Tax breaks help healthcare tech firm move from Lenexa to Overland Park

The first of four office buildings at CityPlace, at U.S. 69 and College Boulevard, will house the headquarters of health care technology company WellSky, formerly known as Mediware Information Systems Inc.
The first of four office buildings at CityPlace, at U.S. 69 and College Boulevard, will house the headquarters of health care technology company WellSky, formerly known as Mediware Information Systems Inc. Courtesy of Hoefer Wysocki

A fast-growing Lenexa healthcare technology company will move next year to a neighboring city, after the Overland Park City Council approved incentives Monday night.

Mediware Information Systems Inc. will be the anchor tenant filling the top two floors of a four-story 125,000-square-foot office building at CityPlace, near U.S. 69 and College Boulevard. It will be the first new Class A office building at the large-scale mixed-use project, developed by Block Real Estate Services.

“We are bursting at the seams,” said Bill Miller, CEO of Mediware, which is rapidly outgrowing its current Lenexa headquarters in an office park at 79th Street and Quivira Road.

Mediware, a leading supplier of software for specialized health care providers, has been at its current Lenexa location for 12 years and has nearly 100 employees, most of whom live in Johnson County. It expects to grow to at least 130 full-time workers by mid-2019, when it plans to move into the new $31.6 million building at 11300 Switzer Road. It expects to increase its local workforce to at least 368 within 10 years, at an average annual salary of about $96,000.

Miller said the company looked at potential expansion locations on both sides of the state line. It settled on CityPlace because of its convenient location, planned mix of retail and residential properties, and the chance to create a signature office location for both employees and clients.

“Our company needs a great front door. It needs a strong presence,” Miller said. “We’re anxious to get there and host clients there.”

The City Council approved a 10-year, 50 percent property tax abatement for the portion of the headquarters that will be occupied by Mediware.

The city set required thresholds for employment, and if Mediware’s job creation falls below 300, or the average salary falls below $90,000 after the first five years, the abatement can be reduced by 25 percent.

The City Council also enhanced an earlier deal with the City Place developer. The Council increased the private activity economic development revenue bonds from $30.6 million to $31.6 million, providing a sales tax exemption for construction materials for the building.

The abated taxes and other incentives total $12.4 million over 10 years, primarily affecting the state of Kansas but also impacting Overland Park, the Blue Valley schools and other Johnson County jurisdictions.

But the council majority pointed out the new taxes generated and other benefits from the project outweigh the costs, by tens of millions of dollars. They said other cities are competing for these jobs and new Class A office buildings, so Overland Park needs to seize this opportunity.

“This is precisely the kind of jobs we want to have in our city,” Councilman Paul Lyons said.

Councilman Dave White predicted Mediware will be the “spark plug” for more development along College Boulevard.

The vote for the incentives was 10-1, with Councilwoman Gina Burke the lone dissenter. She said after the meeting that Mediware is a great company, but she doesn’t think incentives should be used in this manner, with border cities competing for these employers.

Lenexa Chamber of Commerce President Blake Schreck said he wished Lenexa could have accommodated Mediware's growth within the city, but he wished them well in Overland Park.

He still considers the deal a plus for Johnson County and the state of Kansas, and he understood the company's motivation to move within the county.

"That's just kind of the ebb and flow of economic development in this region," Schreck said. "If you get a new building or major capital investment, that's a net plus for the region."

While Cerner is the healthcare technology behemoth in the Kansas City area, Mediware has carved out a profitable set of niche markets.

It is a leading supplier of healthcare software for blood centers, cancer treatment centers, infusion and specialty pharmacy providers, respiratory and rehab centers, and home health and hospice settings. Nearly 1,000 employees are employed in offices across the country and in the United Kingdom.

Miller said the competition for healthcare engineers is fierce, and having a new top-grade building will help with employee recruitment and retention.

Mediware was acquired in 2017 by TPG Capital, a large San Francisco-based private equity firm. That gave Mediware an aggressive capital infusion to pursue its expansion strategy, which includes other acquisitions. It has already announced the acquisition of the Medicare billing company MEDTranDirect.

Ken Block, managing partner of Block Real Estate Services, said Mediware is the ideal tenant for the first of four planned office buildings at CityPlace. They will be added to multiple apartment buildings already built or under construction. Retail shops will be added next year.