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7/22/2010
04:39 PM
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Allscripts Earnings Driven By EHR Adoption

Release of final meaningful use rules is expected to further accelerate the adoption and deployment of electronic health records that boosted Allscripts quarterly income almost 20%.

Allscripts-Misys Healthcare Solutions Inc. reported a 17 percent increase in net income in the fiscal fourth quarter, due in part to a strong increase in professional services which were driven by the accelerated adoption and deployment of the company's electronic health records to hospitals and affiliated physicians.

During the company's quarterly conference call earlier this week, Allscripts' executives said net income for the three months ended May 31, 2010 was $15.7 million, compared to $13.4 million for the same period last year. Year over year revenue increased 14 percent, to $190.3 million from $166.3 million.

"These are extraordinary times in healthcare," said Glen Tullman, chief executive officer of Allscripts. "We continue to win additional share in the physician market led by our electronic health record solutions for physician groups and organizations of all sizes," Tullman added.

The company said quarter over quarter, systems sales moved from $37 million to $43 million, maintenance from $57 million to $66 million, transaction processing and other revenues from $54 million to $57 million and professional service from $17 million to $24 million. The 42 percent increase in professional service growth was driven by the acceleration of electronic health record implementations, the company said.

Tullman expects the federal government's release of the final rules for 'meaningful use' will speed up the adoption of EHRs.

"The release of the final rule creates clarity and certainty that the market has been waiting for. In general the rules were less stringent than expected which will serve to spur adoption by creating more flexibility," Tullman said. "As a result the transition to electronic health records will be less intimidating to providers and solo practices and smaller groups."

As healthcare providers order new systems, Allscripts said it posted bookings of $415.3 million, representing 24% growth year-over-year. For the quarter, Allscripts said it booked contracts worth a total of $118.5 million over the three-month period, a 15 percent increase from a year ago.

"We had another exceptional quarter of EHR sales illustrating our success in winning large physician practice and hospital based community deals," Bill Davis, chief financial officer of Allscripts. "We continue to see large physician organizations move ahead with their strategic plans to implement enterprise health records in order to be optimally positioned to demonstrate meaningful use and take full advantage of the federal stimulus program."

Davis also said approximately $21.7 million or 18 percent of the company's fourth quarter bookings resulted from its Software as a Service transactions, which will be recognized as revenue over the next 48 months. He predicted that SaaS adoption will gain more traction in the latter part of calendar 2010 and into 2011.

"SaaS bookings were 92 million or about 22 percent of total bookings for the fiscal year. We continue to expect SaaS deals to increase as a percentage of total bookings as we see a growing mix in new bookings from the most underpenetrated segment of the market, which are the smaller physician practices generally in the [less than 10 physicians] provider segment who would likely prefer a SaaS based model for purchasing electronic health records," Davis said.

The company reiterated that it sees further opportunities to increase market share among hospitals as it begins to develop relationships with Eclipsys' customer base.

In June, Allscripts said it would buy rival Eclipsys Corp. for $1.3 billion in stock. Regulators need to approve the purchase and shareholders are scheduled to vote on the deal on August 13.

For fiscal 2011, Allscripts-Misys expects revenue of $780 to $790 million, and net income to be in the range of $92.5 to $95.5 million.

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