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Allscripts Eyes Post-Acute Care, Behavioral Health Markets

Allscripts to acquire EHR, PM, and revenue cycle management competitor in post-acute care and behavioral spaces.

By Kyle Murphy, PhD

EHR vendor Allscripts and private equity firm GI Partners have reached an agreement with Netsmart Technologies to fold the health IT developer of EHR technology and practice management systems for post-acute care and behavioral health settings into the former’s growing EHR platform.

"We are excited to partner with Netsmart management to continue to build upon the market leadership they have achieved in the behavioral healthcare technology space and strategically expand the business across the post-acute landscape,” Director of GI Partners Dave Kreter said in public statement.

“This is a team we have been interacting with over the last decade and are thrilled to have signed a transaction with them,” he continued. “The GI team believes this combination will create an industry leader that can improve clinical results and reduce costs in many increasingly important areas of the healthcare ecosystem.”

According to the official announcement, the purpose of the merger is for the combined entity to compete in the post-acute care market with an offering comprising an EHR, PM, RCM, and hosting capabilities and likely bringing one end of the care continuum with another given the presence of Allscripts in inpatient and ambulatory settings.

Related: Top 10 Allscripts EHR Hospital Implementations

Netsmart will merge with Homecare, the rival software and service at Allscripts, as part of the joint venture valued at $950 million. Netsmart CEO Mike Valentine will lead the combined group. According to a Reuters brief, the acquisition is expected to add $150 million in revenue for Allscripts and GI Partners. For its part, Allscripts will be contributing its entire Homecare business as well as $70 million in cash. A report from Fortune values the combined company’s worth at $250 million annually.

The transaction could be completed as early as next month.

A Bloomberg report heralds the deal as a win for private equity which has encountered difficulties competing with corporations in the healthcare space. According to the report, GI Partners took advantage of the EHR company’s stock depreciation to find a partner to bridge and help broker the deal.

“For strategics, there are also merits. They don't have to foot the entire bill themselves and can lean on private equity partners for operational expertise, deal sourcing for add-on acquisitions and, where suitable, the introduction of proven executives to run businesses,” writes Gillian Tan. “It's even more relevant if a company's suffering stock means it no longer has strong currency for an acquisition but still wants to pursue acquisitions for growth. Allscripts, whose stock has shed roughly 20 percent in the year to date, fits the bill.”

For Allscripts, the deal is the latest in a series of agreements with other health IT developers to strengthen its own EHR platform. Last summer, Allscripts took a $200-million equity position in NantHealth with plans to leverage the latter's cloud-based health information technology by incorporating genomic information directly into its EHR technology.

Back in 2013, the Chicago-based EHR vendor acquired Jardogs and dbMotion to add patient engagement and community health technology to its platform. The acquisition of dbMotion also served as the EHR company’s entrée into the population health management market through improved health information exchange.

In making these deals, Allscripts appears poised to compete across the care continuum with other EHR vendors. It remains to be seen if the acquisition and merger gamble pays off for the EHR vendor which was once itself a target of private equity firms as a result of the fallout following an acquisition. That snafu led to the departure of Glen Tullman at the end of 2012 and the naming of his successor and current CEO and President, Paul Black.




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