Brightree buys CAU

Thursday, August 5, 2010

LAWRENCEVILLE, Ga. -- Brightree picked up 300 new customers last week when it acquired Computer Applications Unlimited (CAU), but don't expect this deal to kick off an acquisition binge for the software big wig.

"We've had opportunities to acquire some of the smaller players, but this is the one we wanted," said Brightree CEO Dave Cormack. "Their customer base is right in the sweet spot of our customer base."

That sweet spot: Provides who generate about $5 million in annual revenue. Prior to the acquisition, Brightree had 1,250 HME customers.

The deal is not a complete surprise. Earlier this year, Brightree reported that it planned to invest $50 million over the next four years on product enhancements and, possibly, acquisitions.

Key to the CAU acquisition was not only the size of CAU's customers but also their level of business expertise, Cormack said.

"We're not just buying companies," he said. "It has to be a case that there is a quality customer base. With some of these (software) companies that serve providers in the $0 to $3 million range, I'd be concerned about what is happening with competitive bidding."

Mid-sized to large companies--those generating $5 million in annual revenue or more--have the economies of scale and a better chance than smaller companies to survive competitive bidding and other reimbursement cuts, he said.

In fact, as smaller HME companies go out of business, some industry watchers expect the software companies that service these providers to also fail.

"I would think that a lot of the smaller players would disappear," said Spencer Kay, CEO of Fastrack, a software company that services 450 HME customers, many with annual revenues of $10 million or more. "I see a lot of the customers that we are taking away from these guys, and then you've got so many smaller providers going out of business. The combination is going to hurt the software companies focused on the low end."

Maybe but not necessarily, said technology consultant Doug Stallbaumer, a partner with the Argosy Group. Smaller software companies will survive if they find a way to deliver value to providers, such as a better way to verify a patient's insurance.

"There's still money out there--things still need to be billed," he said. "They have to find a new way to market, a new way to prosper. They can't become stagnant. They have to evolve because if you don't you are going to be history."

As part of the CAU acquisition, Brightree has entered into a three-year lease for the existing CAU facility in Harrisburg, Pa. Brightree has also retained about 20 CAU employees, Cormack said.

"We're not going to mothball the (CAU) product," he said.  "We're going to keep the same level of support, and we are not going to force people off these platforms. Obviously, over time, we'll give them the opportunity to move over to Brightree."