What's next for Allscripts-McKesson? Innovation and interoperability will be key
One month after Allscripts announced it would purchase McKesson's hospital IT business for $185 million, there are still plenty of open questions about how the deal will play out in a competitive landscape of consolidating hospitals.
Allscripts has certainly expanded its footprint, especially west of the Mississippi. But how it absorbs those McKesson customers – or, more to the point, just how it reconciles its Enterprise Information Solutions business with its own existing portfolio of technologies – will be worth watching, said Justin Campbell of Boston-based consultancy Galen Healthcare Solutions.
Campbell has worked on integration and interfacing projects involving Allscripts, Cerner, Epic, Meditech and others. And he's curious to see how the McKesson acquisition – probably the biggest EHR vendor meld since Cerner scooped up Siemens Health Services for $1.3 billion in 2014 – will play out.
Reaction Data executive vice president Chris Jensen agreed that only time will tell how the deal ultimately plays out.
“Sometimes taking over a stalled brand or line of products can improve circumstances for customers and other times, they are just along for the ride, at least until they’ve had enough and decide to get off the bus,” Jensen wrote in a post-acquisition report based on research collected from Allscripts and McKesson customers.
Reaction Data, in fact, found that 27 percent of Allscripts customers had a negative perception of the merger’s impact, while 47 percent were positive about it. Among McKesson customers 30 percent were negative and 27 percent positive.
"From an Allscripts point of view, it was a very shrewd investment," said Campbell. "You've got to think that with their sales staff, their ability to cross-sell, they're going to demonstrate some return on investment."
But there's little question that their hand was forced, he said. "They're one of the companies that has to answer to Wall Street, and where else are you going to get growth in this market? Cerner and Epic already have big footprints and everyone is moving to their platforms. In order for Allscripts to grow, it's acquiring a legacy platform."
The Chicago-based company has long experience with integrating other vendors' technologies, of course. (Not that it's always been easy.) Unlike Epic, which has grown entirely organically, Allscripts' history is one of mergers and acquisitions: Misys, Eclipsys, dbMotion, Jardogs and, just recently, part of NantHealth.
"This is a company that has grown by acquisition," said Campbell. "One of their challenges is a lack of a single source of truth, a unified database that Epic and Cerner have across their settings. But I understand Paul Black's strategy. The only way they're going to compete in this game is to demonstrate the lowest total cost of ownership."
Campbell added that the deal is a good bet for Allscripts when it comes to smaller and rural hospitals that cannot afford Epic.
"But certainly the consolidation that's happening – maybe some of these small hospitals will be acquired by larger health systems – could hinder Allscripts' strategy," he added. "If one of these health systems scoops up a hospital that has Horizon or Paragon, and that health system is already on Epic, there's no question they'll go with Epic. There's not much Allscripts can do about that. So their long-term outlook may be a bit out of their own control."
Another way they can win? Interoperability.
"Allscripts really casts themselves as being open, and that's exhibited by 120-plus apps that are currently in their app store as part of their Allscripts Developer Program," Campbell said. "But if you're going to be truly open with the dev platform, you must allow insights to be delivered to the point of care, and insert extensibility into your applications to truly be interoperable, so you can facilitate innovation," he said.
Campbell suggested that Allscripts must double down on its ADP program, make its technology extensible, focus on core customers and fuel more innovation than ever. "They now have the footprint, and they should be able to do it themselves across this portfolio," he said. "It will come down to the consolidation that happens in the market as these health systems continue to merge. As such it will be unequivocally important to differentiate with innovation," he added. "But that's easy for me to say, because I don't have to answer to Wall Street."
Indeed, there is a lot at stake.
“The acquisition appears to be a deterrent to attracting new customers as 42 percent of non-customers state they are less likely to consider Allscripts,” Jensen added. “It’s not surprising that more McKesson customers are likely to find an alternative EHR after learning of the acquisition.”