Mergers and acquisitions may be hazardous to health IT

Lack of interoperability, integration for EHR systems remains serious concern

Mergers and acquisitions (M&A) can be hazardous to a company’s health, industry experts often warn. In the realm of health IT, this maxim is no less true.

Robert W. Holthausen, professor of accounting, finance and management at the University of Pennsylvania Wharton School, is one expert issuing the caveat. “Various studies have shown that mergers have failure rates of more than 50 percent.” In fact, he added, one recent study found that a whopping 83 percent of mergers fail to actually create value.

Health IT officials also have expressed their concern over industry M&A activity. Barry Blumenfeld, chief information officer at MaineHealth, for example, cited poor electronic health record (EHR) product integration resulting from M&A as one of the biggest reasons the hospital is transitioning from Allscripts and MEDITECH – companies that have recently struggled due to M&A activity – to Epic.

“[With Allscripts], we found we weren’t getting the integration we needed,” Blumenfeld said.

June 2010, the Chicago-based EHR provider Allscripts announced it would merge with hospital IT firm Eclipsys in a $1.3 billion stock deal. That merger, said to have united some 180,000 physicians and 1,500 hospitals nationwide, had foreboding consequences for Allscripts.

Chairman Phil Pead was fired earlier this year along with protest resignations of three other board members. Company shares plummeted more than 40 percent, and CEO Glen Tullman cited “lower than expected sales” as responsible for Allscripts' dismal numbers.

Barry Blumenfeld, CIO, MaineHealth    Insiders, however, cited the company’s failure to integrate products and company cultures as the merger’s biggest misstep.                        

“The question is can you make Company A work under Company B's structure,” said Thomas Lys, professor of accounting information and management at Northwestern University's Kellogg School of Management to  “And the general answer is, probably not.”

McKesson Corporation also followed a similar path to that of Allscripts, with M&A activity of its own, including the 2010 merger with US Oncology, the September 2012 acquisition of health IT company MedVentive and the October 2012 acquisition of MED3OOO.

The problem with these acquisitions, according to Blumenfeld, is that it makes interoperability between a hospital’s health IT system nearly impossible – and that’s simply unfavorable from a user’s perspective.

“When you get to vendors like McKesson or GE or Allscripts, the problem is that they’ve grown mostly by acquisition, and they have these potpourri of products and different platforms and operating systems,” Blumenfeld told Healthcare IT News. “It becomes very difficult – standards or not – to carve together something that feels coherent or feels consistent.”