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IN THE NEWS

BREAKING: Industry Analysts React as Allscripts Pays $185 Million for McKesson’s Enterprise Information Solutions

Last year when McKesson Corp. announced the creation of a new healthcare information technology company with Change Healthcare, it also said it would seek strategic alternatives for its EHR-focused business unit and promised a smooth transition for its customers. On Aug. 3, Chicago-based Allscripts (NASDAQ:MDRX) announced it has agreed to pay approximately $185 million in cash to acquire McKesson’s (NYSE:MCK) hospital and health system IT business, Enterprise Information Solutions. View full story

A Review of Electronic Prior Authorization Technology

With U.S. national healthcare expenditures having reached $9,990 per person ($3.2 trillion total) in 2015 (and projected to grow another 6.5% in 2017), the industry continues to pursue innovative ways to reduce costs, such as moving to value-based care, narrowing provider networks and exploring healthcare technology innovations. While not a new concept, in an effort to pressure costs, there has been additional emphasis in recent years on requiring prior authorization requests for certain (typically high-cost) procedures or medications; this has resulted in a 33% increase in total industry authorizations in the last two years. View full story

Why Former Tech Execs Are Leaving Google And Twitter To Start Health Care Companies

When Stephanie Tilenius, a former senior executive at eBay and Google, decided to start a health-coaching app, many in her network were incredulous. “Everyone thought I was crazy,” she recalls. “Some people loved that I wanted to do something to help others, but a lot socially ostracized me.” View full story

Siemens/Cerner Megadeal Met with Praise, Trepidation by Industry Experts

Across the healthcare IT industry, analysts and insiders are praising Kansas City, Mo.-based Cerner Corporation for its $1.3 billion acquisition of Siemens’ health IT division, while recognizing that there is a lot of uncertainty surrounding the combined company’s future. View full story

ADP Enters Rapidly-Growing Medical Billing and Revenue Cycle Management Market

ADP® today announced the acquisition of privately-held PhyLogic Healthcare, a highly-respected Revenue Cycle Management (RCM) company that has served small- and mid-size U.S. medical practices since 2001. The ADP medical office software division, ADP AdvancedMD®, a provider of leading cloud practice management, electronic health record, medical scheduling, and billing applications, now offers outsourced medical billing services to practices seeking to improve revenue and offload costly and complex medical claims processing. View full story

What Ben Rooks Sees

Is this a particularly unsettled time in the healthcare IT vendor industry, or is it just my imagination? It’s not my imagination, Ben Rooks confirms. Ben, a member of our editorial advisory board and one of the most astute observers of the vendor sphere, says he sees this as a time of “frothiness,” and indeed as a third period of time in the past two decades in which merger and acquisition activity has spiked within healthcare IT. View full story

Drkoop.com Epitomized Hype of Tech Boom and Bust

In the late 1990s, Ben Rooks was an equities analyst, spending much of his time flying around the country meeting with health-care and technology companies that could soon be going public. He still remembers running into the chief executive officer of drkoop.com Inc., an Internet-based consumer health-care network founded by former U.S. Surgeon General Dr. C. Everett Koop. To his surprise, he learned the company was planning an initial public offering. “I remember thinking, ‘You don’t really have a business. How can you be going public?’” said Mr. Rooks, who now is a principal at ST Advisors, a strategic-advisory-services firm he founded. View full story

Healthcare Informatics

2016’s M&A within Healthcare Informatics’ Top 100—Caution Emerged

Last year, we predicted that 2016 would herald slightly muted transaction valuations and a reduction in the total number of completed healthcare IT (HCIT) transactions. Instead, after a somewhat muted first half for financings, we had another overall industry record-breaking year for both investments and M&A activity, albeit less among the top-tier vendors within the Healthcare Informatics 100. This could be regression to the mean after a torrid level of activity in 2015, or it could well be a result of some players remaining comfortably on the sidelines as they absorb past acquisitions, focus on internal growth or, perhaps wait for valuations to come down. View full story

Examining 2015’s M&A Key Activity Patterns with the Experts at ST Advisors

With 2015 being a year of unprecedented merger and acquisition (M&A) activity in healthcare, Healthcare Informatics Editor-in-Chief Mark Hagland sat down to speak with Michelle Mattson-Hamilton and Ben Rooks of ST Advisors, a strategic and financial advisory firm focused on the healthcare IT industry. View full story

Fingerprints of Value-Based Care Revealed in Much of 2015’s M&A Activity

It’s that time of year again; time to sit back and reflect/opine on another year of mergers and acquisitions (M&A) — and what a year it was. Last year saw M&A at record levels (328 HCIT deals in all, up from 308 in 2014) — not to mention a solid number of IPOs (four in core healthcare IT) and a tremendous amount of venture and private equity investment (more than $9 billion invested through 420 transactions). As of the end of 2015, healthcare IT (broadly defined) even had several “unicorn” investments in its ranks (companies valued at more than $1 billion) — Proteus Digital Health, NantHealth, and Zocdoc. Strategic buyers (companies) led in the number of overall deals last year, vs. private equity firms—almost 3 to 1, and looking at disclosed transaction values (recalling that smaller deals don’t have to be disclosed), we learned that 2015 was a year of large ($50, $100, and $multi-hundred million) M&A deals. All in all – a rather glorious (aka active) year for institutional investors, companies looking to be acquired, companies seeking outside investment, and companies wishing to make acquisitions. View full story

The Healthcare Informatics 100 and the Healthcare IT Vendor Sector

You might call it favored-nation status. The 2015 Healthcare Informatics 100, Healthcare Informatics’ annual ranking of the top 100 healthcare IT (HIT) companies by revenue, has a combined revenue of $53.5 billion, equaling the gross domestic product of a small nation. Throw in another billion or so from IBM and Oracle, which do not report HIT revenue but hover in the estimated half billion-dollar range each, and combined 2015 HCI 100 revenue (based on 2014 figures) climbs to nearly $55 billion. View full story

2013 Healthcare I.T. M&A: Do Many Notes Make a Song?

As we do each year when we sit down to write this article, we begin by first taking a look back at last year’s M&A Review. We concluded with a prediction and a promise. First, we anticipated some re-emergence of larger deals, then we promised to discuss athenahealth’s (#22) $293 million acquisition of mobile physician tools vendor, Epocrates. Candidly, I’d give our prediction a B at best. While the M&A market has been robust to say the least, it has mostly been midsized companies acquiring smaller ones (at high prices), with very little movement out of the Healthcare Informatics 100 due to acquisition. View full story

2012 Healthcare IT M&A: The Dog that Didn’t Bark

Activity? Yes. Excitement and liquidity? Not so much. Last year at this time we noted that 2011 saw fewer transformational deals than we would have expected. Surprisingly, 2012 saw fewer still. In fact, the two most noteworthy deals could have been the ones that failed to occur. Both Allscripts (#9) and Merge (#37) shut down their publicly announced sale processes without a winning bid, no doubt disappointing investors who purchased shares in hope of a quick flip (never a wise idea) as well as both companies’ investment bankers. There were some noteworthy M&A transactions among the HCI 100, however, so let’s review some of the highlights. View full story

Healthcare IT M&A 2011

In 2011 the industry actually saw fewer transformational deals than we would have expected, given the attention paid to the sector of late. In fact, the three largest deals we saw weren’t one company buying another, but rather private equity firms buying their way into HCIT, suggesting, perhaps, that the market is more attractive to those outside it seeking to enter than to those who are already within and seeking to grow larger. Clearly, this wasn’t the rule, but it was definitely a trend. View full story

M&A 2010: More Buying, Less Spending

Interestingly, while 2010 saw a fairly active level of M&A, fewer companies from last year's list were sold compared to previous years. This suggests that consolidation activity, while still quite robust, is focusing more on smaller companies, in part because the larger companies have already been consolidated. Where the 2010 list saw nine exits, this year saw only five (plus two instances of private equity firms purchasing from another investor). More on overall consolidation trends in a moment, but first let's review the top deals from the HCI 100. View full story

Mergers and Acquisitions: Uptick Noted

The past year saw a substantive uptick in M&A across all markets, and healthcare IT was no exception. Bouncing off a lackluster year, we've seen both transaction sizes and volumes increase. The HCI Top 100 saw a few names drop out as companies were acquired, making room, of course, for new up-and-comers to join the list. View full story

M&A’s Small Steps

As with so much of the economy over the past year, healthcare IT corporate consolidation has seen a meaningful slowdown. Just as the buyers of software systems are taking a breather, waiting for the economy to improve and, if a buy is necessary, looking for a bargain, so too are buyers of companies. While the number of reportable deals is roughly comparable to last year (and down sharply from the year before that), the size of the checks being written is considerably smaller. Why? Fewer sellers want to go to market in the worst economy in recent memory, and fewer buyers want to take chances or stretch for value. View full story

Gone Shopping

Looking at the level of mergers and acquisitions activity since last year's M&A article, the pace of consolidation appears to have taken a slight breather compared to the rate of the last two years. Where last year's review saw 33 transactions (in the year ending in June, 2008), this year, we see only 25. The reason, to a certain extent, could well be ripples from the sub-prime market meltdown. View full story

On the M&A Front

Since last June's publication of the Healthcare Informatics 100, mergers and acquisition activity in the healthcare information technology (HCIT) sector has continued at a torrid pace, as it has in the broader economy. Fueled by a combination of low interest rates, companies eager to find new growth opportunities, and continued excitement around the sector, close to a dozen of last year's list have been acquired, as well as several companies that likely should have been included in the 2006 edition. View full story

The Hits Just Keep on Coming

While only a few months have passed since February's merger and acquisition update article, there's been enough activity to warrant another. Let's briefly review the largest mergers and acquisitions activities on the companies in and close to the Healthcare Informatics 100. View full story

Consolidation Alters the Mix

Although Healthcare Informatics reviewed merger and acquisition activity last year as part of its annual June 100 issue, the accelerated pace and scale of consolidation warrants an update on how the contenders have shifted and what the chess board will look like going forward. A scan of the upper tier of the top 100 list finds mammoth companies acquiring large ones, new market segments entered through technology acquisitions, companies dividing themselves and an industry stalwart hitching its wagon to one of the biggest companies in the world. View full story

M&A in Healthcare IT

While still considerably down from its high several years go, the number of merger and acquisition transactions grew in 2003 and by all appearances is likely to continue to do so going forward. Between March 2002 and March 2003, M&A activity was near a nadir level with roughly 30 combinations. Between March 2003 and March 2004, closer to 40 transactions were announced. Unlike in the heady days of the dot-com bubble, almost all deals were relatively small. Only six exceeded $100 million, and only one—Rochester, N.Y.-based Eastman Kodak’s acquisition of dental software vendor PracticeWorks—reached $500 million. View full story

HISTalk: Healthcare IT from the Investor's Chair

Musings from the Chair

With summer winding down and Labor Day in the rear view mirror, it felt like a good time to write a quick Investor’s Chair post and share one or two of the more interesting things I’ve noted in the market of late. The biggest news of the summer was clearly Cerner’s announced acquisition of Siemens’ healthcare information technology unit (or, as we old timers would say, Shared Medical Systems.) View full story

Venture Debt: To Use or Not to Use?

"CareCloud borrows $25.5 million from a growth capital lender. I’m never cheered by a company taking on debt just like I wouldn’t be thrilled about a relative signing up for a home equity loan, but I guess it’s good news to be found credit-worthy and to have your plan for using the money vetted by someone whose objectivity is inarguable given their interest (no pun intended) in being repaid." Let me present an alternative viewpoint on venture debt. Debt can be a great part of a company’s capital structure. Let’s use my favorite fictional company, eEngageLytics, as an example. View full story

M*Modal from $1.1 billion to Chapter 11 – What Were They Thinking?

"Mr H, can you get Ben Rooks to opine on how smart Wall Street types could pay $1B for a $450M transcription company? Greater fool theory or something sinister?" Sitting here in the Investor’s Chair, few things make me happier than a thoughtful question. I’m wondering what sinister theory you have in mind (and I’d love to hear it), but my view is emphatically one of the Greater Fool Theory. To support my thesis, let’s enter Mr. Peabody’s WABAC Machine and take a look at the events as they unfolded. View full story

Whither Venture Financing? Or, Where Have All the Cowboys Gone?

Readers might recall my post two years ago that discussed several ways to capitalize a new venture. I’d like to use today’s post to discuss some of the root challenges in one of those options: venture financing. View full story

Thoughts on IPO Pricing: Vocera

With the benefit of hindsight, perhaps Vocera and its underwriters did underprice its IPO, but there’s no way to predict how a company will trade once it’s public. Recall that the underwriters (led by JP Morgan and Piper Jaffrey in this case) had to take their best guess on how much investors would pay for Vocera stock at the time of pricing. The initial filing range is an even broader guess (albeit an informed one, based on how comparable companies are trading). View full story

Ask the Chair: How do I invest in HCIT? And What is the Health Evolution Partners’ Innovations Conference?

“My broker has found nothing other than the usual suspects and none of them are rated all that good. It would be interesting to have your investment banker dude weigh in on investing in a fund or a reasonable combination of individual stocks, with no promises or guarantees, of course.” I’m guessing that would be me, as both a former analyst-dude and I-banker dude. Here’s my view. View full story

Why Does the Financial Community Attend HIMSS?

The tickets are bought, the hotel rooms booked, and the excitement is near. Time to start the HIMSS prep. Inquiring minds want to know – what do members of the financial community do at HIMSS? Yes, in addition to vendors and healthcare professionals, Orlando will be swarming with a bevy of equity research analysts, investment bankers, venture capitalists, and private equity investors. One might wonder. Why do they come? What do they do? What do they hope to get out of it? View full story

Ask the Chair: Thoughts on both RSNA and Aetna’s Purchase of Medicity

RSNA is short for the annual meeting of the Radiological Society of North America. This year was its 96th Scientific Assembly and Annual Meeting. A long-time attendee (the late CEO of Hologic) once told me that the reason it’s held Thanksgiving weekend in Chicago is because it was started as the Midwest society meeting. It allowed all the radiologists’ wives to do their holiday shopping on Michigan Avenue, the “Magnificent Mile”. I’m sure everyone loves flying in to one of the country’s busiest airports on one of the most-traveled days of the year, but there you have it. I, for one, am glad I can take the train! View full story

Health 2.0 2010 – Two Perspectives, One Attendee

I attended my second Health 2.0 conference in San Francisco last week and find myself suffering from multiple personality disorder as a result. My multiples (only 2) are the geeky, health policy, propeller-head Ben; and the Investor Chair Ben. Allow me to share both views. View full story

Capitalizing a New Venture: So Many Choices…

Healthcare in America is all about entrepreneurship — from medical spas to physician-owned hospitals and imaging centers to million-dollar salaries for hospital execs (I agree wholeheartedly with Mr. H on that topic, btw) to software entrepreneurs like Neal Patterson (Cerner), Judy Faulkner (Epic), or Randy Lipps (who realized that supply storage could be improved while his child was in the hospital and so founded Omnicell). Anyone in the healthcare system, from physicians to business people to lab managers, who realizes that the current system they are using or experiencing just isn’t working as well as it could or should can decide to take the risk and form a company, develop a product, and go to market. View full story

Ingenix: Drunken Sailor or Super Genius?

It’s been an interesting time with multiple industry-shifting M&A transactions (but not much in the way of public equity activity). The big question on everyone’s mind these days is “What is Ingenix?” (a) a drunken sailor? (b) a whale at the HCIT casino? (c) just too darned wealthy? (d) a genius assembling parts in a way that has yet to become clear? I would submit it’s actually (e), all of the above. View full story

HIMSS Health IT Venture Fair

Now that the dust from HIMSS 2010 has settled, all the follow-up e-mails sent, and the trinkets and swag carefully filed away, I wanted to deliver my overdue thoughts on the Venture Fair that was held on the Sunday before the full festivities got underway. View full story

Take-Private Transactions

The end of 2009 brought a few company announcements that were particularly relevant to the investment community. Noteworthy among them were the sales of enterprise vendor QuadraMed and radiology systems vendor Amicas to private equity (aka PE, buy-out or leveraged buy-out – LBO – investors). When a public company is sold to an investment firm rather than another company in the same or adjacent sector (such as Sentillion’s sale to Microsoft or CareMedic’s sale to Ingenix), it’s known as a “take-private” transaction. View full story

Ask the Chair: What is this J.P. Morgan Healthcare Conference I keep hearing about?

“All these HCIT companies have been issuing press releases lately informing us that they are going to present at the 28th annual J.P. Morgan Healthcare Conference. What is that and should I even care?” View full story

The IPO Market Returns

As I write this post, the IPO market continues to rock and roll. As some confidence returns, investors look for new places to put money, and perhaps dress their year-end performance results with some nice IPO bounces. Wall Street is, of course, happy to oblige, especially in our own little corner of the economy, healthcare information technology. View full story

Initial Public Offerings, Part 2

The IPO market for HCIT continues to show some signs of life, or at least hoped-for life, as Accretive Health filed its IPO Prospectus (known as Form S1) with the SEC for a $200 million capital raise in late September, with part of the use of proceeds to pay back its private equity investors. Those who notice, track, or even care about such things observed that the company filed with four of Wall Street’s largest firms (known as Bulge Bracket banks) as lead managers — Goldman Sachs, Credit Suisse, JP Morgan, and Morgan Stanley. View full story

Initial Public Offerings — How and Why?

With the recent stock market recovery, companies are once again going public (or, as they say on the Street, “the IPO window is open”). Emdeon returned to the public market with a successful IPO in mid-August and Healthport recently filed its prospectus with the SEC. I’ll sound off on both of those shortly, but I’m sure some might appreciate a plain English translation of what I just said along with how it happens. View full story

How Do Equity Analysts Cover Companies?

I began my Street career on a crisp autumn day as a sell-side stock analyst (well, I was an associate analyst first) covering healthcare IT companies, most of which seem to have been acquired by HBO & Co. (now, of course, known as McKesson). Spending about a decade as a research analyst, I covered the stocks of around 25 companies such as Cerner, HBO, Sunquest, and Eclipsys. As the dot-com/e-health era arose, I covered those stocks as well, helping to take companies like Allscripts, Healthstream and others public. View full story

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