Allscripts to buy McKesson’s hospital HIT business

Allscripts has announced plans to acquire the Enterprise Information Solutions division of McKesson, which operates its hospital and health system information technology business.

Under the agreement, Allscripts will pay $185 million in cash to McKesson, with the final amount to be subject to adjustments for net debt and working capital. The transaction is expected to close in the last three months of 2017, subject to customary closing conditions, including the expiration or termination of the waiting period under antitrust laws.

Allscripts executives say the company will pay for the purchase through its existing secured credit facilities and cash balances.

The move culminates a nearly year-long effort by McKesson to exit the healthcare information technology business.

Also See: McKesson starts to move away from health IT business

McKesson’s Enterprise Information Solutions business includes clinical and financial solutions for healthcare organizations, including the Paragon EHR system; STAR and HealthQuest revenue cycle solutions; lab analytics and blood bank applications; and OneContent, its content management solutions.

Allscripts executives say the purchase will enable it to increase its position in the healthcare IT industry and improve its ability to meet providers’ needs.

“The healthcare IT market remains highly fragmented,” says Paul M. Black, Allscripts’ chief executive officer. “Adding these assets to Allscripts existing portfolio enables us to better serve our clients, increase our scale and further drive our investment in innovation.”

McKesson announced its intent to exit the healthcare IT business last June, beginning a series of moves to withdraw from the industry. It first combined the majority of its Technology Solutions products—such as imaging, workflow, business performance services, connected care services, analytics and the Relay Health unit—with Change Healthcare (formerly Emdeon), a major claims clearinghouse and revenue cycle management vendor.

Also See: Change Healthcare, McKesson unit complete merger

In deciding to sell its remaining HIT business to Allscripts, McKesson executives said they were seeking a good fit for its remaining provider customers.

“We have selected a company that can serve the long-term interests of our customers and has the experience and capabilities to deliver value through its population health, precision medicine, consumer and care management solutions,” said John H. Hammergren, chairman and chief executive officer of McKesson. “The conclusion of this process demonstrates our commitment to support the success of our hospital customers and provide growth opportunities for Enterprise Information Solutions employees.”

Allscripts will invest in and continue to offer Paragon as the integrated EHR and revenue cycle management solution for the small hospital market segment, while Allscripts Sunrise will continue as the primary platform for larger institutions, typically with highly complex service line needs. After the proposed transaction closes, the combination of Paragon and Sunrise hospitals will double Allscripts current EHR hospital client count in the United States.

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