessean.
For Change, a concentrated investment in Atlanta would make sense because of access to McKesson talent, tech-focused universities and a vibrant health IT industry cluster.
“The scale and depth of the IT labor pool in Atlanta — both in health care and non-health care — is more impressive than in Nashville,” said Chris Kane, partner at consulting firm DHG Healthcare.
McKesson Technology Solutions ranked at No. 4 last year with $3.1 billion in annual revenue, according to Health Informatics 100. Change ranked No. 11, with $1.47 billion in revenue.
The technology-enabled health services space is crowded, Kane said.
“Over the last 15 years, the landscape has been littered with failed startups directed at improving health care,” he said. “The McKesson brand affords credibility in information technology generally, and in health-care sectors specifically.”
Change focuses on predictive analytics that can improve sales and profit margin for medical providers, payers and pharmacies, Kane said.
“The health care industry is drowning in data, but starved for insights,” he said. “With 18 percent of GDP devoted to health care, seemingly small increases in efficiency create enormous value.”
Change, which has an office in Buckhead and a call center in Alpharetta, could locate its new headquarters near McKesson’s 400,000-square-foot Alpharetta office.
Alpharetta — which bills itself as the Technology City of the South — accounts for a quarter of metro Atlanta’s top 25 tech employers. Indeed, some of tech’s biggest names — Fiserv, Hewlett-Packard, Microsoft and Verizon — have large operations in the submarket.
Atlanta, in general, is attracting a slew of Fortune 500 IT hubs and innovation centers, drawn by the region’s abundant and relatively inexpensive tech workforce. Global transportation access makes the city attractive to large corporations.
Last year, Anthem Inc. (NYSE: ANTM) confirmed plans to locate a more than 1,000-employee technology center in midtown Atlanta. Kaiser Permanente also opened a $20 million Atlanta technology operation to provide IT services around electronic medical record systems, patient medical records, cybersecurity, mobile, consumer technologies and back-office infrastructure.
General Electric Co. (NYSE: GE) and Honeywell International Inc. (NYSE: HON) also announced plans last year to open IT centers that would collectively employ more than 1,100.
McKesson’s Technology Solutions is the software development unit of McKesson. In 1999, McKesson entered the health care technology space by acquiring Atlanta-based HBO & Co. for $14.5 billion. Shortly after the acquisition, touted as one of Atlanta’s most successful technology deals ever, McKesson auditors discovered revenue booking problems that led to earnings restatements and class-action lawsuits.
Morningstar analysts said McKesson’s health care IT business never fit the firm’s overall strategy and was an impaired asset from the beginning as a result of an accounting fraud, Fortune reported in June. “Management has not made any material investments within this business over the past several years, and to our understanding, the technology was two to three generations behind other major HCIT (health care IT) players,” according to the analysts.
