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Posts Tagged ‘acquisition’

Last week, NaviNet announced its acquisition of Prematics, a company founded a few short years ago targeting the market for mHealth provider solutions. While there are significant synergies and overlap between the two companies’ product offerings, NaviNet’s main driver with this acquisition was to extend itself beyond the desktop and into to the exam room via the physician’s Smartphone. What NaviNet really purchased here was Prematic’s mobile expertise, a highly prized asset given that the Smartphone is so widely adopted by physicians (Chilmark detailed these high adoption rates in our report, mHealth in the Enterprise).

About NaviNet and Prematics

NaviNet’s focus has been on assisting providers (ambulatory practices) with administrative processes. NaviNet currently connects 70% of US physicians with payers through a multi-payer portal, providing online access to claims, PBM, and pharmacy data. The service is mostly free for physicians (they do pay for CMS access), with the payers footing the bill for everything else. In return, payers save on their own administrative costs, but also get another channel to pursue chronic care management messaging. These “healthcare alerts” and “care gap” messages are sent to the physician in an effort to coax care and patient behavior towards wellness and subsequently lower overall cost. More recently, NaviNet has begun looking to extend its reach and services offering, venturing from administrative process support to the clinical arena announcing in October the release of NaviNet EMR and NaviNet PM.

Prematics is known for mobile ePrescribing and is much smaller than NaviNet, with a physician base of only around 4,000. Prematics has had access to the exam room from ‘day one’ through its mobile ePrescribing platform built with lots of goodies on top (CDS, formulary support, medication history …). Prematics has leveraged this platform to move into the chronic care management space – similar toNaviNet – but with the important distinction that messages can be delivered to physicians while they are in the exam room delivering care. Prematics has Apps available on the iPhone, iPod Touch, iPad, and onWindows Mobile devices.

The Office Visit: Ripe for the Payer’s Taking?

Consider the typical, 7.5 minute office visit (in the exam room or a pre/post visit). These are precious minutes where a feeling of trust and general good-will between physician and patient should develop. After those 7.5 minutes are up, a physician should have been able to gather all the information she needed, and the patient should feel motivated to follow the doctor’s orders.

Authoritative symbols such as the white coat can help achieve this result, and so can the physician’s mobile device. Based on research for our report mHealth in the Enterprise, nearly 90% of all physicians carry a Smartphone and most of these make heavy use of clinical reference Apps. This is in direct contrast to EMR/EHR adoption, especially among very small practices who continue to be unmotivated by the HITECH Act.

Through the Smartphone or Touchscreen Tablet, the physician can have immediate access to vital patient information while the patient is right in front of them. Notably, this device does not interfere with the doctor-patient interaction as compared to a desktop. Patients do not experience the decrease in eye contact caused by their doctor seated in front of an immovable screen, and can even be intrigued with the cutting edge mobile technology in their doctor’s hand.

For the payer, the combination of trust and technology in the exam room represent an opportunity where real-time care messages can make an impact. When these messages are relayed through the trusted doctor, they might actually be listened to by the patient. With the Prematics acquisition, Navinet is making the bet is that the presence of the doctor delivering the message will drive patient engagement and behavioral change much more effectively than any nurse call center could.

Will providers welcome this intrusion into their space?  True, the physician would like to be able to quickly answer such questions as: “Did he refill his prescription?”, or, “Is he comfortable paying the co-pay for the medication I am prescribing?”, but in order to get this information, is she willing to turn into a care-message proxy for the payer?

In any case, payers are open to try just about anything to contain costs, and the office visit still represents a yet unexplored setting.

Looking Forward

While Navinet+Prematics represents a powerful force which combines the market reach of Navinet plus the mobile expertise of Prematics, their biggest competitor remains the IT shops of payers themselves, who wish to build their own single-payer portals.  Navinet still faces the upward climb of signing up these payers one by one.

This acquisition could also spur interest in other M&A activities for mobile chronic care management companies.  Notably, WellDoc has been in the news lately for integrating its mobile chronic disease management solution with Allscripts as well as a recent strategic alliance with AT&T.

With the chronic disease epidemic now gripping the US, it is no surprise that so much attention is being paid to technologies that could potentially enact behavior change among physicians and patients and contain costs. While the NaviNet Prematics acquisition is a reflection of the optimism surrounding mobile technology as a solution, I remain skeptical that physicians will dutifully act on these messages, and even if they do, if patients will turnaround their behavior on the basis of an office visit.

 

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Just as we are trying to put the final touches to the forthcoming HIE Market Report, another major HIE vendor gets acquired and again it is a very big fish swallowing a small and very pricey little fish. Geez, they are making our life difficult here at Chilmark.

This morning, Aetna announced that it will acquire Medicity for some $500M.  With United Health Group’s Ingenix acquiring Medicity’s top competitor, Axolotl earlier this year and now Medicity being picked up, the HIE market is going through a major upheaval with few, (one could even argue none) strong, independent HIE vendors left.

Chilmark Research will reach-out to both Medicity and Aetna to get their take on this acquisition as well as competing vendors as this really is a pretty big deal for all players in the HIE market.

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On Monday, Covisint announced that it had acquired DocSite. Yesterday, we were finally able to catch-up with Covisint VP Brett Furst to get some background on the acquisition.  Following is what we learned and our assessment.

Some Background:
Covisint was orignally founded by the Big Three auto makers to assist them with their supplier relations and procurement strategies.  To meet the needs of these automotive companies and their need for strict intellectual property (IP) control and secure communication with their supply base, Covisint built a very robust communication platform with strong, federated identity and security management.  Not too surprisingly, these security features lend themselves quite well to the need to communicate health data securely across a network, thus Covisint’s move into these sector several years ago. Today, Covisint is the technology behind the Southeast MI HIE, my1HIE and the Minnesota HIE.

Covisint’s HIE platform can be broken down into two core pieces: ExchangeLink and AppCloud.  ExchangeLink is the the technology backbone for Covisint’s providing the fundamental building blocks for an HIE including messaging, Master Patient Index (MPI) Record Locator Service (RLS), portal, etc.  ExchangeLink has also been architected and positioned to serve in a Platform as a Service (PaaS) model with application programming interfaces (APIs) that are shared with third party partners to create a rich ecosystem of applications that can potentially be deployed within a given HIE. Covisint has been working closely with the American Medical Association to build out this PaaS model and the the third party vendors are found within what Covisint has branded as their AppCloud.

To date, Covisint has relied heavily on its third party partners within AppCloud to provide the various added functionality that a client may need within the context of an HIE with Covisint providing the basic plumbing via ExchangeLink.  With the acquisition of DocSite, a subtle change to their strategy has occurred.

The Acquisition:
Covisint has only made three acquisitions to date in the healthcare sector.  The first was ProviderLink in 2006, a small (30 employee) company that had a healthcare-specific messaging workflow solution. ProviderLink was picked up for $12M. The second was another backoffice infrastructure play, Hilgraeve, which Covisint acquired in 2008.  Hilgraeve had HyperSend PDX which facilitated data exchange between practice management systems and EHRs as well as importing data (labs) into an EHR.  Again, more of a backoffice solution to further strengthen ExchangeLink and its applicability to the healthcare sector.

DocSite, which has been a partner of Covisint via the AppCloud, is primarily a provider of quality measurement tools such as PQRI but also has some other tools such as clinical decision support. DocSite is a clinician facing application that is designed to help an institution meet quality guidelines in support of pay for performance initiatives.  DocSite also offers a number of tools for quality reporting that are critical in the support of meaningful use requirements as well. Clearly, DocSite is not an infrastructure play as the last two acquisitions were and signals a change at Covisint that they will not rely strictly on AppCloud partners going forward.

Assessment:
The PaaS model remains a tough sell in the still immature HIE market and Covisint likely struggled to market this concept to state and local officals, as well as enterprises who are in the market for an HIE.  While ExchangeLink may be a fine platform, it is only that, a platform and there is really quite a bit more that organizations seek from their HIE vendor and these organization may have been reluctant to first need to create a relationship with Covisint, then secondly, choose from the among the AppCloud partners and set-up separate agreements with them. Simply too much to manage and this goes against the preferred approach of “having one throat to choke” should something go wrong. By itself, ExchangeLink was simply not competitive in this rapidly changing market.

DocSite looks to be a savvy acquisition as it brings a high value proposition to the table by addressing one of the most critical metrics in the healthcare sector today, measuring and quantifying quality of care delivered. The new meaningful use Stage 1 requires some quality metrics to be measured and reported. DocSite within the Covisint platform can meet that need, which will only increase in future Stages 2 & 3.  There is also the broader changes coming from the Healthcare Reform bill that will accelerate the transition to pay for performance/pay for quality.  Again, DocSite’s quality reporting/analytics will facilitate a clinician/institution in meeting those requirements.

It is likely that Covisint will accelerate its acquisition strategy to acquire other, small companies (DocSite has ~30 employees and 80 customers) that will be clinician facing to fill specific targeted niches (gaps) of its HIE platform. More broadly, HIE vendors as a whole will also increase their emphasis on providing quality reporting tools either through partnership or acquisition. For example, Care Evolution has a partnership with Thomson-Reuters and more recently, Ingenix, which has a host of reporting capabilities, acquired Axolotl.

In this rapidly moving market, there is one constant – Change. Stay tuned.

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Last week, Ingenix announced that it would be acquiring Axolotl.  Probably no one was happier than the folks at Gilat Satellite Networks who had invested $4.5M in Axolotl over ten years ago, had written off that investment during the dot-com bust in 2001 and now is looking at getting some $24M in cash plus another $3M by year’s end.  Gilat receiving $27M from the sale of Axolotl (we estimate Axolotl’s sales in FY09 to be about $15-18M) signals only one thing: Ingenix paid a kingly ransom to acquire Axolotl, in excess of 8x 2009 sales.

This begs the question: Why did Ingenix pay so much for such a small HIT vendor?

Having interviewed a couple of Axolotl competitors about this deal and completing a briefing call this morning with Ingenix executives Bill Miller, EVP for Provider Solutions and Art Glasgow, CTO along with our broader analysis of the market, vis a vie the forthcoming HIE Market Report (yes, its coming, really it is), following are some thoughts and perspectives.

Ingenix is a company that grows by acquisition having acquired some 50+ companies since 1996. Since the beginning of 2010, the company has made 5 acquisitions already and based on the call with Ingenix today, there will be more. Miller stated on the call that Ingenix has primarily served the payer market but sees a convergence of administrative and clinical processes, thus has been making targeted acquisitions in the provider HIT market (e.g., CareTracker, a PM/EMR solution, Picis, an EMR for ED, QualityMetric for outcomes measurement) and now Axolotl. Miller inferred in the call that part of its provider acquisition strategy is to acquire companies with strong brand recognition in the provider market. Clearly, Axolotl has that in the HIE market, particularly among publicly-led HIEs, or RHIOs.

As one competitor put it: “Ingenix bought into the market.” And as another one stated, (Axolotl’s top competitor): “We are very happy.” Ingenix paid heavily for brand and for an established presence in the market (Axolotl has roughly 250 hospitals using their Elysium HIE platform and currently support four state-wide HIEs). As an independent company similar to Axolotl, the second vendor must be seeing the potential for a very large pay-out should they be acquired, thus not too surprising that they would be happy with this deal. But that second vendor may also be developing a slightly nervous twitch as very large players with deep pockets such as Carlyle Group (they own Carefx), GE, IBM, McKesson (owners of RelayHealth), Microsoft, Thomson-Reuters (partner with Care Evolution) and now Ingenix enter the HIE market. Let’s not count out the EHR vendors such as Cerner, Epic, and others who are also developing their own HIE solutions. The writing is on the wall: In five years time there will no longer be small, independent HIE vendors.  Those independent HIE vendors that survive will be a division of a far larger company.

During our call with Ingenix, Glasgow stated that Ingenix’s core competency is analytics and this is the focus of internal R&D expenditures. For all other HIT application areas, Ingenix would rather make an acquisition than organically build. Coupling Ingenix’s analytical capabilities with Axolotl’s Elysium platform creates some intriguing possibilities both from the perspective of Ingenix selling more of its portfolio in a larger more comprehensive HIE platform sale, but also creating the possibility for the HIE organization to create a sustainable model for future viability as articulated in an Ingenix White Paper (caution PDF). With forthcoming changes in healthcare via reform, new payment models etc., analytics will become an increasingly critical need for providers and HIE vendors are ideally positioned to provide such capabilities. Yet based on our research, virtually all HIE vendors have weak analytics capabilities. Microsoft is one of those at the forefront in this area with their Amalga platform, but their overall HIE solution is still a work in progress.

Glasgow also went on to state that Ingenix sees the HIE market moving to a PaaS model and Ingenix will continue to support Axolotl’s current development efforts to open up its APIs to third party vendors. The move to PaaS in the HIE market is still a nascent trend but one we believe will stick. Chilmark is planning to do a deeper dive on the subject in a future report. In the near-term we will be talking to Medicity later this week getting a deep-dive briefing on their forthcoming iNexx platform, which is at the forefront of among HIE vendors in creating a PaaS for the HIE market.

Some Challenges:
With any acquisition, there are always challenges, from alignment of staff (and even rationalization), to setting priorities for future R&D, to soothing customer and prospect fears as to what the acquisition means to their current or future investment. Challenges we foresee include:

Recouping their investment. Ingenix paid dearly for Axolotl, a company with a strong brand in the market, but also a company with an older platform that has proven difficult for some to implement and maintain. Axolotl clearly recognizes that Elysium needed to be re-architected and is well down the development path to address this need. Thus, Ingenix needs to continue to invest in Axolotl beyond the purchase price to insure Elysium transitions to a modern platform to support a PaaS model. This is not easy work, nor is it inexpensive and it is likely that there will be changes to Axolotl’s pricing structure to compensate for this investment.

Quelling market fears, part one. Ingenix has a mixed history with providers, having been sued by the NY Attorney General, and dragged before Congress last year for reportedly providing data to payers that shortchanged patients and providers. Ingenix has tried to come clean on the issue, but it has left a bad taste in the mouth of many. Now that Ingenix is jumping into  the very public arena of HIE, they will need to convince state agencies, providers and consumers that their intentions are noble, that data will be used to help improve care and ultimately outcomes while insuring that personal health information will remain secure and private.

Quelling market fears, part two. An acquisition nearly always generates some consternation on the part of existing customers and future prospects, with the number one issue being: Is their investment safe (i.e., the acquirer will not sunset the product and continue to invest in R&D)? With over 50 acquisitions in 14 years, Chilmark assumes that Ingenix is pretty savvy at how to acquire a company, leverage the assets, keep customers happy and build from there. But against that backdrop, Ingenix must address a market that has a lot of concerns over vendor/product viability. It is incumbent on Ingenix to educate the market that it indeed has a clear strategy for Axolotl and its Elysium platform. That the strategy aligns with market needs. that it includes continued support (R&D $$$ to modernize Elysium) and that they will continue to offer the level of support (if not better) that customers have come to expect from Axolotl.

Final Assessment:
Ingenix’s strategy for the HIE market is in very close alignment with what Chilmark Research is seeing as well: The move from simple messaging, i.e., pushing lab data around, to higher order capabilities such as analytics and the move to a PaaS model for HIEs.  While these are clearly the future trends for HIEs, the timing as to when these trends take hold is still very much in question.  The HIE market remains convoluted, messy and difficult, if not near impossible to make sense of.  Adding to the issue of complexity is market maturity wherein many buyers are often just looking for the most basic of capabilities.  Even Axolotl recognizes this releasing Elysium Express a few weeks back to address this basic market need.  Hopefully, Ingenix is a very patient company and fully understands the nature of the market it has just paid a princely sum to enter as it may be sometime before they recoup their investment in Axolotl.

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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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This morning, IBM announced that it will acquire leading healthcare Master Data Management (MDM) vendor, Initiate for an undisclosed sum.  The healthcare IT (HIT) sector is white hot right now so it is likely IBM paid a pretty penny for Initiate, the clear healthcare market leader in Master Patient Index (MPI) technology.  Combining Initiate sales for 2009 at around $90-95M, a hot sector (say 3.5-4x revenue evaluation)  and one concludes that IBM put down nearly $400M for this healthcare darling.  This acquisition confirms one of our 2010 predictions – a significant increase in HIT acquisitions, including the entry (or increased presence, as in this case) of large IT vendors.

So What Did IBM Get?

With tens of billions of ARRA stimulus funding being poured into the healthcare sector under the HITECH Act, IBM has picked up one of the real jewels in the industry who is ideally positioned to capitalize on a significant portion of that federal largess.

As we have written previously, core to HITECH legislation is that funding be used to promote “information exchange for care coordination.” Such coordination of care hinges on a clinician’s ability to pull up the right records, for the right patient, at the right time. Tapping such patient information tucked within an EHR, an HIE, a public health database, etc. at the click of a mouse is done via MPI, but this is no trivial task. Most software vendors offer an MPI solution within their product based on deterministic algorithms.  But these algorithms, that rely on such things as name, address, maybe a social security number, are often not robust enough for large data sets.  More advanced, albeit more complex, MPI solutions rely on probabilistic algorithms, which is Initiate’s core competency.

Initiate currently serves some 2,400 healthcare facilities and lays claim to being used at 40 or so health information exchanges (HIEs).  Currently, Chilmark Research is conducting a study on the HIE market (hope to have draft ready by HIMSS) and in our discussions with many in this sector, Initiate is seen as the clear market leader and partner to provide HIE clients with an MPI that will meet their complex information sharing needs.

In somewhat of a surprising move, Initiate jumped directly into the HIE market by acquiring the small HIE start-up, Accenx in October 2009.  It will be of some interest to see how aggressively IBM leverages both Initiate and the Accenx solution going forward.  Our bet is that IBM will partner for RHIOs (e.g. Axolotl, Carefx, Medicity, etc.) but go directly after the private HIEs within large Integrated Delivery Networks (IDNs) competing against the likes of large EMR companies Cerner and Epic as well as HIE pure plays Medicity, RelayHealth, etc.

Final Assessment:

Excellent move by IBM and an acquisition that they will be able to leverage in other markets such as their significant presence in supply chain management.

Installing Initiate requires a significant amount of services, IBM will be able to capitalize upon this as well.  Also, IBM has a not so insignificant hardware (large database servers) and software businesses  that can be combined with Initiate to provide healthcare with a larger, more complete solutions suite.

This acquisition will put increasing pressure on Oracle to make a bigger move in the healthcare sector.  (Note that Sun Microsystems, a recent Oracle acquisition, does have an MPI – being used in NHIN’s CONNECT platform – but reports from the field do not rate this solution highly).

Acquisition also puts some pressure on Microsoft’s Health Solutions Group, who yesterday closed on their acquisition of Sentillion.  Microsoft is making a modest play in the HIE market with Amalga UIS, Sentillion will also play a role here, but there is, at least to our knowledge, no MPI solution within Microsoft’s portfolio that can compete with Initiate. How Microsoft responds will be interesting to follow.

There is some danger, however, that Initiate may languish under the IBM umbrella becoming buried within a multitude of applications that IBM currently offers.  Hopefully, IBM recognizes the jewel they have acquired and will not let this market darling succumb to internal forces that may wish to simply drop Initiate into the large IBM application hopper.

For another perspective, Ray Wang of Software Insiders has a good analysis of this acquisition in the context of the MDM market space.

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Yesterday, MediConnect announced that it had acquired Florida-based PHR vendor, PassportMD. The acquisition is a good move by MediConnect as it will allow them to extend beyond just collecting records on behalf of consumers (it offers such a service on Google Health), but now provide consumers with a solution to present such records in an easy to view and understand format within the framework of the PassportMD PHR. Terms of the deal were not disclosed and PassportMD operations will be moved to MediConnect’s headquarters in Utah.

Based on prior knowledge of PassportMD and my call with MediConnect’s CEO, Amy Anderson yesterday, following is Chilmark Research’s assessment of the acquisition.

Background:

PassportMD

PassportMD is a small PHR vendor founded by dermatologist Steven Hacker to primarily serve seniors.  When Chilmark Research conducted its study on the PHR market in late 2007/early 2008, PassportMD was predominantly a USB-based PHR targeted at seniors who traveled frequently, thus the “Passport” brand.  In mid-2008, PassportMD received investment funding and moved aggressively to build a web-based PHR and recruited Joan Lunden as its spokesperson. In late 2008, PassportMD was one of four PHR vendors selected to participate in the CMS trial that is now taking place in Utah and Arizona.

Targeting seniors, PassportMD is designed to be very easy to use with a fairly straight-forward, intuitive interface.  Among its features is a “mouse-over” capability that provides more detailed information on various aspects of one’s health record, for example medications or conditions, to set-up phone call-based medication reminders and the ability to selectively tag and share aspects of one’s PHR with their physician.   The company also offered a “Concierge Service” whereby it would act as a proxy for the consumer to gather their personal health information (PHI) from various sources for a small fee to populate the PHR.

PassportMD used a direct-to-consumer marketing model, an extremely challenging approach that no PHR to date has been successful at pursuing.  Despite the assistance of a well-known spokesperson such as Joan Lunden, establishing a partnership with Microsoft’s HealthVault, offering a basic PHR for free and being one of the four selected for the CMS demo, PassportMD today has struggled to gain subscribers today having fewer than 5,000 active users.

MediConnect

MediConnect was founded in 1996 and has grown rapidly to nearly 1,000 employees today structured around a direct, business-to-business service model.  MediConnect is not so much a software firm, as a services firm providing medical record retrieval services for insurers and lawyers.  This explains the high employee count as retrieving medical records in an industry that has a dearth of content in digital format(s) is not a trivial task.  Once the medical records are retrieved, MediConnect can scan them and if desired, perform data extraction and medical coding services for its clients (see figure).  CEO Amy Anderson stated during our call yesterday that MediConnect now has over 6M records stored in a secure encrypted format on its servers.

Anderson stated that MediConnect had been considering an expansion of its services into the consumer market, including the development of their own PHR.  Not long after PassportMD approached MediConnect about its ability to facilitate PassportMD’s concierge service, MediConnect decided that rather then build, simply buy a PHR solution, PassportMD.

MediConnect will continue to offer the PassportMD PHR for free and will even populate the PHR with any consumers’ PHI that they may have stored on their servers, upon a consumer’s request.  MediConnect’s business model for PassportMD will be similar to their existing model for business clients, collecting a small fee for retrieval of records on behalf of a consumer while offering the base PassportMD PHR for free.  Anderson stated that the consumer’s PHI in PassportMD would be fully portable allowing a consumer to download them to their hard-drive, print them out, send as a PDF or export in either CCR or CCD clinical formats.  (Note: MediConnect is already on Google Health and PassportMD is on HealthVault, thus the combined solution will be available on either of these personal health platforms (PHP)).

Analysis:

Based on personal experience, there is certainly a need to assist consumers in collecting their medical records, which may be scattered across numerous institutions and doctors’ offices.  But a need is not necessarily a market and MediConnect will face some serious challenges ahead for PassportMD for the following reasons:

The direct to consumer go to market strategy for PHRs is an absolute dead-end.  Today’s consumers are still not at a point of education/knowledge as to the value of owning and controlling their PHI.  It is highly unlikely that MediConnect will have success where so many before it have failed.

MediConnect may offer a solution suite to health insurers helping insurers provide their members with a PHR populated with claims data.  With the notable exceptions of Aetna and United Health, the insurance market has done a terrible job in offering PHRs and supporting portability for their members.  Couple that with consumer distrust of insurers and it is pretty easy to see why insurer sponsored PHRs are rarely used and may even be on the decline.  One insurance executive I spoke to discontinued their relationship with WebMD replacing this expense with allowing members to export their records to one of the major PHPs, which of course was free for this insurer to enable.  MediConnect’s opportunity here is limited.

The employer market for PHRs is one area that MediConnect may find some opportunities but this will take some additional investment on their part to develop a presence in this market among the brokers that serve large self-insured employers who are the primary market for such services.  Of course, MediConnect may also look to the employer-based PHP Dossia for some traction in the employer market if they have the patience as Dossia has been moving quite slowly since its founding.

Thankfully, it appears that Mediconnect already has a robust business in the existing services that it provides business clients and can afford to be patient letting the market develop for PHRs and subsequently PassportMD as there are no easy opportunities/quick wins today in the PHR market outside of the provider space.

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