Case and investors buy services firm

ConnectYourCare helps with directed savings

October 06, 2005|By M. WILLIAM SALGANIK | M. WILLIAM SALGANIK,SUN REPORTER

ConnectYourCare Inc., a Timonium startup that provides services to manage health savings accounts, is being acquired by Revolution Health Group, an investment and operating company launched recently by America Online founder Steve Case, the two companies announced yesterday.

Founded in July, Washington-based Revolution Health brings together a number of high-profile investors and board members. Besides Case, investor-directors include former Secretary of State Colin L. Powell and two ousted CEOs: Franklin D. Raines of Fannie Mae and Carly Fiorina, of Hewlett-Packard. It announced six other deals yesterday as well.

All the acquisitions are in the area of consumer-directed health care - a rapidly growing form of health insurance that combines high-deductible insurance policies with tax-sheltered savings accounts to pay medical expenses.

Consumer-directed plans began to gain popularity about five years ago, and were generally offered by niche players, said Steve Davis, managing editor of Inside Consumer-Directed Care, an industry newsletter. As the small niche companies "gained traction," Davis said, they attracted the attention of larger health insurers, setting off a number of acquisitions.

Within the past year, Davis said, the two largest consumer-directed specialty companies have been gobbled up by the two largest general health insurers - Definity Health by UnitedHealth Group and Lumenos by WellPoint Inc.

Overall, Davis said, about 3.5 million people are enrolled in consumer-directed plans now, but his publication projects that the number will triple next year.

Revolution Health hopes to build its own consumer-directed powerhouse through both acquisitions and developing capability in-house, Ron Klain, executive vice president, said yesterday.

He said Revolution Health has "a broader vision" of consumer-directed care, including not just a category of health insurance but anything where the consumer has choice and pays out-of-pocket. The acquisitions yesterday included four companies that primarily collect information for consumers and an investment in a company that operates "RediClinics" in Wal-Mart and other retail stores.

ConnectYourCare offers a linked debit card and online tools to allow consumers to manage their tax-sheltered accounts, and provides a variety of general health guides and specific data on hospital costs and outcomes. It markets to employers, health insurers and banks who want to offer consumer-directed plans, according to Terry Hunter, its CEO.

Hunter said ConnectYourCare may soon move to larger quarters near its current Timonium location, but would continue to operate with its current identity and staff.

"Our plan was always to go into the venture capital markets in 2005, and we did that," he said. After several months of talks, it did the deal with Revolution Health.

"We liked the idea that they could be a pseudo-venture capital company, but also wanted to build the largest consumer-directed platform out there," Hunter said.

bill.salganik@baltsun.com

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