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Allscripts’ Acquisition of Practice Fusion – Focus Now Shifts to Ambulatory Space

Allscripts’ Acquisition of Practice Fusion – Focus Now Shifts to Ambulatory Space
March 16, 2018

Allscripts has announced yet another acquisition. This time, it is set to acquire Practice Fusion, a cloud-based EHR platform, for $100 million. Allscripts is planning to fund this purchase through its existing secured credit facilities and cash balances. This is the latest in a series of acquisitions which Allscripts made over the last year.

Looking back at the acquisition of McKesson’s EIS in October 2017, Paragon EHR helped Allscripts establish its presence in the small hospital EHR segment, and helped it double its client base to approximately 400, thanks to McKesson’s large customer base in the small-sized hospital segment. The other products in the EIS portfolio also helped Allscripts broaden its product portfolio in hospital information systems. This was a move to fortify its position in the hospital EMR space.

Another acquisition Allscripts made in the second half of 2017 was that of NantHealth’s provider/patient engagement solutions business, including the FusionFX solution and components of its NantOS software connectivity solutions. This will set up a strong foundation for Allscripts’ PHM business.

Allscripts’ acquisition of Practice Fusion is directed to bolster its position in the outpatient ambulatory market. The portion of the saturated EHR market which Allscripts is trying to capture through this acquisition, i.e., small practices, specialists, and solo physicians, is the one with scope for maximum growth. This transaction complements Allscripts portfolio of products in the independent physician practice space, which is hard to reach. Allscripts will have an opportunity to address gaps in care by driving HIT even in small physician practices, thereby ensuring penetration of HIT at all levels. Moreover, Practice Fusion was once valued at $1.5 billion and raised more than $150 million in funding. In a report published by Capterra, it was ranked among the Top 5 most popular EHR vendors in 2017.

Allscripts’ Acquisition of Practice Fusion – Focus Now Shifts to Ambulatory Space

The following are the benefits this acquisition will bring to Allscripts.

First, Practice Fusion’s EHR is currently being used by 30,000 ambulatory practices contributing to five million patient visits per month. This acquisition will increase Allscripts’ reach to 75,000+ physician practices, which is a 60% increase. According to a report published by SK&A, Allscripts was ranked second in the physician practice EHR market with 7.46% market share. Practice Fusion was ranked fourth with a market share of 6.34%. Epic was ranked first with a market share of 13.54%. The addition of Practice Fusion’s market share with Allscripts’ in this space will bridge the gap between Allscripts and Epic, and take Allscripts close to the first position.

Second, Allscripts will get access to Practice Fusion’s data. This acquisition of Practice Fusion acts as a platform that can enable Allscripts to improve its Big Data and analytics capabilities. This will be an excellent opportunity for Allscripts to leverage its NantHealth acquisition, through which it can facilitate the dispersal of the insights derived from the Big Data. These acquisitions will help Allscripts gather data from all the critical points in the patient lifecycle.

Third, Allscripts will also have the option of cross-selling its existing physician and community practices solutions like Allscripts CareInMotion™ - Population Health Management Platform, Allscripts® Revenue Cycle Management Services and 2bPrecise™ - Precision Medicine Platform to Practice Fusion’s customers. Allscripts will also gain access to Practice Fusion’s ecosystem of over 600 companies, which include labs and imaging, healthcare applications, pharmacies, and health systems.

Finally,the acquisition also benefits Allscripts in the life sciences space. Its current solutions in this area are focused on reducing the cost involved in clinical trials by improving recruitment, retention, and time to market. Allscripts also works with life sciences companies to help them make evidence-based decisions by leveraging its ambulatory dataset along with other sources of data that goes through its various other applications. The addition of Practice Fusion’s physician data to its already-existing data will help strengthen its position as a data aggregator. This will enable it to more competently help life sciences companies and complement their existing life sciences solutions. Now, Allscripts will be better positioned in the National Precision Medicine Initiative, a move to facilitate the use of precision medicine by gathering data from one million or more volunteers. Allscripts will also gain access to Practice Fusion’s partners in the life sciences space.

Apart from the benefits mentioned above, Practice Fusion’s cloud-based infrastructure also fits into Allscripts’ bigger picture. That said, even though Allscripts will increase its market share considerably, it will still face strong competition from veterans like Epic, Cerner, eClinicalWorks, and NextGen.

Practice Fusion was earlier using a blend of free and freemium models. It generated revenue through advertising and offered a free model with the option to upgrade for a fee. The premium model did not have features convincing enough to make the users upgrade; it was basically an Ad-free version of the free model.

Practice Fusion has reportedly started intimating customers of a transition from a freemium to subscription model, which could be based on the size of physician practices. This subscription fee is estimated to be around $100 per physician per month. It will be interesting to see the impact of this move on its customer base. Also, this move will test the stickiness/willingness of customers to continue using its products despite transitioning to a paid model. Allscripts acquired Practice Fusion not only to strengthen its ambulatory presence, but also create a new revenue stream. The result of this transition will determine Allscripts’ success on both these counts.

On the other hand, questions will be raised as to how this acquisition will benefit Practice Fusion apart from providing it access to Allscripts’ scale and funds. Practice Fusion initially did all the heavy lifting, spending around 12 years to establish itself in the fiercely competitive EHR market and also captured a notable chunk of the individual physician market. We will have to wait and watch out for the changes that Practice Fusion will undergo.