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Merger Mates

June 15, 2010
by Mark Hagland
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Web-Exclusive Interview: Eclipsys CEO Phil Pead explains what drew him to Allscripts and Glen Tullman

Phil Pead, 57, president and CEO of the Atlanta-based Eclipsys Corporation, spoke with HCI Editor-in-Chief Mark Hagland this week about his vision for the merger of his company and that of the Chicago-based Allscripts. If the merger, announced June 9, goes through all its necessary approvals, Pead and Glen Tullman, CEO of Allscripts, expect the merger process to be completed “in the September-October timeframe,” Pead says. Pead will be chairman of the combined company, while Tullman will be CEO. The merger was valued at $1.3 billion in an all-stock transaction, and involves more than 5,500 employees. Below are excerpts from Mark Hagland’s interview with Pead.

Healthcare Informatics: What was the rationale for you behind this merger action?

Phil Pead: As you look at say, probably middle to late last year, we began to see more and more requests from hospitals asking for some kind of integrated ambulatory and inpatient solution. And this was always where healthcare was going, with the majority of procedures being performed in an ambulatory setting. So if you look at that anticipated evolution, things were always going to shift towards that. But then you look at the federal government, offering $30 billion to accelerate this. And meaningful use will require 10 percent meaningful use on the hospital level, and perhaps as much as 40 percent on the ambulatory level. And CIOs and clinicians are saying, if we don’t connect our community physicians, we’re going to lose this opportunity. And for a long time, hospitals didn’t believe that they could really have the legal opportunity to help fund physicians; and then that changed. And then meaningful use came about, and that really accelerated things for us.

Where we did not provide an adequate solution was in the ambulatory environment, because the workflows were so different. Allscripts and Eclipsys have a lot of mutual clients. And they said, we need you guys to get together and work this out. Now, one of the things our competition is going to say is that the integration will be very difficult. But I’ve got news for them: Allscripts has a dot-net platform, and so do we. We’ve both standardized on Microsoft. Furthermore, we both have an open architecture, and we can write to each other’s platforms. Finally, we in essence have already done this with numerous clients, and [Manhattan-based] New York Presbyterian is one example in which that work has already taken place. What’s more, because of our relationship with [Redmond, Wash.-based] Microsoft, we’ll be able to integrate HealthVault, so we’ll end up with a really seamless experience. And we’ll have 180,000 physicians, 1,500 hospitals, and 10,000 post-acute facilities running our combined software. That pretty much takes care of the entire landscape for patients. Just the other day, I was talking with a CEO about the situation in which a patient is admitted to the hospital and receives treatment, and then when the patient goes back into the community, the results and details of that patient’s treatment are not communicated to his or her primary care physician, and then that same patient ends up being readmitted time after time, without the benefit of the kind of handoff of information that might have averted readmission.

And that’s how this merger is going to change healthcare. It’s not just a question of transferring information, but providing usable data across the continuum. We have the best data analytics in the market. So because we have the best clinical analytics in the marketplace, we’ll be able to take the data generated by the patient’s admission to the hospital, and transfer that back to the providers in the community. And to me, that’s ultimately where I wanted to take Eclipsys, and where Glenn wanted to take Allscripts.

HCI: And you believe that the integration will be very quick?

Pead: Yes, because it’s dot-net and open architecture, and Microsoft is very excited about helping us. We’ll be $1.2 billion revenue, and entirely dot-net in architecture—the biggest healthcare play in the industry. And do you want to go MUMPS, or move towards the platform of the future? And we’ve already got clients today who use Allscripts on the outpatient side and Eclipsys on the inpatient side. We’ve already got reference sites where this is already working today.

HCI: Will the cultures of the organizations mesh?

Pead: Yes, I think they will. We’ve had a number of town-hall meetings already. And folks are really excited. The Allscripts folks are excited, because they’ve now got a much bigger playing field on the inpatient side; and our folks are excited, because our campus is much bigger. So it’s very exciting for everyone.

HCI: How would you allay the service concerns of anyone worried, especially in the context of meaningful use?

Pead: The beauty of this is that there’s almost no overlap of product sets, so we won’t be distracted by that. We’ve got PeakPractice, a really great SaaS-based product that provides EMR and practice management to smaller physician practices, while Allscripts has Professional, which addresses the mid-sized practice, as well as Enterprise, their large-scale ambulatory, which we’ll merge onto our Sunrise platform, though we’ll also allow people to use Sunrise as a standalone product. But we’ll also integrate the workflow onto Sunrise, so that if someone wants to scale that out to their faculty, they can do that via the enterprise product. That’s what we’ve done with New York-Presbyterian. And because there is virtually no overlap, that will be smooth. So we just need to work on the integration at the technical level.

HCI: At the time of HIMSS in March, were you already negotiating with Allscripts?

Pead: Well, all that information will be provided through our proxy. But we’ve been talking together for a while, just because we’ve got mutual clients, so we were talking just on the integration side. But I’ve got to tell you, the best thing for me is when clients push you together, because you know you’ve got a winner. And our clients love it, because they’re able to put together the best inpatient and ambulatory solutions.

HCI: Do you anticipate any layoffs?

Pead: Clearly, there’s going to be some effect of the merger, probably more in the back office area, because there are duplications being two public companies—accounting, HR, such areas. But the opportunity for us on the cost savings side is on the systems side. And because there’s so little overlap on the product side, I don’t see a lot of that kind of thing, in terms of people. And the last thing you want to do is to do a merger like this, and see a lot of unhappy people who are forced to leave. For Allscripts, their back-office systems had been provided by Misys. That contract is over in October; and we’ll be able to provide ours. So I won’t say there will be no layoffs; but that will be minimal. We’ll have over 5,000 employees, $1.2 billion in revenue, and because we both have leadership positions in both places, we’ll need them as much as they need us.

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