McKesson’s decision to sell its small physician practice electronic health records and practice management product lines to ambulatory vendor e-MDs is expected to bring benefits to both companies.

The purchase builds the customer base of e-MDs and enables McKesson to focus efforts on market segments where it offers multiple products, industry experts say.

With the sale, e-MDs significantly increased its client base that now expands to 55,000 physicians. The acquisition brings 35,000 physicians using one of McKesson’s many small practice products, which include McKesson Practice Choice, Medisoft, Medisoft Clinical, Lytec, Lytec MD and Practice Partner. Terms of the sale were not disclosed, nor did the companies say when the deal would be completed.

The sale does not reflect a change in McKesson’s overall health information technology strategy, says Scott Sanner, senior vice president and general manager at the vendor’s business performance services unit.

The move is a smart one for McKesson, says John Osberg, managing partner at Informed Partners LLC, which facilitates mergers and acquisitions. “McKesson can support hospitals but not a solo practitioner,” Osberg says. “This is in e-MDs’ wheelhouse. They have success in supporting small and mid-sized practices with cost-effective products. This is good for everyone.”

McKesson was serving 35,000 physicians with an average practice size of 1.5 physicians, including support of their transitions to ICD-10, when the vendor is focusing on larger markets for its revenue cycle management tools and other services, and e-MDs can better serve the practices, Sanner says. “e-MDs is squarely and solely focused on the small company market. It’s core to them; it’s what they do day in and day out.”

The buyer expects to work with its new physician clients to help them meet the requirements of the changing practice of medicine, says Patrick Hall, executive vice president at e-MDs. "The company understands that many of its new physician clients like the current systems they are using, and will work with them on their schedule to offer solutions that meet the unique needs of their kind of practice."

e-MDs is banking on its new clients taking advantage of deeper services that the company can offer, including revenue cycle management, credentialing enrollment, patient engagement software, connectivity to health information exchanges and clinical analytics.

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Osberg believes e-MDs will be successful in migrating new clients to its platform because a cloud-based system will reduce costs and support services will improve. Further, while the EHR meaningful use program is winding down, small physicians still face pressures to upgrade their technology to support population health, accountable care, value-based reimbursement and interoperability, he adds. “There’s a lot of motivation to go to that cloud platform.”

The bottom line, says Alester Spears, principal and CEO at business management consultancy Healthcare EDI Partners, is that the smallest physician practices need significant support and e-MDs can do a better job of that. With ambulatory software sales decreasing, e-MDs can cross-sell products and solutions into a new customer base, as it is easier to acquire business than sell to new clients.

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