CHICAGO – "Any time a business decision is client-driven, it's much more likely to be successful," says Allscripts CEO Glen Tullman.
And so, Tullman says, he has high hopes for his company's $1.3 billion dollar merger announced in June, which will see Tullman serve as CEO of the combined company, with Eclipsys's president and CEO Phil Pead becoming chairman of the combined company, focusing on smoothing the transition, and tending to key client and strategic relationships, and international opportunities.
"We share with Eclipsys now more than 20 joint clients" including Columbia University Medical Center, the Lahey Clinic and Hartford Hospital, says Tullman. "And they're very interested in having us work together. We have a unique benefit in that both companies use Microsoft .NET as our fundamental architecture, and consequently having the two systems work in an integrated fashion is much easier to do. I've known Phil for years. We both have a healthy degree of respect for each other, and a friendship. So as we began to show up at the same meetings, and those clients suggested we put the companies together, we started to have some conversations."
As Tullman sees it, the two company's strengths are complementary. Allscripts is well known for its presence in the ambulatory market, and Eclipsys is a leader in acute care settings.
Together, the new company will make for a combined client base that includes 180,000 physicians, 1,500 hospitals and 10,000 post-acute organizations – resulting in the industry's largest network of clients on one product platform.
The merger also better positions the combined company to help its clients more effectively access the approximately $30 billion in federal funding for hospital and physician adoption of EHRs provided by the American Recovery and Reinvestment Act (ARRA).
"Both Eclipsys and Allscripts share a vision of a connected system of health in which critical information follows the patient and informs all providers that assist the patient across the complete care continuum," said Pead on a conference call announcing the deal. "This merger will turn that vision into a reality."
With both the Eclipsys Sunrise Enterprise and Performance Management solution for hospitals and the Allscripts portfolio of solutions for physician practices running on .NET, and with both companies sharing an "open architecture" approach, which simplifies connection to third-party apps across care settings, the pair seem well matched. "Given our respective architectures," said Pead, "we believe we'll be able to deliver this integration very quickly."
Indeed, says Sean W. Wieland, senior research analyst at Piper Jaffray, the merger is "a match made in heaven on a PowerPoint slide." But as always, the devil is in the details. While Tullman called the marriage "about as crisp and clean a merger as you're every going to see," it will still be a "very complex" process, says Wieland.
He notes that while there's not much overlap on the hospital side of things, there is some duplication on the physician side. He also wrote that he'd heard "from some customers that the Allscripts Enterprise HER needs some work and the merger could be a distraction to the management.”
Nonetheless, Wieland was inclined to "believe that they will be able to execute." His conviction is borne out by recent history, he said; he gives Allscripts "a lot of credit" for the way it handled the relatively seamless merger with Misys in 2008. (The deal, which is accretive to Allscripts's non-GAAP earnings starting in calendar year 2011, will mean that Misys's controlling interest in Allscripts is reduced to eight percent through share buyback and a secondary offering, with the remainder of the company divvied up between Allscripts (55 percent) and Eclipsys (37 percent) shareholders.
"I don't ever want to say that any integration is easy," says Tullman. "We're going to focus a lot of time and attention, much as we did with the Misys integration. We have a very solid plan in place already, and we feel confident." In the meantime, he and Pead are excited to be leaders in "the single fastest transformation of an industry that we have ever seen," says Tullman.
"Allscripts is a leader in the ambulatory space. Eclipsys is the leader in CPOE, and has been there for seven years; out of the top 21 "Best Hospitals" from U.S. News and World Report, 18 use Eclipsys software. That gives you a sense of the quality there." Meanwhile, "it's clear that Phil loves the space. He's very customer focused. He's very smart about technology. And so his vision was to build a great company. What we concluded together was that there was enough work for both of us to do."
