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Under New Leadership, Merge’s Revenue Continue to Slide

November 1, 2013
by Gabriel Perna
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Merge Healthcare, the Chicago-based imaging informatics software provider, continues to struggle, posting less-than-stellar financials in the first quarter under its new regime.

The company went through a transitional period in the second quarter of 2013, when CEO Jeffery Surges resigned following a disappointing financial performance in its second quarter. Justin Dearborn was promoted shortly thereafter. In addition, on Aug. 26, the company announced that Michael W. Ferro, Jr. had resigned as chairman of the board and as a director, effective immediately.  

In Dearborn’s first quarter as CEO, Merge’s sales decreased to $57.2 million from $60.4 million ($61.0 million on a pro forma basis) in the third quarter of 2012. Its revenue was $57.2 million in the second quarter of 2013 as well. 

In an earnings call with investors and analysts, Dearborn said the company witnessed spending delays in both ambulatory and acute or hospital settings. He attributed the hesitation in spending to several external pressures, such as the federal budget sequester and regulatory mandates such as the conversion from ICD-9 to ICD-10 and meaningful use Stage 2, which have “focused technology investments in core hospital information systems and revenue cycle management and not in other important but not mandated projects.”

It wasn’t all negative for Merge, however. The company saw three particular areas of encouragement: growth in its eClinical business, a large contract with a radiology ambulatory practice located in San Diego, and within the cardiology segment.  The eClinical backlog increased $29.5 million (127%) to $52.8 million in the third quarter of 2013, from $23.3 million in the third quarter of 2012.

In an exclusive with Healthcare Informatics back in August, senior vice president and chief product officer of Merge, Steven Tolle spoke of the company’s prospects. He said the company was bullish on its opportunities in relation to meaningful use and interoperability.

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