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Healthcare IT Mergers, Acquistions Heating Up

Health IT vendors are jockeying for stimulus funds and making deals to optimize their positions in the growing market for electronic medical records.

It's been just a week since the U.S. health department released its near-final "meaningful use" criteria, but moving and shaking in the e-health record market is already underway.

With the U.S. government waving more than $20 billion in stimulus rewards at doctors and hospitals for using e-medical record systems in "meaningful" ways starting in 2011, health IT vendors are jockeying to be get a piece of the action.

Vendors that offer standalone software that helps doctors manage the administrative and business side of their practices are scurrying to pair up with vendors of e-health record vendors that don't already offer practice management modules -- and vice versa.

In fact, Wednesday, AdvancedMD Software Inc. announced it acquired PracticeOne, a provider of e-health record systems to doctor offices. AdvancedMD Software has an installed base of 3,000 small and mid-sized physician offices in the U.S with more than 10,000 users of its practice management and billing software.

While PracticeOne is a small privately held firm with 40 employees and only a few hundred independent doctor offices using its e-health record software, the company was a good fit with AdvancedMD, which acquired PracticeOne not for its market share, but for its product offering, says AdvancedMD CEO Eric Morgan.

Both companies' products are offered as SaaS, so that meshed well. But best of all, said Morgan, PracticeOne's EHR is already certified by the Certification Commission for Health IT (CCHIT).

An important requirement of the proposed federal "meaningful use" criteria is that the e-health record systems used by doctors and hospitals must be certified, a status that's been time-consuming and expensive for some health IT vendors, especially smaller companies, to achieve so far.

The offering of AdvancedMD's practice management system integrated with the CCHIT-certified PracticeOne "is powerful, [and] puts us in a position of having robust functionality," said Morgan.

While it's not uncommon for even the smallest doctor offices to use software to manage their practices -- including scheduling and billing processes -- the biggest technology gap is in doctors using IT for managing their clinical processes and improving patient care.

Dramatically increasing the number of U.S. doctor offices and hospitals that use health IT to improve patient outcomes is the biggest goal of the federal government in its American Recovery and Reinvestment Act's HITECH "meaningful use" stimulus programs.

"Most doctor use practice management software, but the vast majority don't use EHRs," Morgan said, estimating that only about 15% of AdvancedMD's practice management customers are already using e-health records from any vendor.

"There's tremendous opportunity for us to cross sell to our existing clients," he said.

AdvancedMD, a private firm, employs about 150 and is projected to generate sales of about "the mid $30 million" range, said Morgan. He would not disclose financial terms of the PracticeOne acquisition.

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