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Allscripts Making Progress Toward Closing Sale of Netsmart Stake

Allscripts has hired financial advisors to run a formal sale process for its joint venture stake in behavioral EHR company Netsmart.

Allscripts plans to finalize a sale of its Netsmart stake within a few weeks.

Source: Thinkstock

By Kate Monica

- After generating significant interest from a group of financial sponsors, Allscripts has made the decision to hire financial advisors to execute a more formal sale of its joint venture stake in behavioral health EHR company Netsmart.

Allscripts updated investors on the status of its plan to sell its stake in Netsmart during its third quarter earnings call on November 1.

The health IT company has owned about 50 percent of Netsmart for the past two years. Allscripts management initially planned to complete the sale in the third quarter, but made the decision to hold off on following through with a sale after receiving more interest from potential financial sponsors than expected.

Allscripts first announced its plans to sell its joint venture stake in Netsmart in August during its second quarter earnings call.

“Given the substantial interest and the complexity of the sale of our stake, we decided to hire financial advisors to run a more formal sale process and ensure we maximize value for shareholders,” said Allscripts President Rick Poulton during the call.

“We remain more convinced than ever that Netsmart is a great company, with a great team, who have great vision for the future, and Allscripts shareholders to get fairly rewarded for the value that we have collectively created there, whether it be in the near-term or a little further down the road,” Poulton continued.

While Allscripts did not successfully close a sale in the last financial quarter as planned, the health IT company expects to finalize a deal in the near future.

“We have completed the formal auction process and are now engaged in final diligence and late-stage negotiations with a group of financial sponsors,” said Poulton. “We expect these negotiations to run over the next several weeks, and we will make a decision at the conclusion of these discussions on whether to transact or not.”

Allscripts purchased nearly all of Netsmart for $950 million in 2016 in a joint venture with private equity investor GI Partners. As part of the joint venture, Allscripts and GI Partners each own about 50 percent of Netsmart.

While interest in Netsmart remains high, the behavioral health IT company had a disappointing quarter.

“Business performance at Netsmart was lighter than we expected during the third quarter,” said Poulton. “Bookings were down considerably year-over-year — albeit on a very soft year-over-year comp — and both their revenues and earnings came in below our expectations.”

All told, Allscripts posted $522 million in revenue, with an increase of 16 percent over the same time last year. The health IT company also saw losses totaling $36 million during the third quarter, compared to $29 million in the third quarter of 2017.

“Looking ahead, we believe we will continue to benefit from the investments we have made in building out a complete solution set for our clients in both the acute and ambulatory sectors as well as our unique offering in the payer and life sciences business,” said Allscripts CEO Paul Black.

Allscripts recently partnered with substance abuse disorder prevention and management solutions provider Appriss Health to allow users to access prescription drug monitoring (PDMP) information at the point of care.

Users will be able to access Appriss Health’s NarxCare platform through Allscripts ePrescribe, Allscripts Professional EHR, Allscripts TouchWorks EHR, Practice Fusion EHR, and Allscripts Sunrise.

Appriss Health’s PMP Gateway offers clinicians EHR-integrated access to patient prescription information, data analytics tools, and other resources to support clinical decision-making, boost patient health outcomes, and promote safe prescribing practices.

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