Allscripts To Buy Eclipsys For $1.3 Billion

Electronic health record vendor Allscripts Wednesday announced it will buy Eclipsys in an all-stock transaction valued at approximately $1.3 billion. Under the terms of the agreement, Eclipsys stockholders will receive 1.2 shares of Allscripts for each share of Eclipsys, equating to a 19% increase from Tuesday's closing price.

Allscripts, which offers clinical software, information, and connectivity solutions for physicians, and Eclipsys, a provider of solutions and services to hospitals and clinicians, said the merger will enable both companies' clients to more effectively access the approximately $30 billion in federal American Recovery and Reinvestment Act funding for hospital and physician who adopt EHRs.

Additionally, the combination of Allscripts and Eclipsys solutions will further establish Allscripts as a leader in driving "meaningful use," the criteria that physicians and hospitals must satisfy in order to qualify for federal funding under ARRA.

Driven in large part by the ARRA incentives, which begin in 2011, EHR adoption by physician practices is projected to grow. The government's stated goal is to provide every American with an EHR by 2014.

"We are at the beginning of what we believe will be the single fastest transformation of any industry in U.S. history, and the combination of the Allscripts Electronic Health Record portfolio in the physician office and leadership in the post-acute care market, with Eclipsys' market-leading hospital enterprise solution creates the one company uniquely positioned to execute on this significant opportunity," Glen Tullman, Allscripts CEO, said in a statement.

Tullman, who will remain CEO after the close of the merger, which is expected around year's end, said his company's vision is to help improve the quality and cost of care by leveraging technology to create solutions for healthcare delivery organizations.

The merger agreement has been approved by the boards of directors of both Allscripts and Eclipsys and is subject to stockholder approvals and other customary closing conditions and regulatory approvals. The ownership stake of Misys, currently Allscripts' majority stockholder, is expected to be reduced through share buyback and secondary offering. Allscripts anticipates over $100 million in cost savings over the first three full fiscal years after completion of the transaction.

The merger will give Allscripts a client base of over 180,000 U.S. physicians, 1,500 hospitals, and nearly 10,000 nursing homes, hospices, home care, and other post-acute organizations. EHR adoption has also been accelerated by hospitals and health systems offering to support and subsidize the technology for affiliated physicians under the Stark Law safe harbor.

One example is the North Shore-Long Island Jewish Health System, which recently announced it would subsidize up to 85% of the cost of implementing the Allscripts EHR for over 7,000 affiliated physicians in New York City and Long Island. North Shore-LIJ's hospitals currently utilize the Eclipsys Sunrise Enterprise suite of solutions as well as the Allscripts Emergency Department and Care Management solutions.

Both the Eclipsys Sunrise Enterprise and Performance Management solution for hospitals and the Allscripts solutions for physician practices leverage common platforms, including Microsoft.NET and other advanced technologies. The companies also share an open-architecture approach, simplifying the connection to third-party applications across every care setting, resulting in a single patient record.

The merger will offer a single platform of clinical, financial, connectivity, and information solutions.

Phil Pead, president and CEO of Eclipsys will become chairman of the combined company. According to Pead, both Eclipsys and Allscripts share an approach to the healthcare industry that focuses on creating a single patient record that connects all applications within an organization and across a community.

"The combined company will be unique among healthcare IT companies not only in our ability to drive utilization, but also in our ability to quickly integrate our solutions and connect clinical information across every link in the healthcare chain," Pead said in a statement. "In combination with our powerful analytics and revenue cycle solutions, healthcare organizations will finally be able to realize the true promise of information technology, improving both clinical and financial outcomes across the entire community of care."