IDX was being shopped earlier this year as its founder Rich Tarrant wants to run for a Senate seat as a Republican in Vermont where Bernie Sanders will probably enjoy pointing out how much money he’s got and how he got it. Now that its been sold apparently it thinks that GE is a perfect match. It certainly seems so for IDX’s shareholders, as it was basically going nowhere with somewhat older hopsital technology, and having trouble getting outside the business of big (usually academic) medical groups with its physician systems. Plus there was the UK fiasco. And getting a 25% premium makes for a very nice exit.
The whole thing is somewhat curious. Other than Epic is not available, Cerner was too expensive, and IDX was being shopped, why did GE buy it — and why did they pay so much? As has been pointed out at length over at the HISTalk blog, IDX has a mixed product line and a mix of customers. Even more weirdly they have a deal with Allscripts (that makes ambulatory EMRs) that is responsible for a decent chunk of Allscripts customers, and even if Glenn Tullman (Allscripts CEO) made nice noises about it, it’s hard to see why GE (which owns the Logician EMR product which its renamed to Centricity in the brochure, but still not renamed on the screen) wouldn’t start favoring its own product — unless it buys Allscripts next and merges the two ambulatory EMRs into one. Perhaps then they’ll bother with at least a comsetic veneer of pretending that its all one product line.
What’s really going on here is the confusion amongst the big FDA-regulated imaging device guys (GE, Siemens, Philips, Toshiba) about how this IT stuff is playing out. They know that their hospital clients are slowly integrating the IT and Med Tech side of their houses, and they face the fear that if they can’t supply both ends of the chain, then they may lose business on their more profitable med tech products to a rival (i.e. Siemens) that can cut the customer a deal on the other end. But there is not really a good HIT candidate to buy, so maybe a mere $1.4bn on a not-so-good one is enough for now.
My guess is that the integration of Med Tech and IT as a serious business effort is ten years away. By then the leading IT systems (e.g. Cerner and Epic) risk being out of date. At that point maybe Siemens Soarian (or its successor) or whatever GE is building with Intermountain, or whatever McKesson ends up doing, or maybe whatever Oracle builds in 2007-9, will be the hot newly rearchitected product that will dominate the hospital IT market — which by then may be much bigger than the med tech market. But that’s all speculation as to how it will shake out longer term.
For now it strikes me that GE will sit on IDX for a while, try to figure out how to sell more of some EMR (probably Logician) into its physician practice customers, and milk the revenues from its bigger hospital clients, while it talks to them and sees if it can get them interested in whatever great new products that it may develop some time down the track. It’s kind of a tweener strategy which is, as has been said, not like GE. But they’ve seen Siemens fall somewhat flat with its SMS acquisition, and they’re make a decent amount off PACS (although a whole lot less than the Healthcare Informatics Top 100 has been reporting until this year when it corrected its standings). So the IDX acquisition gives their IT guys more products to sell, a decent customer base, and won’t probably screw-up their lucrative imaging business too much.
But still paying 25% over what the market thought IDX was worth strikes me as being a little odd.
This acquisition surprised me a little. What is really interesting is the Allscripts agreement. IDX owns 17% of Allscripts (through the Allscripts acquisition of ChannelHealth from IDX), and they have about 4 years left on a co-marketing agreement. Nearly all of Allscripts customer base and their sales pipeline consists of IDX customers. So, it seems to me that GE has to either buy Allscripts or sell that 17% that they now own. What do you think will happen there?
On another note, I work for McKesson and it seems to me that we could be on the verge of some much-needed industry consolidation. Do you think that the GE-IDX deal could be the start of a new round of mergers?