Healthways announces acquisition of behavioral economics company, HealthHonors

Healthways, Inc. (NASDAQ: HWAY) today announced the acquisition of HealthHonors, a market-leading behavioral economics company that specializes in behavior change science and optimized use of incentives, in a cash for stock transaction. Healthways will integrate the HealthHonors science and technology into Embrace™, Healthways’ comprehensive information system, to enhance sustained engagement in healthy behaviors.

“Just as Healthways has led the industry in applying behavior change science, now we will lead the market in offering scientifically based incentive programs,” said Ben R. Leedle, Jr., Healthways chief executive officer. “Integration of HealthHonors’ innovative incentive strategy will boost our overall engagement and adherence to clinical and behavioral regimens.”

The purchase price includes an upfront cash payment of $14.7 million and a multi-year earn-out arrangement. Although the financial impact of the acquisition is expected to be a net cost of $0.02 per diluted share in Healthways’ fourth quarter of 2009, the Company’s previously provided full-year earnings guidance remains unchanged.

One key differentiator offered by HealthHonors is their Dynamic Intermittent Reinforcement™ proprietary software that determines the lowest economic reinforcement necessary for an individual, based on behavioral patterns, to maintain his or her healthy behavior. HealthHonors has been able to show, in trial and commercial environments, a range of 33 to 56 percent increase in sustained adherence to targeted behaviors, while decreasing incentive budgets.

“HealthHonors’ technology was developed by physician-scientists to help people achieve their best health,” said John Sheehan, president and chief executive officer of HealthHonors. “By integrating our strong science, knowledge and technology infrastructure with Healthways’ solutions, we will be able to scale to millions of people.” HealthHonors will continue to sell, service and expand their business with pharmaceutical manufacturers and others to improve medication adherence and compliance.

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