Siemens Jumps into HIE Waters

Acquisition fever has set in and they’re dropping like flies, independent HIE vendors that is. Earlier today, Siemens announced its intent to acquire enterprise HIE vendor MobileMD. So in little over a year we have seen IBM snag Initiate, Axolotl fall into the hands of Ingenix/United Health Group (Ingenix is now known as OptumInsight), Medicity tie the knot with Aetna, Harris pick-up Dept of Defense clinician portal darling Carefx and Wellogic, a damsel in distress, being rescued by Alere. Elsevier also announce an intent to acquire dbMotion for a whooping $310M, but nothing came of that other than a substantiation of the rumor that dbMotion was being shopped.

That does not leave many small, independent HIE vendors that have some traction left in the market. Following is our list of such vendors and what might become of them:

4medica: A relative new comer to the HIE market, 4medica will be profiled for the first time in the upcoming HIE Market Trends Report which is scheduled for release in early 2012. 4medica is quite strong on lab information exchange. Future: 4medica still remains under the radar screen as it completes its platform to truly serve all HIE needs. Once that process is complete, the company is likely to gain increasing attention and will be acquired in 18-14 months.

Care Evolution: Privately owned and self-funded, founder has every intent to stay independent. As he has told us on more than one occasion, I’ve already made plenty of money and this is not about cashing out to the highest bidder. Future: Everyone has a price but this company may be one of the last to fall into the arms of another.

Certified Data Systems: Appliance (think small router with embedded HIE functionality) HIE vendor that has close, yet non-exclusive partnership with Cerner. Would not be surprised if they struck a similar deal with Epic as Epic struggles to connect to EHRs outside its system. Future: Fairly new to the HIE market but gaining traction. Will stay independent for next 12-18 months, after that, anyone’s guess.

dbMotion: One company already made a bid, but pulled back, thus pretty clear this company will be acquired, question is how much and we suspect it will be significantly less than what Elsevier was planning to pay. Future: If price is right, could be acquired at anytime.

HealthUnity: Small HIE vendor from the Pacific Northwest that made a big splash when with Microsoft (Amalga UIS) they won the big Chicago HIE contract. Future: With Microsoft cozying up close to Orion, HealthUnity will be looking hard for other partners and/or to be acquired. Will give them 12-18 months as an independent.

ICA: Another small HIE vendor that has had a few wins here and there but will come under increasing pressure from larger, better funded HIEs. Future: Likely to be acquired in next 6-12 months, maybe even earlier.

ICW: InterComponent Ware is a German HIT company and a sizable one at that with over 600 employees. To date, ICW has a very small presence in the US HIE market so an acquisition, if there were one, would have little impact.  Future: Their foreign ownership, size and interests in several health related markets make them an unlikely candidate for acquisition.

InterSystems: Arms dealer to all, InterSystems Cache and Ensemble are widely used in the market and the company has built upon these core technologies to get into HIE market. Future: Fiercely independent and senior team is basically the same since founding this company will remain independent.

Kryptiq: Having signed a strong partnership deal with Surescripts, Kryptiq is unlikely to be interested in any acquisitions talks. Future: Will remain independent for time being and if Surescripts’ Clinical Interoperability solution gains significant traction, Surescripts will likely acquire Kryptiq outright.

Orion Health: New Zealand-based, privately owned with good prospects in markets beyond America’s shores, this company will likely want to stay independent (future IPO) unless of course a very large software company (think IBM, Microsoft, Oracle etc.) gives them an offer they can’t refuse. Future: Will stay independent.

Getting back to the Siemens/MobileMD deal…

While we have not had an opportunity to talk with either Siemens or MobileMD (will provide follow-on update once we do) here are some quick take-aways:

Siemens has chosen to buy. This is unlike other EHR vendors who have either built their own HIE solution (athenahealth, eClinicalWorks, Epic, NextGen) or have partnered with others (Allscripts, Cerner, GE).

Existing partner doesn’t cut it. Siemens has an existing partnership with NextGen for ambulatory but NextGen’s HIE is a closed system. This prevented Siemens from being able to leverage this partnership to serve their client needs, which most often includes a multitude of EHRs in the ambulatory sector to interface with.

Lacked sufficient internal resources. By buying into the market, Siemens has signalled that it does not have the development resources to respond quickly enough to customer demand (not too surprising, Siemens has been struggling in the North American market for sometime). This also signals that they could not find the right partner outside of their NextGen relationship, which is a tad puzzling as we are quite sure they paid a premium for MobileMD.

Paid a premium. We estimated MobileMD sales in 2010 just shy of $8M in our 2011 HIE Market Report. HIE vendors are selling at a premium, even second tier ones such as MobileMD. Assuming industry average growth in 2011 (we peg it at 30%) that would give MobileMD sales of ~$10.5M for 2011. We put the final strike price for MobileMD at $95-110M.

Existing MobileMD customers relived. Unlike the acquisitions of Axolotl and Medicity, which both fell into the hands of payers, MobileMD is going to a fellow HIT vendor which must assuage the fears of more than a few MobileMD customers and prospects. Siemens intends to keep MobileMD whole, bringing on-board MobileMD’s president and founder, again contributing to continuity.

ADDENDUM: Please excuse our lack of posting on industry trends in a more frequent manner. Like many in the healthcare sector, Chilmark Research is struggling to keep up with demand and recruit top-notch resources. We seem to have hit our stride in this market, are receiving countless engagement inquiries and engaging in most of them. All good problems to have, but you dear reader are the one who ultimately suffers from our lack of posts. Thank you for your patience to date and know that we are doing our best to keep you informed with some of the best research and analysis of this critically important and meaningful market.

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Orion Strengthens Portfolio & MSFT Gains HIE Partner

On Monday, New Zealand based Orion Health announced that it would acquire the mothballed Health Information Services (HIS) assets of Microsoft, Amalga HIS. In the same announcement, Orion and Microsoft also announced a partnership for Microsoft’s healthcare analytics solution Amalga UIS.

Microsoft, during its HIT buying binge days a few years back had picked up the Thai-based HIS company, Global Care Solutions. Global Care Solutions was credited with building the HIS for medical tourism destination Bumrungad hospital in Thailand. While Microsoft tried to quell EHR vendor fears in the US that this HIS solution suite, later rebranded as Amalga HIS, would only be sold overseas and not it the US, most EHR partners chose to put some distance between themselves and Microsoft. Needless to say, this created far more challenges for Microsoft and its still budding healthcare sector initiatives and the company decided to discontinue further investment in Amalga HIS in July 2010, effectively putting it on the market.

Now, over a year later, Microsoft has finally found a buyer for this asset in Orion Health, who, like Microsoft, has stated that it does not intend to sell this solution suite in the US but instead focus on the Australian and Asian markets. Would not be at all surprising if Orion further extended that reach to all Commonwealth countries, which has been the company’s Go-to-Market (GTM) strategy to date. In speaking with Orion yesterday, they reiterated their intentions to not sell this solution suite in the US market.

Seeing as it took Microsoft over a year to unload Amalga HIS, one has to wonder: Was this solution suite poorly architected or was Microsoft asking far more for it than what others were willing to pay? Having been demo’d the solution on a couple of occasions, likely the latter. Which then makes one wonder, so what kind of deal was actually struck? Our guess is that it had a lot to do with the second portion of this press release, that was overlooked by most in the press, the future partnership surrounding Amalga UIS.

Our latest research on the HIE market is pointing to a significant increase in interest in combining the basics of an HIE (getting clinical data flowing) with analytics to deliver better, more informed care and equally important, optimize the operations of a healthcare organization. As the healthcare sector moves from a transaction-based reimbursement model (fee for service) to one based on outcomes (value-based contracts), analytics will play an increasingly critical role. Thus, we are seeing a number of moves in the market, both acquisitions and partnerships, that look to more closely tie what have been two disparate offerings into one cohesive package.

Orion Health does not have a robust analytics solution. Microsoft does not have a robust HIE solution. Bringing the two together could create a powerful offering and potentially put Orion on equal footing with other HIE market leaders that are currently a step ahead of them with regards to analytics, including OptumInsight (former Axolotl + Ingenix), Thomson Reuters and Care Evolution and their HIEBus platform and IBM, who acquired Initiate in 2010. For Microsoft, this also could be a significant win for to date, they have struggled to find a strong Tier One HIE partner – with Orion, they have found such a partner that could juice sales for Amalga UIS.

But this is far from a done deal for as with any partnership, the devil is always in the details. Based on our conversations with both companies, they do appear to be cognizant of the challenges that lay before them. The biggest challenge will be getting Amalga into a form factor that accelerates time to value for those who adopt this solution. To date, the Amalga solution has seen more than its fair share of challenges in the field in this regard. Couple that with the Orion customer base, which is weighted towards public HIEs, and one can foresee some significant GTM challenges for these two companies in the future. Allscripts faced a similar challenge with HIE partner dbMotion. Orion and Microsoft would be wise to look closely at how Allscripts successfully addressed this challenge for their target market.

 

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AllScripts+Eclipsys, Who Loses?

Today, leading ambulatory EHR vendor AllScripts announced that it will merge (it’s really acquire) with one of the larger acute care EHR vendors, Eclipsys creating one of the largest EHR vendors in the market with some 180,000 physicians using their solutions.  This acquisition is being driven not by ARRA and all the taxpayer dollars flowing into healthcare, but by healthcare reform and the trend towards bundled payments, patient centered medical home models and the move by hospital networks to become Accountable Care Organizations (ACOs). Large healthcare organizations will increasingly be looking to HIT vendors who can provide the full suite of solutions for both acute and ambulatory requirements. This merger is simply an acknowledgement of that need.  It will be interesting to see what impact this merger will have on other ambulatory EHRs, such as NextGen and eClinicalWorks.

Now there will be plenty of others writing about this merger and its implications to the market so rather than focus on the obvious issues regarding EHRs, rationalization of product portfolios, go to market, etc., Chilmark Research will look into one small and important piece:

What might this acquisition mean to these companies’ respective HIE partners, dbMotion and Medicity?

We’ve spoken to both HIE vendors and are on track to release our HIE Market Trends Report (includes in-depth profiles of the twenty leading HIE vendors in the market) by the end of June so we are uniquely positioned (at least we think so) to provide an educated assessment.

AllScripts+dbMotion:
In April 2009, AllScripts and dbMotion announced a go-to-market partnership wherein dbMotion would be AllScripts go to partner for all things HIE.  This partnership is both marketing and R&D with both companies working together to deliver what is called the AllScripts Community Record powered by dbMotion solution.  This partnership did not make a lot of sense to us as dbMotion is a fairly sophisticated solution that is more suitable for large IDNs and academic medical institutions like its US lighthouse customer, UPMC, which also happens to have a significant equity stake in dbMotion.  dbMotion is also not exactly an inexpensive solution.  So how does this fit in the ambulatory market that is the sweet spot for AllScripts?

Speaking to Peter McClennen, dbMotion’s North American President, Peter stated that he is both “excited and humbled” at the thought of this merger. Excited in the future prospects, humbled in its implications to the broader market. Peter went on to state that to date, the partnership has seen a number of market successes such as that at UMass Medical Center, and most recently the win at Thomas Jefferson University.  Today, AllScripts/dbMotion have about a half dozen customers that are leveraging the dbMotion suite to enable, as Peter put it, “actionable semantic interoperability” between an acute care facility and affiliated ambulatory practices.  What Peter means by actionable semantic interoperability is basically an ability to create an on-demand view of a patient record (drawing from all data sources in a dynamic fashion), which is quite similar to Microsoft’s Amalga platform.  This is an important factor which we’ll come back to later.

So getting back to the question: How does dbMotion fit in the ambulatory market that is the sweet spot for AllScripts?  Looking at those joint sales, large mothership institutions (UMass, Jefferson, etc.) are making the investments in dbMotion to more closely tie affiliated practices who are on AllScripts.  These large institutions have the need and the resources to make this happen.

Eclipsys+Medicity:
In June 2009, Eclipsys and Medicity likewise announced a a go-to-market partnership.  Unlike the AllScripts/dbMotion partnership, the Eclipsys/Medicity partnership is far deeper wherein Medicity is the underlying technology powering the Eclipsys’s branded HealthXchange.  This requires a deep level of technology integration between the two respective platforms.  It also requires a higher level of sales and marketing investment by Eclipsys as HealthXchange is on the price sheet that their sales force takes to market.  It’s no easy task to back-out of such a deep integration.

In speaking with Medicity’s CEO, Kipp Lassetter earlier today, Kipp stated that Eclipsys informed him that they remain “fully committed to the partnership.” Kipp went on to state that in addition to several wins to date, the partnership has a “number of deals in the works.”  As with the AllScripts/dbMotion partnership, the objectives are the same, help large IDNs and hospital networks better link acute to ambulatory.  HealthXchange is based more on Medicity’s MediTrust and layered in their some of their Novo Grid technology.

AllScripts+Eclipsys, Who Loses?
In any acquisition/merger there is a natural rationalization process, rationalization of staff, products and of course partnerships.  The combined entity will now have two HIE partners and some rationalization may occur with one HIE vendor remaining at the alter, while the other walks away with the groom.

In their investor slidedeck, AllScripts, on slide 22, clearly shows HealthXchange in the Eclipsys solution portfolio stack.  Looks like AllScripts certainly acknowledges the importance of HealthXchange, though it is curious that they have the solution under the columns of financial and administrative transactions and not clinical. Evenmore curious is that there is no mention of dbMotion and the AllScripts Community Record solution on this slide.

So does this mean dbMotion is the one that will be left standing alone at the alter?

Well, if anyone was left standing alone, it would likely be dbMotion, however, we do not believe this will happen for a couple of reasons:

First, though the relationship is barely a year old, AllScripts and dbMotion have benefited from landing a number of key wins, so why stop now?

Secondly, dbMotion has one of the more technologically advanced HIE solutions in the market today. It’s not cheap, but it does provide some pretty impressive capabilities that are not easily matched.  And remember what we said earlier, dbMotion is more akin to Microsoft’s Amalga than it is to the traditional HIE solutions in the market today, including Medicity’s solution suite. Thus, there may actually be more opportunities to create synergies between these two companies and their offerings.  The wildcard in this scenario is Microsoft’s partnership with Eclipsys wherein Eclipsys is now offering modular apps on top of the Amalga platform.  Will this have any influence on the dbMotion partnership?  That’s anyone’s guess today.

In closing, we see polygamy occurring with both Medicity and dbMotion playing a role in the combined AllScripts/Eclipsys organization.  If done properly, everyone will benefit, especially customers.  If done wrong, a major cluster f*ck in the making.  These are capable companies with capable leadership, our bet is on a successful polygamist relationship.

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HIEs, Future PaaS for Healthcare?

iaas-paas-saasAn interesting, and somewhat overlooked press release came out last week from the health information exchange (HIE) vendor Axolotl wherein they announced that a third party independent software vendor (ISV), eHealth Global Technologies, would be available on top of the core Axolotl HIE application, Elysium Exchange.  The new app, Elysium Image Exchange allows for secure image exchange among HIE participants.  Though the new application may appear like nothing more than Axolotl contracting out the building of an app desired by its HIE customers, there is a more here than meets the eye.

HIE Vendors as Future PaaS for Clinical Needs

Independent HIE vendors (not part of a larger EMR vendor) such as Axolotl, Covisint, dbMotion, InterSystems, Medicity and RelayHealth are in a unique position to become more than just an HIE focusing on the exchange of clinical records but could become Platform as a Service (PaaS) vendors providing a wide range of services and apps on top of their core infrastructure, OS and App Server stack.  The following two figures illustrate what is possible should these vendors open up their application programming interface (APIs) to allow other ISVs to build apps on top of their HIE platform.

HIE1

HIE2

HIE vendors are in an ideal position to become a PaaS for they already have the key features necessary.  As aggregators and distributors of clinical data in a secure fashion, these vendors have the core infrastructure already in place.  They have the data repository, they have the master patient index (MPI) and they understand what is required to address privacy and security requirements of data exchange within a network.  What these vendors, by and large have not done is open their APIs to third party ISVs to truly create a PaaS.

In speaking with Axolotl’s president Glenn Keet he stated that they came to the realization that they alone could not move fast enough to meet the needs of the market.  While they currently offer an CCHIT certified “EMR lite” for small physician practices there are a multitude of other services that they foresee.  For example, within the “meaningful use” criteria that physicians will need to demonstrate to receive reimbursement for EHR adoption, there are a number of quality reports that must be created and filed with CMS.  Keet envisions ISVs leveraging Axolotl’s APIs to create services to automate such reporting.  Meaningful use criteria also will require physicians to sponsor a PHR for their customers.  Again, with an open API, PHR ISVs could sit on top of the Axolotl (or other HIE vendor) platform and provide such capabilities. Clinical decision support (CDS) tools are another app/service that would be ideally suited to sitting on top of an HIE PaaS.

Microsoft is another vendor who is now venturing in to the HIE market with its Amalga platform, which is the foundation for the Wisconsin HIE (WHIE).  Using its core Amalga UIS along with HealthVault, Microsoft could also create a clinical PaaS with a multitude of ISVs providing services to the physician market. To date and to our knowledge, this has not occurred but we’re pretty sure Microsoft is looking into providing such capabilities as it would be in alignment with other actions that they have done to date in the healthcare sector.

What this may portend is the creation of PaaS that support the concept of substitutable apps as laid out by Ken Mandle and Issac Kohane of Children’s Hospital Informatics Program (CHIP) Boston. Another proponent is David Kibbe with what he refers to as Clinical Groupware a concept he first described back in Febuary 2009.  In each of these examples, the dominant theme is the move away from monolithic EMR/EHR apps to small, lightweight apps that are invoked when needed.  More information on this concept can be found at the recently created site: ITdotHealth (Note: Unfortunately, at the recent meeting at Harvard Medical School, Health Information as a Platform, which was organized by Mandl and Kohane, outside of Microsoft, there did not appear to be any representation from HIE vendors.)

An Opportunity for RHIOs to Become Viable?

A lot of effort and money is now being poured into the build-out of public Health Information Exchanges (HIEs) that are commonly referred to as Regional Health Information Organizations (RHIOs).  While many see it crucial to build out this information exchange infrastructure to support care coordination (a key criteria for stimulus funding reimbursement for EHR adoption), the challenge for RHIOs has been to create a business plan that insures long-term viability of a RHIO once grant funding drys up.  The market is littered with failed, failing and simply struggling RHIOs.  Recently, while sitting in on a conference call where a State RHIO discussed their go-live plans a question was asked: Do you have a model for sustaining the RHIO long-term?  To which the Executive Director of the RHIO replied, No.

But might not a RHIO that is actually a PaaS for a given region or State, become a provider of Clinical Groupware including a range of services and applications such as multiple lightweight EMRs to choose from, say one for pediatrics, another for orthopedists, a third for general practioners, quality reporting services, a range of CDS apps, etc. charging a small transaction fee for the use of such services and thereby begin to create viable service-based business? We think so and see this as the next evolution in the HIE market.

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