Quality Systems Inc., which owns physician software vendor NextGen Healthcare Information Systems, will acquire HealthFusion Holdings, another ambulatory vendor, for $165 million.

The deal is significant as it gets Quality Systems into the small physician practice market for the first time and also will bring cloud-hosting capabilities for the first time to NextGen.

NextGen primarily serves larger physician practices, while HealthFusion serves the small practice market with a cloud-hosted electronic health records/practice management system, as well as a claims clearinghouse. HealthFusion’s fully mobile product line, called MediTouch, serves more than 3,000 practices totaling more than 6,000 subscribers.

The acquisition includes an additional payment of up to $25 million if HealthFusion generates $43 million in revenue during 2016; the company is on a recently annualized revenue pace of more than $30 million. The purchase is expected to close by March 31, 2016, and Quality Systems expects the acquisition to add to earnings in the first full year.

Quality Systems will fund the acquisition of HealthFusion with $115 million via a credit facility from J.P. Morgan and U.S. Bank, and the rest through cash on hand.

The agreement to buy HealthFusion comes a week after Quality Systems unloaded its underperforming small hospital business unit that was part of NextGen, selling it to QuadraMed Affinity Corp., which owned the QCPR hospital information system that never achieved sufficient market share.

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