MedQuist transaction to consolidate Philips' position in medical dictation market

Eindhoven 29 June 2000Royal Philips Electronics of the Netherlands and MedQuist Inc. of the United States have entered into a contract whereby Philips will complete a tender offer for 57 percent of MedQuist's fully diluted common stock for a cash price of $51 per share. The transaction is subject to Philips acquiring 57 percent of the fully diluted shares of common stock of MedQuist, as well as the expiration of the Hart-Scott-Rodino waiting period and also other customary conditions. After completion of the transaction of US$ 1.2 billion, MedQuist's shares will continue to trade on NASDAQ under the symbol "MEDQ".

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MedQuist is a US-based provider of outsourced medical record transcription services with sales of approximately $330 million in 1999. Philips' investment is intended to lead to the transformation of MedQuist into a multinational, technology-based medical document services provider over broadband networks. MedQuist plans to aggressively roll out Philips' speech and other technologies, enabling major productivity improvements in the conversion of dictated medical records into written text.

Philips Medical Systems (PMS) is a global leader in diagnostic imaging systems and services, incorporating advanced x-ray, magnetic resonance, computed tomography, ultrasound and imaging information systems to provide the data necessary for the most effective patient care. MedQuist occupies a strong adjacent position in the hospital's information chain. For example, Radiology departments, where most of the imaging systems are used, are also some of the heaviest users of medical dictation services. Philips will now be able to offer its customers cost-saving software and services along with a full range of imaging systems.

"This acquisition moves us further into health care services, which is in line with our stated strategy, and provides us with a significant growth opportunity, as well as leveraging our speech technology capability", stated Cor Boonstra, who is CEO of Philips. "MedQuist has a market leadership position and a strong management team which enables it to become an effective early adopter of automated dictation. That will translate into more complete solutions for our medical customers. We have confidence in the current management team's ability to continue to drive the company forward."

David A. Cohen, MedQuist Chairman and Chief Executive stated, "We are delighted to have Philips as our partner. The combination of our client base and their world-class technology and experience is extremely powerful. During the coming year, we will utilise Philips technologies to begin the transition to our new digital transcription platform via regional data centres, providing us with additional growth opportunities, generating revenue and cost synergies, and allowing us to enter important new markets. With Philips as our technological partner and major shareholder, we are confident in our ability to undertake this important step in the future of our company."

Philips will also accelerate MedQuist's plans to expand into Europe, where Philips Medical Systems and Philips Speech Processing have strong existing hospital relationships. The two companies also plan to expand MedQuist's current range of outsourced transcription services to include in-house speech recognition software sales and Application Service Provider models. As part of the transaction, MedQuist and Philips have equally entered into a license agreement for the joint development and implementation of speech recognition technology.

The more efficient use of MedQuist's transcription workforce, via the use of Philips Speech Processing's technology, and the recruitment of more widely available "editors", is anticipated to lead to even faster growth (already 20 percent per year on average), due to the fact that growth has been limited by the availability of qualified transcriptionists. Consequently, Philips and MedQuist do not expect any workforce reductions as a result of the speech technology roll-out, which will take place between 2001 and 2005.

For more news about the recent evolution in the digital transcription market, please also read the VMW June 2000 article Lernout & Hauspie to complete acquisition of Dictaphone Corporation.


Leslie Versweyveld

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