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Posts Tagged ‘acquisitions’

Yesterday, Chilmark Research participated in a webinar hosted by the eHealth Initiative. The topic of discussion was consolidation in the HIE market and drawing upon our research for the recently published HIE Market Report, we gave the following presentation.

While we do predict that the HIE market will continue to consolidate, the big question is how much are larger companies willing to spend to pick-up one of the Tier Two HIE vendors. There are still several good companies out there that are ripe for the picking but after the large valuations we saw for both Axolotl and Medicity in the second half 2010, are these Tier Two companies expecting the same rich rewards. If so, this may dampen the appetite for acquisitions and we’ll see stronger partnerships being formed instead.

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Since the beginning of 2010 there has been a series of acquisitions in healthcare IT (HIT) market, which recently culminated in one of the largest, IBM’s acquisition of Initiate.  Triggering this activity is the massive amount of federal spending on HIT, (stimulus funding via ARRA which depending on how you count it, adds up to some $40B) that will be spent over the next several years to finally get the healthcare sector up to some semblance of the 21st century in its use of IT.  But one of the key issues with ARRA is that this money needs to be spent within a given time frame, thus requiring software vendors to quickly build out their solution portfolio, partner with others or simply acquire another firm.

And it is not just traditional HIT vendors doing the acquiring (AdvancedMD, Emdeon, Healthcare Mgmt Systems, MediConnect, etc.).  As the table below shows, many of these acquisitions are being driven by those who wish to get into this market (Thoma Bravo, Wound Mgmt Technologies, etc.) and capitalize upon future investments that will be made by those in the healthcare sector.

We are only at the beginning of the sea change in the HIT market and one can expect far more acquisitions over the next 12-18 months as stronger players expand their portfolios and new companies enter the HIT market.  If you are currently assessing an HIT solution for your organization, be sure to assess a vendor’s product road map and how they will meet your future needs (government mandates – e.g., meaningful use, interoperability, etc.) for if their answers are not absolutely clear, compelling and logical, you’ll better off looking elsewhere.

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Doing some quick analysis of the healthcare IT market and have uncovered some 17 HIT software acquisitions since beginning of year.

Is this but a lead up to the big industry confab, HIMSS that begins in a few short weeks?

Certainly, the market is in desperate need of consolidation. Recent actions are likely but a small example of a trend that will accelerate over the next 12-18 months.

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