Need for scale drives consolidation among software companies

ATLANTA - Fresh off his acquisition of MedAct Software, Brightree President and CEO Dave Cormack says the pace of consolidation among software companies is only going to increase.

Brightree's acquisition of MedAct in November is the company's second this year and its fifth since 2008. The other acquisition this year: CareAnywhere, a software company serving home health and hospice providers.

“It's all about interoperability,” Cormack said. “We're talking to some of the managed care plans, and they're looking for transparency down the supply chain. It's a brave new world, and you need to have scale to handle this kind of interoperability.”

Brightree gains 330 customers with its acquisition of McKinney, Texas-based MedAct. Gregg Timmons, CEO of MedAct, will join Brightree as executive vice president, MedAct Division.

Another big change to health care that's putting a premium on scale: the transition to ICD-10, a much larger set of codes that are more specific and diagnosis-driven. Brightree plans to spend $1.5 million to bring its software up to speed with ICD-10, which goes into effect Oct. 1, 2014.

“It's a major investment for a software company,” Cormack said.

The need for scale is a big reason why MedAct hitched its wagon to Brightree, says Timmons.

“Our customers need to have access to these capabilities,” he said. “It's not like MedAct couldn't do it over time, but the pace of innovation had to pick up. They have a great roadmap for going forward.”

Brightree will continue to provide development and customer service support for MedAct's software, and even update it for ICD-10, Cormack says.

“We'll continue to give customers choice, as long as the market demands it,” he said. “But our flagship products will continue to be on the Brightree platform.”

Other deals this year by software companies include Mediware's acquisition of Fastrack and Definitive Homecare Solutions/CPR+.

“Health care is still a fairly fragmented market,” Timmons said. “In other markets like retail and oil and gas, they've already gone through supply chain integration and they're using technology to drive efficiencies.”