The costs of integrating the ambulatory and acute expertise of Allscripts and Eclipsys may outweigh the synergies of combining the two companies.
The costs of integrating the ambulatory and acute expertise of Allscripts and Eclipsys may outweigh the synergies of combining the two companies.When HITECH passed with the American Recovery and Reinvestment Act in January of 2009, many people thought healthcare organizations -- both hospitals and physician practices -- would immediately flood the marketing looking for EMRs and the highly specialized people needed to install and customize them. But that didn't happen. Instead, there ensued a kind of "Phony Market" with tumbleweeds blowing across the HIT business landscape where people had expected the autobahn.
But after people digested the Meaningful Use and Certification specification proposals around March or April of this year, the expected bull market did materialize, and major EMR vendors booked record quarters. Those record quarters, of course, came at the price of strained resources. Internally, vendors are maxed out in terms of their ability to handle the needs of current customers, yet still they seek growth by adding new ones. Almost everyone in the industry will also agree that the HIT talent pool -- specifically clinical folks with some IT savvy - is becoming ever shallower.
With organizations trucking along at maximum speed, leveraging all available resources to satisfy the market, is now a good time to embark on one of the biggest HIT mergers in history? Allscripts and Eclipsys think so. Those organizations announced on June 9 they planned to become one (technically Allscripts is buying Eclipsys).
But the process of becoming one is not without its price. Merging two companies of that size -- including all the executive, financial and legal resources it consumes -- demands a significant chunk of bandwidth. That bandwidth must come from somewhere. Inevitably, some of it must be subtracted from the resources those organizations could have -- or would have -- brought to bear for the benefit of current customers.
People only refinance their homes when the long-term benefit of doing so outweighs the closing costs. Organizations should only enter into mergers when the resources drained by the act of merging are far outweighed by the synergies of working together. On paper, Allscripts and Eclipsys are a perfect match -- one organization has the ambulatory piece and the other the acute piece. Together they boast a nice string on the continuum of care.
But another challenge will be actually integrating those technologies so they run off the same database, otherwise the merger may only be so much marketing. The companies tried to get ahead of this concern in their press release, stating: "The Eclipsys Sunrise Enterprise and Performance Management solution for hospitals and the Allscripts portfolio of solutions for physician practices currently leverage common platforms, including Microsoft.NET and other advanced technologies. This will accelerate the delivery of an integrated hospital and physician practice offering. The companies also share an 'open architecture' approach, simplifying the connection to third-party applications across every care setting, resulting in a single patient record."
Will the merger be a successful one? Of course, only time will tell, and with a merger of this size, success must be measured in years. I've interviewed both Glenn Tullman (CEO of Allscripts, who will be CEO of the new entity); and Phil Pead (CEO of Eclipsys who will be Chairman of it). They are both very smart gentlemen, know the business inside and out, and are passionate about improving healthcare. But let no one pretend that mergers come without a hidden price. For that reason, and despite the exuberance of company executives, often the most jittery participant in this kind of deal is the current customer.
Anthony Guerra is the founder and editor of healthsystemCIO.com, a site dedicated to serving the strategic information needs of healthcare CIOs. He can be reached at aguerra@healthsystemCIO.com.
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