Allscripts and Eclipsys Merger - A Review

Earlier this month, outpatient focused vendor Allscripts announced a major move - merging with (or more officially buying) hospital focused vendor Eclipsys… and thank goodness, because I always had trouble spelling Eclipsys! We seem to get 1-2 of these major acquisitions a year, and I would predict we'll continue to see about that rate until there are only 3-4 major healthcare IT vendors standing. And don't be surprised if one or two of those are not the classic ones, but rather larger IT companies who finally want to get into this market (e.g. IBM, Microsoft).

This particular merger is a reasonably logical acquisition since they were both likely losing out on deals where the buyer wanted an integrated inpatient and outpatient system from the same vendor. Of course, it will take awhile (at least 1-2 years) to really allow them to offer a well interfaced product (and don't be fooled - it will never be a truly integrated one, see below for more). In the meantime, the following business logic makes sense:
• Current organizations who work with both companies will immediately benefit as they should be able to assume that the products will start integrating and that the vendor should now pay for that (that's certainly what I'd ask of them).
• Current organizations who use Eclipsys and want to buy an outpatient EMR for their affiliated physicians will make Allscripts their "vendor to beat".
• Current organizations who use Allscripts and are looking to replace their inpatient systems will make Eclipsys their "vendor to beat".
• Organizations who are ready to "start from scratch" right now should at least be willing to hear what Glen Tullman has to say, and maybe he'll convince a few to be "early partners" in this great experiment…

Here is what various pundits are saying about this merger:
The official Press Release on June 9, 2010
Allscripts and Eclipsys announced a definitive agreement to merge in an all-stock transaction valued at approximately $1.3 billion...The combined company's client base will include over 180,000 U.S. physicians, 1,500 hospitals, and nearly 10,000 nursing homes, hospices, home care and other post-acute organizations. In addition, Allscripts will buy back the majority of their shares from Misys (who will go from a 54% to a 10% owner).

Glen Tullman will remain CEO of the company. Eclipsys President and CEO Philip Pead will be chairman of the company and will focus on strategic relationships, product and process integration and international business. The companies project $25 million in cost savings in 2011 and more in subsequent years. The transaction is expected to close in four to six months.

Healthcare IT News Story (June 9, 2010): Allscripts, Eclipsys to merge in $1.3 billion deal
- A simplified version of the press release.

Information Week (June 9, 2010): Allscripts Eclipsys Merger Saps Resources
This author points out how "the costs of integrating the ambulatory and acute expertise of Allscripts and Eclipsys may outweigh the synergies of combining the two companies".

Health Data Management (June 10, 2010): The Early Take on Allscripts-Eclipsys
Allscripts' pending acquisition of Eclipsys makes sense but has perils, according to several consultants specializing in helping providers select information systems.

Modern Healthcare (June 14, 2010): Allscripts' Eclipsys deal: the financial details
Allscripts-Misys Healthcare Solutions, Chicago, a developer of electronic health records systems for ambulatory-care physicians, will borrow most of the $577 million or more needed to extricate itself from the majority control of British IT developer Misys and then swap $1.3 billion in stock to buy all of Atlanta-based hospital and physician electronic health-record system developer Eclipsys....

Modern Healthcare (June 15, 2010): Allscripts deal: Success is in the execution
“If they perform really well, this strengthens them, because this is what the market wants, inpatient and ambulatory,” said Adam Gale, president of healthcare information technology market watcher KLAS Enterprises, based in Orem, Utah. “But can they deliver it? That's a whole other question. I guarantee you that is heavy on their minds.”

HISTalk Blog (June 15, 2010): Interview with Glen Tullman and Phil Pead
Glen Tullman is CEO of Allscripts. Phil Pead is president and CEO of Eclipsys.

HealthSystemCIO.com (June 16, 2010): Will Allscripts and Eclipsys truly integrate?
"True & total integration is almost impossible in the maddeningly complex world of HIT today…When a company like AllScripts buys a suite of products from another firm like Eclipsys, all they can truly integrate are the brochures, Powerpoints, proposals and contracts. The rest is interfaces, like every HIS vendor (and hospital) has plenty of already."

HIStalkPractice (June 21, 2010)
HIT Vendor Executives on Reactions to the Allscripts/Eclipsys Acquisition.