- The sale of McKesson’s hospital and health system health IT business to Allscripts confirms that the inpatient health IT market offers few opportunities for technology developers to make headway.
In a deal valued at $185 million, Allscripts a week ago agreed to acquire McKesson Corporation’s Enterprise Information Solutions, the latter’s inpatient health IT division comprising, and bring to an end the latter’s role as a technology provider.
“This strategic acquisition further advances Allscripts strategy to offer the most comprehensive, high performing health information technology and solutions. Upon close, McKesson will have furthered its focus as a global leader in healthcare supply chain management solutions,” the companies announced in a joint statement.
McKesson began divvying up or selling off components of its health IT business last year via agreements with Change Healthcare and e-MDs. Earlier this year, McKesson featured prominently in IDC Health rankings as one of the top-five largest health IT companies in the world.
Once the deal is finalized, Allscripts will become the owner of another inpatient EHR technology (Paragon), two RCM solutions (STAR and HealthQuest), a laboratory information system (McKesson Lab), and a content management system (OneContent).
“Adding these assets to Allscripts existing portfolio enables us to better serve our clients, increase our scale and further drive our investment in innovation,” said Allscripts CEO Paul M. Black said at the time. “This transaction is expected to directly benefit our existing clients and our shareholders, as well as the Enterprise Information Solutions clients and team members we'll welcome to our family.”
However, there is much more to story than acquiring existing health IT systems which the Allscripts CEO addressed in an earnings call the same day as the McKesson acquisition announcement.
Black made clear to investors that the acquisition was part of a company strategy to improve its presence in the inpatient EHR market where its growth has been steady but incremental.
“We've been doing that one RFP at a time since we arrived and have built some momentum both inside the US and abroad,” he said.
The McKesson acquisition, therefore, represents an attempt to address a challenge preventing Allscripts from expanding its presence among hospitals and health systems (i.e., customers):
According to the company, which declined additional comment on the agreement, its purchase of McKesson inpatient health business doubles its hospital EHR customers.
While Allscripts President Richard Poulton noted that “consolidation is a natural occurrence and it’s evitable” and that leadership “didn't feel like we had to do anything,” the subtext of his comments rang clear. The inpatient health IT market — especially the hospital EHR one — offers few new opportunities for companies to make up ground on their competition.
Given that McKesson was firmly entrenched in a space Allscripts was targeting specifically, the acquisition marked the shortest distance between points A and B.