Molina Healthcare, Inc., a managed care organization that operates health plans for nine state Medicaid agencies, said it would acquire the Health Information Management (HIM) business unit of Unisys Corp. for approximately $135 million.

The move puts the Long Beach, Calif.-based healthcare firm squarely into the lucrative market for managing state Medicaid Management Information Systems (MMIS), where Unisys is the third largest player after HP Enterprise Services (formerly EDS) and Affiliated Computer Services, Inc.

Molina president and CEO J. Mario Molina called the acquisition a logical fit for the healthcare payer. "We've wanted to do this for a long time because at its core, an HMO is an information processing company," said Molina, who is also a physician.

"We collect eligibility data, determine what the benefits are and we pay claims to providers who take care of patients," he added. "And that's also what the HIM unit does on behalf of state Medicaid agencies. Those core business process functions are exactly the same."

Unisys's HIM business unit, which provides MMIS design, development, implementation and fiscal agent services, currently hold MMIS contracts with five states: West Virginia, Maine, Idaho, New Jersey and Louisiana. HIM is currently moving Maine and Idaho from mainframe-based systems to modernized MMIS. It also provides drug rebate administration services for the Florida Medicaid program.

Assuming approval by regulatory authorities and Medicaid clients, the acquisition will be completed in the second half of 2010. All 900 HIM employees will continue on as Molina Healthcare employees.

Molina said combining an HMO with an IT services firm will result in a hybrid model that is uniquely positioned to win MMIS contracts against larger IT companies like HP and Xerox and HMO competitors such as Amerigroup.

"We're buying a company that has a strong track record in this market and can provide an understanding of business process improvements in this space," he said. "At the same time, we provide value in that we understand the healthcare side and we know how difficult it is to define requirements and configure these systems properly and quickly."

Molina said he is also well aware that many MMIS projects have lately gone awry, beset by budgetary overruns, schedule delays and performance and implementation failures. For this reason, one of the company's key goals initially will be to continue to effectively service and complete its current MMIS projects.

"Everything we do in the future in terms of applying for new contracts is really going to depend on how we handle this transition and be able to prove to our customers that we can do the work," he said.

"However, it's always been part of our culture to grow. So once we sort of get things under control, we're going to go after new contracts."