A Trend Toward EMR Consolidation?

By Ken Congdon, editor in chief, Health IT Outcomes

The big news in healthcare IT circles this month was Allscripts' acquisition of Eclipsys. According to issued press releases, the purchase was an all-stock transaction valued at approximately $1.3 billion. The combined company will employ nearly 5,500 employees ? with Allscripts' CEO Glen Tullman serving as CEO of the combined company and Eclipsys' CEO Phil Pead serving as chairman.

This merger has been met with some skepticism in the healthcare community and uncertainty on Wall Street (Allscripts' stock has dropped more than 10% since the merger was announced). However, when you look at the current climate of the healthcare industry, this move makes good business sense.

For example, ever since the American Recovery and Reinvestment Act (ARRA) was passed in February of last year, hospitals and physicians have been rushing to deploy EMR systems to capitalize on the monetary incentives for EMR meaningful use outlined by the act. The problem is that the market is saturated with EMR vendors of all different shapes and sizes and few of these platforms interoperate well with the others. Allscripts, for instance, specializes in EMR software for physician's offices, while Eclipsys specializes in software for hospitals and healthcare systems (according to Pead, Eclipsys owns a one-third market share of hospitals with 200 beds or more). Given that one of the primary goals of ARRA is to connect physicians with their hospitals, the fact that these two systems didn't historically communicate extensively with one another was not a recipe for effective interoperability and HIE (health information exchange). The merger can provide an EMR platform that effectively addresses the needs of the physician community and the hospital/healthcare system community. Efforts are already underway to blend the capabilities and functionalities of their software offerings. It also provides a means for Allscripts to quickly gain traction in the hospital market (a space that's notoriously tough to break into).

Allscripts will obviously face extensive competition from healthcare infrastructure giants such as McKesson, Cerner, and GE Healthcare that will argue that their EMR platforms meet the needs of both the hospital/healthcare system and independent physician communities. However, these systems are sometimes perceived as being "too expensive" or "too big" for smaller physician practices. The Allscripts/Eclipsys merger marks the first time (that I know of) that two niche EMR players have come together to leverage their collective strengths to offer a more complete solution to address changing market demands. If the merger works the way Allscripts and Eclipsys both hope it does, we may begin to see a true market leader emerge in the EMR space and a trend toward consolidation among an extensive EMR vendor community. It's too soon to tell of course, and there will always be a need for more niche EMR suites to meet the specialized requirements of specific departments or specialties (ER department EMR, pediatric EMR, etc.). However, the wheels may have been set in motion for some significant changes to the landscape of the EMR marketplace.

Ken Congdon is Editor In Chief of Health IT Outcomes. He can be reached at ken.congdon@jamesonpublishing.com.