Allscripts-Eclipsys Merger: Healthcare IT Vendors Sense a Bonanza in Medicare Changes
Hospitals and doctors are slowly -- but finally! -- getting the idea that they need to work more closely together to improve quality and cut costs. Unsurprisingly, healthcare IT -- especially electronic health records, or EHRs -- is going to play a big role in that process. And today's news that Allscripts (MDRX), a top supplier of EHRs to office-based physicians, plans to shell out $1.3 billion to buy Eclipsys (ECLP), a leading hospital IT vendor, shows just how seriously technology suppliers are taking that challenge.
The combined client base of the two companies will include 180,000 physicians, 1,500 hospitals, and 10,000 nursing homes and other post-acute facilities. Allscripts hasn't had an inpatient EMR up to now, but it already sells discharge planning software to hospitals.
The merger will position Allscripts to compete head to head with bigger hospital IT vendors such as Epic, McKesson (MCK), Cerner (CERN), Meditech, GE, Siemens (SI) and QuadraMed. Of these vendors, only Epic has developed a successful product for use in doctors' offices. But GE, Meditech, and McKesson acquired outpatient EHRs some years ago, and QuadraMed has an arrangement to sell eMDs, a popular ambulatory-care EHR, to its hospital clients.
A few years ago, Eclipsys acquired Medinotes, a vendor of small-practice EHRs, and rebranded it as the Peak Practice EHR. But sources tell me Eclipsys has stopped supporting that product. Allscripts will undoubtedly replace Peak Practice with its own EHRs and interface them with Eclipsys' hospital systems. Both companies sell financial as well as clinical applications.
In the short term, the interfaced systems will help users of both Eclipsys and Allscripts EHRs meet the "meaningful use" criteria for federal health IT incentives; those requirements emphasize the need for electronic "connectivity" between different systems. Down the road, the merger will position hospitals and doctors that use the common technology platform to collaborate on quality improvement initiatives and improve the coordination of care. The same will be true for users of other products that span the inpatient/outpatient continuum of care.
This is important to providers because the Affordable Care Act requires Medicare to begin financially rewarding cooperation between physicians and hospitals. A provision of the law encourages providers to form "accountable care organizations" that can share in any Medicare savings they produce. In addition, Medicare will launch a pilot program "to develop and evaluate paying a bundled payment for acute, inpatient hospital services, physician services, outpatient hospital services, and post-acute care services for an episode of care that begins three days prior to a hospitalization and spans 30 days following discharge."
Hospitals have always had strong reasons to bind admitting physicians to them, either through employment or other types of arrangements. But the impending changes in reimbursement by Medicare and private payers are accelerating hospitals' hiring of doctors, while also increasing their interest in sharing IT systems with them.
What's interesting about these moves, however, is that they don't create interoperable health IT systems or break down information silos across communities. Instead, they create the ability to communicate electronically across single enterprises, using proprietary systems that can't easily exchange data with other proprietary systems. It's possible that regional or statewide health information exchanges (HIEs) will transcend these boundaries, but it will be a long time before HIEs are widespread. Until then, physicians will continue struggling to get all the data they need to provide the best possible care.
Image supplied courtesy of juhansonin at Flickr.