March 24, 2008

1. Allscripts and Misys Consummate Desperate Lust; Shareholders Hose Them Down

Facts and Background

Allscripts and Misys Healthcare announced Monday that the two physician systems companies plan to merge in a complex financial transaction, forming Allscripts-Misys Healthcare Solutions Inc. Allscripts management will run the new company, with Misys holding a majority of board seats. Allscripts board member John McConnell, who sold previous companies to both Allscripts and Misys, resigned in protest of what he said was an inadequate offer for Allscripts and the certain personnel cuts that will follow.

Opinion

Consolidation of the physician market is inevitable, but who would have guessed that Allscripts would pair up with Misys of all companies as MDRX shares went down in flames after a poorly received earnings report?

Musings

• Allscripts points out the premium it's getting for selling out. They don't mention that it's still a fire sale based on share prices before the Halloween meltdown.
• Shareholders of both companies are skeptical based on share price after the announcement. Spin will follow.
• John McConnell has worked with both companies and knows the scoop. If he thinks it stinks, it stinks.
• Was not having Misys in the picture holding back Allscripts prospects or vice versa?
• It's surprising that not only is the management team of Allscripts still in place, it will remain so after the merger. A 66% share price drop and execution problems with TouchWorks should have been reason enough to bring in new blood, regardless of current management's abilities, especially when it was clear that the Allscripts team was terrible at managing Street expectations.
• Shareholders of both companies complained, but will they trust management enough to vote the merger through? Probably.
• The synergies proclaimed, other than saving a few million by firing the usual HR/finance/marketing types that are duplicated, are based on the fact that Misys has sold only 20% of its practice management companies the electronic medical records component, of which its offerings are modest at best. Given the extremely low penetration of EMRs in general, that may be more of an exposure than an opportunity, particularly since the former competitors can hardly keep a straight face in proclaiming instant integration with the variety of systems each partner brings as dowry.
• Other than some notably stupid consultant merger names (PricewaterhouseCoopers), Allscripts-Misys Healthcare Solutions Inc. may be one of the worst company names ever conceived, clearly signalling to the market that nobody was willing to give up their brand in the show of supposed unity and creative synergy.
• This would have been a great time to take the new company private instead of keeping the temporarily tainted MDRX ticker symbol and all the competitive disadvantage involved with being publicly traded.
• Even with two on one, eClinicalWorks, e-MDs, NextGen, and several other better and cheaper competitors can still take them.

2. Data-Selling EMR Vendor Insists on Privacy - For Itself, Not Patients

Facts and Background

Perlegen Sciences, a Mountain View, CA genetic research company, announced Tuesday that it had signed a deal with an intentionally unnamed EMR systems vendor to mine patient data without their consent and then contact them to ask for DNA samples. Deborah Peel, MD of the Patient Privacy Rights foundation, calls it "the new Tuskegee," referring to a research project started in 1943 when African American men with syphilis were not told of their diagnosis in a prospective study of how they would fare without treatment.

Opinion

Name the vendor. They ought to be run out of the industry for stupidity, if nothing else. Right up there with Perlegen, which proudly announced its deal in a press release. Surely nobody could miss the point that people are scared to death to have companies rummaging around their genetic profiles for God knows what purpose.

Musings

• This is a PR gaffe of monumental proportion for the companies involved.
• Congratulations to Patient Privacy Rights. All the naysayers who claimed healthcare IT vendors were above selling patient data just got proven wrong.
• The secretive EMR vendor will get subscription fees, program fees, and milestone payments. Hopefully that's a lot since they may not sell many more systems if named.
• Perlegen will get an ownership in the EMR company.
• What Perlegen wants to do is not bad, but its approach is inexcusable.
• Perlegen gets a lot of research work, including that of the Michael J. Fox Foundation for Parkinson's Research.
• Perlegen filed IPO plans last year, but pulled the plug when one of its tests failed to work as expected. Drug companies appear to own substantial chunks of the company and its main interests appear to be in reducing the risks of drug companies in their expense of marketing ineffective or potentially harmful drugs that could be predicted through genetics.
• At least the company claims it will receive only de-identified patient data from its silent partner. Reading between the lines, it sounds as though the submitting providers will re-identify the information to arrange contact with the company. All without patient approval.

3. UCLA Bans Psychiatric Paparazzi

Facts and Background

UCLA's neuropsychiatric hospital announced Tuesday that it will ban cell phones and laptops in order to protect patient privacy. The announcement followed the discovery of a patient group picture on a social networking site. UCLA Medical Center had announced less than a week earlier that several employees and physicians would be fired or disciplined for inappropriately accessing the electronic records of Britney Spears.

Opinion

Makes sense. It would be easy to blame the person who posted the picture, but that person was also a psych patient and the circumstances of its posting were not announced.

Musings

• Sounds like UCLA now has Known HIPAA Violation #2 under its belt. Will the government look the other way as it usually does?
• Oddly, UCLA's media relations person said the ban affects only inpatients, not employees.
• UCLA should at least congratulate itself for being one of few Los Angeles locations that hasn't served as a backdrop for a Britney Spears Freaking Out video.

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