Allscripts to Pay $100 Million Cash to Acquire Practice Fusion

Today, Allscripts announced that it would pay $100 million cash to acquire EHR vendor, Practice Fusion. I wouldn’t quite say this is a fire sale, but in Silicon Valley it’s pretty close when you consider that according to CrunchBase Practice Fusion had raised over $157 million. These seem to be the kind of transactions that Allscripts likes to do. I’ve heard it said that Allscripts is the place where EHR software goes to die. That’s a corrupt way of describing what I think has been their strategy.

The press release said that Practice Fusion supports 30,000 ambulatory practices and 5 million patients. I wouldn’t be surprised if the practices number is inflated since it’s a free EHR and a lot of ambulatory practices signed up to check it out, but don’t actually use the software. I’m at least 2-3 of those practices and haven’t touched my accounts in years. The July 2017 meaningful use attestation data listed 8,440 providers using Practice Fusion software. So, Practice Fusion still has a good size user base, but it’s probably closer to 12-15k practices in my opinion.

As I’ve looked at the ambulatory EHR market, I’ve often been describing EHR vendors as distribution channels as opposed to EHR software vendors. If you go around any exhibit hall, EHR vendors aren’t really selling EHR software much anymore. In most cases, EHR vendors are catering to their existing user base and then using them as a distribution channel for other products and services. With this in mind, Allscripts acquisition of Practice Fusion expands their distribution channel. That’s a valuable thing.

One other piece of this transaction which I believe many won’t understand is Practice Fusion’s relationships with life science organizations. Those relationships are how Practice Fusion was funding their free EHR. I’ve heard mixed reviews on those relationships, but no doubt Allscripts is hoping those relationships can generate more revenue for their company when they add Allscript’s large userbase.

Fierce Healthcare also found in the SEC filing for this acquisition an interesting note about Practice Fusion receiving a request from the US Attorney’s office:

The SEC filing also noted that Practice Fusion received a request from the U.S. Attorney’s Office for the District of Vermont in March 2017 requesting information and documents as part of a civil investigation into the company’s EHR certification. Allscripts stated that although Practice Fusion has complied in “a cooperative, thorough and timely manner,” any legal proceedings, damages or settlements could “adversely impact” future operating results.

No doubt these requests are an extension of the $155 million eCW Whistleblower lawsuit. I expect most major EHR vendors have had some sort of inquiry after the eCW lawsuit. Hopefully, the team at Allscripts vetted the inquiries well especially given Practice Fusion’s past history of pushing the envelope. Considering Practice Fusion’s FTC Charges and Settlement, I’d think that they’d have been careful about their EHR certification, but it’s hard to take the Silicon Valley mentality out of your culture.

The other obvious tie into this story is Allscript’s previous acquisition of McKesson’s HIT software business. I’ll admit that it’s hard for me to keep up with all the EHR software that exists under Allscripts umbrella, but with the addition of Practice Fusion, Allscripts certainly has an EHR software for healthcare organizations of every shape and size. Plus, I expect they run their EHR businesses at break even while they make most of their money off of other lines of business they can sell to their EHR customers. It’s not just Allscripts that’s seen how much money can be made doing revenue cycle management and providing other services to their EHR users.

I will be interested to see what Allscripts chooses to do with Practice Fusion long term. Will they eventually sunset the Practice Fusion EHR and encourage users to migrate to one of their other EHR? Will they start charging Practice Fusion EHR users for the EHR? You can imagine the outrage that would come if they did start charging, but EHR switching isn’t a simple process. So, I’d imagine that many practices would just start paying and it would take months and years for them to finally switch EHR vendors and many would probably just decide to stay with “the devil they know.” That would be a big gamble on the part of Allscripts, so it will be interesting to see if they make it. Then again, maybe they have enough revenue from being a distribution channel to Practice Fusion users that they’ll be able to continue the free EHR model. Time will tell.

Those are some initial thoughts on the acquisition of Practice Fusion by Allscripts. I should also note that the acquisition isn’t complete. It still has to go through the standard ant-trust evaluation process, but I don’t expect that to be an issue. What do you think of this acquisition? Is this a good move by Allscripts? What does this mean for Practice Fusion users?

About the author

John Lynn

John Lynn

John Lynn is the Founder of the HealthcareScene.com, a network of leading Healthcare IT resources. The flagship blog, Healthcare IT Today, contains over 13,000 articles with over half of the articles written by John. These EMR and Healthcare IT related articles have been viewed over 20 million times.

John manages Healthcare IT Central, the leading career Health IT job board. He also organizes the first of its kind conference and community focused on healthcare marketing, Healthcare and IT Marketing Conference, and a healthcare IT conference, EXPO.health, focused on practical healthcare IT innovation. John is an advisor to multiple healthcare IT companies. John is highly involved in social media, and in addition to his blogs can be found on Twitter: @techguy.

1 Comment

  • Allscripts has quite an interesting history of acquiring small practice EHRs. If I remember my history lessons, they acquired Healthmatics as part of the Misys deal and it is now known as Allscripts Professional; their go-to product for the small physician market.

    However, they also acquired Advanced Imaging Concepts, whose product they renamed TouchChart, which was subsequently sunset. They picked up Medinotes and Bond Software as part of their Eclipsys acquisition and both of those were immediately sent packing. They purchased rights from iMedica for the product which they named MyWay and sent to the software graveyard in short order. There may be more, these are just the ones that come to mind.

    Soon they will have Practice Fusion, which is also targeted to the small practice market and, unlike some of the products above, comes with a questionable revenue stream. There may be some synergies associated with life sciences organizations that I don’t understand. But if I were a Practice Fusion user, I wouldn’t feel too comfortable about this change.

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