Franklin's Passport Health girds for two acquisitions

Firm readies debt round, keeps IPO options open, plans credit-access service

Email | Print By Milt Capps

Scotte Hudsmith

Passport Health Communications, one of Nashville's fastest-growing companies, has signed letters of intent to buy two healthcare technology companies and intends to execute the deal with a new round of debt financing.

Executive Vice President Scotte Hudsmith, who is responsible for both corporate finance and business development, told NashvillePost.com today that Passport has completed "quality of earnings" due diligence on both companies and is now examining the companies' management teams and controls. He said one or both the deals could close by March 31.

Hudsmith would not disclose the identities or locations of companies targeted for acquisition, saying only the companies are complementary, "tech-driven" and profitable, with strong talent aboard.

He added that, to support the two immediate acquisitions, the company is close to securing debt financing via one or more members of "a small group of lenders."

Passport's technology and services help reduce errors for hospitals, physician groups and other customers. The company serves more than 1,500 hospitals and nearly 3,000 physicians groups, renal care and surgery centers and others. Passport serves 55,000 unique users with access to one or more Passport products. The company executed 105 million transactions in 2007 and projects 135 million this calendar year.

Completing the two pending deals – or others among the four serious acquisitions now in the company's development pipeline – could move total company employment beyond 300, including the 210 projected to be in place at Passport's Cool Springs headquarters by year's-end, according to Hudsmith.

Those job projections, coupled with financials recently provided to to the investment community, suggest that consummating the acquisitions would create a company with perhaps $80 million in revenue – a sharp increase from last year, when sales came in at $37.2 million and EBITDA at $11.5 million. The 12-year-old company had $13.6 million in revenue in 2003.

Hudsmith said he believes revenue will hit $100 million within three years, propelled by acquisitions, new products and providers' increased awareness of financial losses associated with insurance-eligibility errors.

Acknowledging the company has considered whether to launch an IPO, Hudsmith said, "we're fine on our own," but he would not rule out an eventual public offering. He said he receives "five or 10 calls a day" from private-equity investors, venture capitalists and others. Meanwhile, Passport management regularly presents the company to venture forums.

Another growth stratagem: Passport also plans to introduce a data-exchange portal through which qualified patients can, when they are checking-in with their provider, obtain adequate credit lines to pay for deductibles or other expenses.

Hudsmith said Passport is working with unnamed financial institutions to provide credit for both prime and subprime borrowers, and is testing the offering in a small hospital he declined to name. Passport would not issue credit, per se, and would receive a payment for each approved credit transaction.