Industry Reaction – Allscripts To Acquire Eclipsys

We are posting this on both HIStalk and HIStalk Practice due to the broad interest in today’s announcement of the proposed Allscripts acquisition of Eclipsys. We have industry reaction to today’s announcement. Let’s start with some random thoughts from Mr. H and Inga.

Some thoughts about Eclipsys

• Above are the two-year share price graphs, with Eclipsys in red and Allscripts in blue. ECLP shares are trading at about half their 1999 price.
• Phil Pead’s background is selling companies, which Eclipsys has desperately been trying to do for many years with no takers (allegedly). He’s been with Eclipsys for almost exactly one year and surely gets the credit for finally finding a buyer.
• Eclipsys started with a relatively small number of big academic medical center clients on the old TDS platform and has struggled to convince them to upgrade to Sunrise (a product it acquired) instead of choosing a new vendor.
• Despite the arguably superior CPOE and clinical documentation capabilities of Sunrise, it has competed poorly against Epic and Cerner.
• Nearly 40% of ECLP revenue supposedly comes from about 20 big customers, with one of those contributing about 10% of the company’s revenue. That one big Eclipsys customer is supposedly North Shore – Long Island Jewish, subject of a September announcement involving its $400 million effort to connect its 7,000 doctors and 13 hospitals with … wait for it … Allscripts. Surely that customer and its Eclipsys relationship had a large impact on the Allscripts acquisition interest. Obviously Allscripts needs to keep NSLIJ very, very happy.
• Eclipsys most likely paid big money for its recent acquisitions, buying the former Medinotes/Bond practice EMR products, EPSi financial management, and Premise throughput management as it desperately sought to diversify away from its at-risk Sunrise user base. Those acquisitions didn’t seem to do much for the company’s performance.
• Eclipsys ran through a long line of executives whose tenures there were unremarkable.
  
  

Some thoughts about Allscripts

• Some of the announcements referred to the deal as a “merger” and some Eclipsys communications implied that Eclipsys was the acquirer, but that’s spin: this is an outright Allscripts buy.
• The new company will have a large footprint, but that’s usually more about sales than it is product performance, integration, or customer satisfaction.
• Glen Tullman is a more competent executive than anyone who has ever run Eclipsys. As was the case with the Misys merger, he gets operational control.
• It’s late in the HITECH land grab to try to integrate companies and products in the hopes that enough hospitals are left that haven’t locked into their vendor partners to prepare for Meaningful Use. This would have been a much better deal a year ago. Companies should be focusing on execution in the heat of HITECH, not trying to bolt two companies together.
• Allscripts will have an even larger roster of competing practice EMR products. Surely they will not all be go-forward products, especially the Allscripts version of MyWay that Aprima (formerly iMedica) sold them while keeping their own rights to it, then vastly improving it to sell under their own name.
• A minimally appreciated benefit of the deal is that Misys, always a stiff and awkward US healthcare IT player that didn’t seem to have its heart in anything but UK banking software, is out of the picture. That should be greatly beneficial to Allscripts.
• We checked the registration date of the new site OneAllscriptsEclipsys.com. It was May 6, two days after Eclipsys announced results.

Thoughts about today’s conference call

• It was touted that both companies run on Microsoft platforms, but the key is whether Allscripts is good at integrating products.
• Glen Tullman says there is little product overlap, but they company will have four PM/EMR products plus Tiger, which is already being retired.
• Sunrise Ambulatory wasn’t on the slides of the combined solution set that we noticed.
• Assuming Peak Practice and MyWay are similar and PeakPractice is the sexier one, will they retire MyWay? It’s sold through the reseller channel, which will make some folks unhappy if so.
• Allscripts needs top-line growth, so the (theoretical) combined market gives it a way to (theoretically) grow.
• Dumping Misys allows Allscripts to control its own destiny, including investing in technology to a degree that Misys was unwilling to do.
• The combined company will enjoy an 8-10% growth rate, the company says, which doesn’t sound impressive if we really are starting the “single fastest transformation in HIT.”
• Helios was mentioned more than once as a go-forward product. It’s the recently announced Eclipsys capability to open up Sunrise to independent developers.
• The usual synergies were proclaimed (firing redundant managers and back-office employees, cutting the cost of running two publicly traded companies, streamlining sales and marketing).
• Allscripts shares were down nearly 10% today. Misys shares were way up on the news it was cashing out. Eclipsys shares were up around 3%. Investors don’t seem to like the deal so far.

Unanswered questions

• What will the go-forward ambulatory products be?
• How will key Sunrise customers react to having their vendor absorbed into a larger entity that has historically had less focus on hospitals?
• What’s the HIE strategy — Medicity, dbMotion, MOSS, something else?
• Will Allscripts EHR clients with IDX financials be a big target for Sunrise?
• What happens to the arguably most valuable Eclipsys executive – John Gomez?
• What’s the benefit of the acquisition to Eclipsys and its customers?
• What happens to sales of both companies now that the merger has been announced, yet won’t be consummated for months? Prospects hate uncertainty and HITECH forces them to decide somewhat quickly.

We hand-picked some of our readers with deep expertise to provide their analysis, some of which we agreed to run anonymously.

Jeffery Daigrepont, SVP, The Coker Group

It’s an interesting merger, but not a surprising development in that Eclipsys and Allscripts were the few remaining vendors without an alignment strategy to the opposite side of the coin. This announcement comes not long after NextGen acquired Opus and Cerner’s more aggressive move into ambulatory. 

Vendors are clearly getting prepared for hospitals getting back into physician employment and their desire to have a single vendor solution. Therefore the market is wanting to have “one throat to choke” when it comes to selecting a vendor for all of its integration needs. I also think Epic is dominating the inpatient space because they have been so far ahead in offering a true integrated solution for several years now. The other inpatient vendors are having to play catch up and it’s faster to merge than try to build. 

The market should expect some clunky workflow for several years while they try to blend together their platforms, although I am sure the spin machine will sell this as one patient record harmonizing seamlessly across every location of care. The press release is already indicating ONE unified record. I just wonder which of the eight EMRs will emerge as the system for housing the ONE record.

It’s also worth pointing out that both vendors have made past unsuccessful attempts in crossing over own their own. Eclipsys acquired Bond Medical a couple of years ago and has not been successful getting it off the ground. Allscripts tried the same with some inpatient technology as well. Neither could penetrate this market.

It’s also going to be interesting to see how the company operates in terms of where and how they focus their attention. For example, Meditech, Cerner, HealthLand, etc. can offer both inpatient and outpatient technology, but no one will ever accuse these of being ambulatory vendors. Vendors will generally tilt in one direction and will also focus their time and efforts accordingly.  

As for the market’s reaction, it’s going to be interesting to see how this ONE new company can manage so many overlapping products and solutions in this new age of certification and system compliance standards. The timing of this merger is interesting because it comes on the heels of Meaningful Use. Does anyone really believe they will keep all of their overlapping systems up to certification? I suspect they will start commercially discontinuing products that are not considered modern, such as all of the Misys baggage on the Allscripts side. 

After this merger, the new company will be trying to support eight EMRs systems and five practice management solutions with a sprinkling of inpatient technology. I could be wrong with this count, but it’s fair to say they have a boat load of duplication, the most of any vendor in the market. Customers buying from this new company should seek protection from their system being discontinued in the next couple of years as they move to their dream of ONE record.

Hospital CIO and Eclipsys Customer

Sounds like Glen Tullman pulled another fast one. This is the same type deal he architected with Misys. Glen controls the management suite, where all the real decisions are made, and the other company controls the board room. 

Non-Competing Vendor CEO

This is an Allscripts response to the NextGen inpatient deal. Allscripts was probably feeling pressure to have a complete solution for the bundled payment/ACO market. They were probably feeling they couldn’t live up to market expectations. This will provide enough accounting confusion for the next several quarters to hide any shortfall in organic performance.

Bill O’Toole, O’Toole Law Group

This is a great move for both companies. Allscripts has proven itself in the ambulatory world. Physicians on a selection team for an HIS at their associated hospitals will look favorably on the new combined company based on their prior experience with Allscripts. Eclipsys gets a new image, sort of like your father’s Oldsmobile being merged with the Corvette. No offense intended to Eclipsys, but in my days at Meditech I was surprised if they were up against us as a finalist. I believe the growth of the combined company will greatly exceed the individual growth expectations of the separate companies.

Investment Banker

The combined business looks great on paper with little overlap in capabilities (PeakPractice being the biggest one) and a substantially bigger platform. The challenge will be integration, of which this will be the largest attempted in this industry for a while. Even though they have a highly talented team, the challenges will be significant.

I would ask why two companies that have strong growth opportunities on their own (as they have constantly communicated to investors) would see the need to take on massive integration risk in a market that presents once in a lifetime growth opportunities.

Eclipsys Physician Practice Customer

I don’t think this’ll have a major impact on my little neck of the trenches for the foreseeable future. These acquisitions / mergers aren’t shocking given that we all know they’re going to happen in this period. I’m guessing bigger ones are in the works even as we type.

Though their press release really doesn’t address it (nor does it address the plans for the “Helios” platform which I hope continues), I know that they’ve recently sold millions of dollars of PeakPractice (originally, Bond Technologies’ “Clinician”) to some large companies and I was told the PeakPractice development team would be receiving even greater resources now. Of course, things do change, including corporate direction, but personally, I’m not worried about my software yet.

Todd Cozzens, CEO, Picis

There is an increasing trend for general practitioners to be employed by hospitals, but an opposing trend that specialist areas like emergency and anesthesia are outsourcing physician services.  So net/net, though on the surface it makes sense to combine the two areas, there is no real market force pushing for an end-to-end hospital-to-physician EHR. To the contrary, the one thing that really is taking off with lightning speed from ARRA is interoperability within and outside the hospital enterprise.

I can cite 10-15 real examples of systems already pushing CCDs among disparate EHRs, for example. Hospitals just aren’t in a position for wholesales swapouts of their IT systems across the board — it’s too disruptive and expensive. The new interoperability mandates will allow more modular approaches to building out EHRs.

With regard to the high acuity market, the merged entity will have an ED product from Allscripts, an ICU product from Eclipsys, and I assume they will acquire an OR product. So they will look like a company that’s serious about high acuity, which I think is good because it endorses our long-held belief that hospitals are becoming big high acuity care centers as the population ages and needs these services more and less acute services move out.

That’s where it stops. Our high acuity suite has been integrated and developed now for seven continuous years, has much deeper functionality, and is much more intuitive than a loose patchwork of independent applications. Our investment in analytics and interoperability with the big EHRs is starting to really pay off as well as we are the go-to, embedded high acuity enterprise suite for a growing number of IDNs. The proof? Tell me which HCIT other than us has taken on over 100 net new hospital customers in the last two years. Not even Epic has done that.

Is it too late in the HITECH game to be making a major acquisition? No, I think they’re trying to build a sort “shadow” Epic and it does make sense, as I said, on the surface. This deal definitely helps Eclipsys a ton more than Allscripts, however. And don’t forget the last time a physician-focused system company took over an in-hospital EMR vendor — IDX taking over Phamis and the subsequent sale of that mess to GE. That was a Harvard business case on how not to execute post-merger.

What happened there is that selling small ticket items to docs is totally different than mega-systems to mega IDNs — it’s kind of like Cessna buying Boeing. And then you have all these legacy technologies and systems — Allscripts with 3-4 legacy physician systems and all the legacy technology still embedded in Eclipsys. Any customer that thinks some sort of new, singular, integrated, magical, cloud-based, miracle hospital / physician solution is going to suddenly appear on the market in the next 5-7 years from this entity will be seriously misguided. Huge execution risk here. Good time to be a duct tape and bailing wire salesman, however.

All the market dynamics are in place for further consolidation. ARRA HITECH and healthcare reform — the perfect storm. I don’t subscribe to the idea that it’ll be Google or Oracle or Microsoft that will drive the consolidation. I think it’s more than just a technology convergence. I see much grayer lines between payors and providers and enabling technology providers that make the system much more transparent for the three P’s – payors, providers, and patients. 

Margin pressures are already forcing payors and providers to both to think very differently. The two things that healthcare reform were supposed to fix — cost and quality — aren’t going to improve at all for the vast majority of patients, providers, and payors. Something has got to give, or else healthcare passes 50% of our GDP by mid-century. If you look at other industries that had this pressure, it was things like supply-chain integration and other forms of co-opetition among former adversaries that drove change and finding ways for all to make money. It’s actually a time of huge opportunity. 

Intelligent Healthcare Information Integration 6/8/10

EHR Data: Privacy vs. Publicacy

Lately, there’s a whole buncha buzz about on this digital healthcare data ownership versus sharing stuff. You know the issue of which I speak: Dr. Deborah Peel, et al, reminding us that the road to healthcare data integration is strewn with personal privacy landmines galore, and then, the NHINers and other data gatherers, like Jonathan Bush’s athenahealth with their recent touting of “athenaCommunity” as one arm of their mission “to make healthcare work as it should.”

This is a tough one, no matter which knife you use to slice it. On the one hand, Dr. Peel is correct that healthcare data once released to the digital winds is “like a sex tape that lives on in perpetuity in cyberspace.” People, especially us rootin’ tootin’ ‘Mericans want our personal privacy protected at virtually any cost. I don’t think any of us want our personal health histories “Paris-ized.” (Although, Ms. Hilton seems to have parlayed her randy exposure into a personal triumph. Regardless, I doubt that’ll work for any of us if our hemorrhoidal or high colonic histories get similarly YouTubed.)

J. Bush is also on the mark, though. Our personal healthcare information needs to be shared in order to be of value. Gone are the days when you have one doctor who spanks your butt when you’re born and follows you through “till death do you part.” We move, change providers, have multiple providers, use Minute Clinics and ERs — i.e., we roam. It is impossible to fathom our healthcare histories making it in timely fashion to the many destinations we do in any version of the old, tattered, paper chart. (Lord, just try to get a faxed report from another provider during the fifteen minutes you have a patient in your office!)

If we didn’t have such cultural issues as racism, ageism, sexism, and “sicko-ism,” maybe we wouldn’t care who sees our psychological or proctological profiles. If we had fully socialized medicine or if we had complete private pay healthcare sans insurance companies, maybe it wouldn’t matter who got what gross genital germ or mental misfire malady. If you get sick, either we all pay (socialized) or you do (tough break, buddy…them’s the cards you’re dealt.)

But, we live here in the land of the free and the home of the individual. We hold our privacy sacrosanct (unless we want to see what Paris has been up to and then the paparazzi have full sway.) We hold many of our prejudices, and the fears we have about others’ bigotry, nearly as holy. Yet, we also live in the land of the insurers/CMS and the home of McDonald’s medicine. We want our healthcare delivered on demand — done right without needless repetition or avoidable error and with minimal co-pays.

I was asked to write about this issue by a friend who’s a muckety-muck at a big EHR vendor. I was really hoping I could give him some unique, big toot piece. I’ve thought and thought about it and the wow-ness I’d hoped for seems less like a grand toot and more like an SBD. The eventual solutions for healthcare data privacy versus “publicacy” will be hard-fought and counter-punched for years.

This I know: I have met both Deborah Peel and Jonathan Bush. I’ve listened to each speak on multiple occasions. I like them both and think both are brilliant. I also think both are intimately and ultimately concerned about doing what’s best for patients, providers, and all of healthcare. In this very sticky wicket of personal privacy versus grand communal good, I’m very glad to see both are engaged in this battle, guarding opposite flanks of our healthcare ranks. Our vanguard is well-manned (-womaned.)

From the trenches…

“When it comes to privacy and accountability, people always demand the former for themselves and the latter for everyone else.” – David Brin

Dr. Gregg Alexander, a grunt in the trenches pediatrician, directs the “Pediatric Office of the Future” exhibit for the American Academy of Pediatrics and is a member of the Professional Advisory Council for ModernMedicine.com. More of his blather…er, writings…can be found at his blog, practice web site or directly from doc@madisonpediatric.com.

News 6/8/10

The New York eHealth Collaborative names Greenway Medical Technologies, Sage Healthcare, Eclipsys, eClinicalWorks, and NextGen as preferred EHR vendors.

New data from MGMA shows that 65% of established physicians were placed in hospital-owned practices last year, as were almost half of physicians just out of residency or fellowship. One likely factor is higher first-year guaranteed compensation with hospital-owned practices compared to private practices. First-year guaranteed income has fallen 2% for specialists since 2006, but increased more than 17% for primary care physicians.

Steve Jobs introduces the iPhone 4, complete with a thinner profile, a 5-megapixel camera and flash, and video chat (FaceTime). Though the FaceTime feature will only work between iPhone 4s for now, I’m sure it will eventually be huge in healthcare. Time for some creative type to develop an app that translates video chat to a CPT code and passes the code to a physician’s billing system (if you steal this great idea, I’ll expect you to send me wine or shoes when you hit the big time).

UBMD (NY) selects Allscripts EHR for its 450-physician practice. Physicians in the 18-practice multi-specialty group also serve as faculty at the University of Buffalo School of Medicine and Biomedical Sciences.

Health Informatics Consulting will provide implementation assistance for ambulatory surgery centers adding SourceMedical’s Vision and Vision EHR.

Partnerships like the one mentioned above reminds me of a prediction I shared with a friend not long ago. Perhaps this isn’t terribly profound, but I believe we’re going to see a marked increase in collaborations between ambulatory EHR vendors and third-party consulting firms. As stimulus-hungry physicians demand quick but thorough implementations, look for more vendors trying to secure alternative implementation resources, at least for the next couple of years. Hospital vendors have relied on third-party consultants for years, but it’s been less common in the ambulatory world.

Spectrum Health Medical Group (MI) will spend up to $60 million on EHR technology over the next five years as part of a master plan to dramatically grow the practice. The 90-physician group anticipates growing to 700 providers by 2014, a process that may cost more than $150 million in physician recruitment and support costs. Spectrum says the goals for growth include recruiting faculty for the MSU College of Human Medicine and building its research capacity. No doubt Spectrum also believes that tighter physician alignment will help keep its four hospitals full.

Proof that security and privacy blunders are not unique to the good old US of A: an employee at a Welsh medical practice mails an unencrypted USB drive that never makes it to its final destination. Unfortunately, the memory stick contained data on 8,000 patients. Lampeter Medical Practice was called out for the incident, though not fined.

Speaking of data breaches, 3M Health Information Systems releases a breach notification tool with new versions of 3M ChartRelease and 3M DisclosureTrac software. The functionality provides a template for creating breach notifications, plus saves the details for reporting purposes.

An HHS advisory workgroup recommends that EHRs be enhanced to deal with needs of unique populations, such as children and victims of domestic abuse. The AHRQ and CMS are already working on a pediatric record template for children enrolled in Medicaid or CHIP that includes such nontraditional factors as literacy, language and cultural barriers, domestic violence, and crime.

For about $3,000, a small practice can purchase a EMR solution that includes Dell hardware and free Practice Fusion software. The Dell/Practice Fusion bundle is available through both companies. Dell has similar marketing agreements with Allscripts, Meditech, and eClinicalWorks.

athenahealth makes some changes in its executive team following the resignation of David Robinson as COO and Nancy Brown as SVP corporate development. Ed Park is promoted to COO and Derek Hughes will take over the SVP role. After talking to one athena insider, I don’t think the changes are an indication that we are  about to see big shifts in the company’s direction. Meanwhile, athenahealth stock continues to struggle, falling 13% in the last month.

E-mail Inga.

News 6/3/10

The Retina Group of Washington (DC) selects the SRS hybrid EMR for its 20 specialists.

MED3OOO founder Pat Hampson is profiled in Smart Business. He advocates a culture based on strong relationships to foster growth. He suggests that employers value and recognize the contributions of each individual, nurture two-way employee communication, and empower employees. His approach seems to have worked since he started out 15 years ago: the company employs 1,760 and earned $137 million in revenue last year.

Practice Fusion and Kareo launch an integrated EHR/PM solution that includes Practice Fusion’s web-based EHR and Kareo’s medical billing software. Both companies will market the products.

Medical billing and A/R management company Medigistics selects CPU’s MED/FM Medical Billing and Practice Management software. The company provides services for over 300 physicians and CRNAs.

Over 40% of private practice physicians are connected to hospital systems, according to a new Beacon Partners study. The most common connection is via a patient/physician portal (35%), followed by a  results reporting interface (20%). Half the hospitals and practices surveyed have had to cut back on IT investments due to the economic climate and reduced access to credit markets.

The Ohio General Assembly passes legislation to establish 44 existing primary care practices as training centers for patient-centered medical homes. They will be reimbursed up to 75% of  their costs for HIT products, including EHRs, HIEs, e-prescribing, and decision support tools.

CHHIT extends full 2011 certification to Allscripts Professional EHR 9.1 and Medicat 2011 10.0. That’s a total of 19 products, if you are counting.

I haven’t mentioned any stats on HIStalk Practice in awhile, but traffic and subscribers continue to grow steadily. May readership increased 11% over last year and our subscriber base has jumped 28% since the beginning of the year. Confirmed e-mail subscriber count is now 774. Thanks to everyone who takes the time to read and sharing the site with your friends. And of course, a big thanks to our sponsors for their great support!

US Oncology announces its new iKnowMed platform for community oncologists. In 2004, US Oncology purchased iKnowMed and its oncology-specific EHR and has since added a revenue cycle management inventory management component.

In what appears to be a fairly comprehensive review of the HITECH Act’s implementation status, Manatt Health Solutions concludes that many eligible health providers will have difficulty achieving proposed Meaningful Use criteria. This is especially true for small and rural practices and certain community health centers. As a result, EHR adoption rates will be less than anticipated. The report is also critical of the HITECH’s approach to interoperability, saying it is unlikely to yield quality improvements and cost efficiency gains. Other key points:

• There need for stronger policies that would encourage practices to follow evidence-based treatment guidelines for improving patient health outcomes.
• All currently excluded health care providers need to be included in the program to enable true coordination of care across all care settings.
• Regional Extension Centers may face sustainability and operational challenges; alternative approaches should be developed to ensure ongoing EHR adoption and implementation support.

E-mail Inga.

News 6/1/10

From: Apple Doc “Re: iPad. Is Sage/Intergy going to be iPad compatible? That would be good news for us few with new iPads.” I asked the folks at Sage and a spokesperson provided this response: “Using Microsoft Remote Desktop Service or Citrix XenApp, Sage Healthcare software can be used from many different devices, including iPad. We began testing immediately upon the release of the iPad, and will continue testing for the next several weeks.”

mPay Gateway secures an additional $1.55 million in funding from new and existing investors.

Healthcare South (MA) selects Allscripts EHR/PM for its nine pediatric and family practice offices.

Sevocity offers regional extension centers and educational organizations free access to its Internet-based EHR, setting up as a demo clinic for up to 20 users and requiring them to have nothing more than PC with Internet access.

AHRQ releases a report on practice-based EMR usability and concludes that vendors are not performing adequate usability testing, following user-centered design principles, nor getting real usability experts involved in product design. Mr. H provides a great summary here.

The American Academy of Professional Coders names Daniel Schwebach VP of practice management initiatives. Schwebach most recently served as a manger with Pricewaterhouse Coopers, overseeing daily practice operations for over 400 faculty physicians.

Spurred by physician shortages and improvements in technology, the interactive telemedicine business is now growing almost 10% annually. The $3.9 billion industry includes home monitoring devices, teleconferencing, e-mail interactions, and healthcare applications on smartphones. Of course now that more insurers are agreeing to reimburse providers for many of these services, look for more physicians jumping onboard.

Enforcement of the Red Flags Rule is pushed yet again. The FTC set December 31, 2010 as the new deadline, giving Congress time to consider legislation that would affect the scope of covered entities. One proposed bill would exempt healthcare practices with 20 or fewer employees.

NextGen parent Quality Systems reports Q4 numbers: revenue up 19%, EPS $0.45 vs. $0.40, falling short of consensus earnings expectations of $0.49.

E-mail Inga.