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Remaining McKesson EHR technology sold to Allscripts

McKesson Corp. departs the mainstream EHR business with the sale of its remaining EHR technology aspects to Allscripts, essentially leaving only four major hospital EHR vendors.

With McKesson EHR technology now under the Allscripts brand, the electronic-health-record hospital and health-sector market is essentially left with only four major players: Epic Systems Corp., Cerner Corp. and the considerably smaller Meditech and Allscripts.

After selling its outpatient EHR assets to ambulatory EHR vendor eMDs last year and assigning most of its other health IT products to Change Healthcare in March 2017, McKesson Corp. is now out of the health IT business, other than a few medical specialty and pharmacy-related IT systems.

Allscripts bought McKesson EHR technology, part of the Enterprise Information Solutions (EIS) business unit that includes the Paragon EHR system, in a $185 million cash deal on Aug. 3.

With Cerner and Epic steadily carving up the hospital EHR segment between them, McKesson, Allscripts and Meditech had all lost market share in recent years. So, for Allscripts, the move bolsters its customer base.

"This is good for both of them. It lies within McKesson's strategic vision and enables Allscripts to ride the wave a bit longer and stabilize some of their financial performance," said Kate McCarthy, a health IT analyst at Forrester Research. "It's not a bad deal."

While it has some hospital customers, Allscripts has found its strongest niche in large physician practices. Now, it has a stronger offering for smaller hospitals and health systems.

That positive development, however, has been offset by Allscripts' recent losses stemming from its 2015 equity investment of $200 million in NantHealth in exchange for 10% of the genomics IT vendor, Politico reported.

Allscripts last week said it had to write down $114 million in poorly performing stock stemming from the 2015 deal with NantHealth.

This is good for both of them. It lies within McKesson's strategic vision and enables Allscripts to ride the wave a bit longer and stabilize some of their financial performance. It's not a bad deal.
Kate McCarthyhealth IT analyst, Forrester Research

Meanwhile, the McKesson EHR sale consolidates McKesson's strategy of concentrating on its core medical and pharmacy supply business and pharmacy IT lines.

"It's a good thing for EIS employees. There's been a lot of good feedback from EIS employees, and they're happy to be part of Allscripts," said Kristen Hunter Chasen, a spokeswoman at McKesson, based in San Francisco. "It's a win-win for everyone."

Even after divesting itself of its EHR systems and moving all its medical imaging and other health IT products to Change Healthcare, McKesson is much bigger than Cerner and Epic combined, highlighting how incidental its EHR revenue was to the healthcare giant's main business.

Tom Lynch, a spokesman at Chicago-based Allscripts, declined to expand on what was in the joint release about the McKesson EHR sale.

"Adding these assets to Allscripts' existing portfolio enables us to better serve our clients, increase our sale and further drive our investment in innovation," Allscripts CEO Paul Black said in the release. "This transaction is expected to directly benefit our existing clients and our shareholders, as well as the Enterprise Information Solutions clients and team members we'll welcome to our family."

In 2016, McKesson had $190.9 billion in revenues. By comparison, Cerner reported $4.8 billion in earnings the same year, and privately held Epic's 2017 earnings have been reported as about $1.7 billion.

Allscripts registered revenues of $1.6 billion last year. Meditech had 2016 revenues of $462 million.

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