SAIC trains its focus on health IT market

July 22, 2012

McLean-based Science Applications International Corp. plans to add more than 1,300 employees to its health business with its planned acquisition of Westfield, Ind.-based MaxIT Healthcare Holdings, announced last week.

The deal marks the latest contractor move into health information technology and follows the Supreme Court’s recent decision allowing President Obama’s health-care law to move forward. Contractors are aggressively buying up health IT businesses in hopes of positioning themselves to win work modernizing health systems and records at the state and federal level and at commercial health-care providers.

With its purchase, SAIC’s health-solutions business unit grows to about 6,000 employees. The company plans to combine MaxIT Healthcare, a consulting business that specializes in setting up electronic health record systems and IT strategy and planning, with health-care IT company Vitalize Consulting Solutions, which it bought less than a year ago.

Defense firms in particular have looked to health IT as a way to diversify and remake their businesses to prepare for a downturn in military spending.

Fairfax County-based ManTech International, for instance, has been known for providing logistics and maintenance services on the battlefield, but entered the health information-technology market in January when it bought Herndon-based Evolvent Technologies, which integrates medical information across different platforms.

The purchase, while relatively small, “marks a very stark shift and is indicative of where a lot of these companies are going or trying to go,” said Mitchell Martin, a principal at the McLean Group.

In one of the bigger recent deals, Falls Church-based General Dynamics bought Arlington-based health-care IT business Vangent for nearly $1 billion last year.

SAIC officials resisted the comparison, arguing that the company has been working in federal health care for more than two decades.

For some contractors, health IT “tends to be more a hedge against weakness in their core market,” said Clement Chen, senior vice president and chief health strategist at SAIC. “For us, commercial health care . . . is a mainline identity that’s part of our DNA.”

For those who hope to compete, the draw is clear. Gerard J. DeMuro, executive vice president of General Dynamics’ information systems and technology group, said the company is expecting the country’s aging demographics as well as legislation backing electronic health records to bring continued growth.

Amanda White, an analyst for health and social services at Herndon-based Deltek, which analyzes the government contracting market, said Obama’s health-care law also has generated opportunities to consult on and build health insurance exchanges for states.

SAIC officials expect military and veteran health organizations to continue to spend dollars modernizing their health records, despite shrinking government budgets.

“Everyone has been chasing the health IT market,” said Michael S. Lewis, director of equity research at Lazard Capital Markets. “It reminds me of the cybersecurity market three or four years ago.”

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