The quickly shifting EHR landscape saw another major move last week following Allscripts’ announcement that it is focusing its offerings by offloading its hospital EHR assets to Harris Computer, a subsidiary of Canada-based holding company Constellation Software.
Harris is set to acquire Allscripts’ Hospitals and Large Physician Practices business segment for $670M, plus an additional $30M tied to the segment’s performance in the next two years.
- The transaction includes Allscripts’ Sunrise, Paragon, TouchWorks, STAR, Opal, HealthQuest, and dbMotion solutions, which together accounted for $928M of the company’s $1.5B total revenue in 2021, but have also been steadily losing market share.
- The $700M valuation implies a 4.8x multiple on the hospital EHR segment’s expected earnings for this year, not particularly high given that other publicly traded EHR companies command an average multiple of over 10x, which reflects two consecutive years of shrinking revenue with another decline forecast for 2022.
- By divesting the contracting division, Allscripts can now “maximize focus” on its healthier service lines like the Practice Fusion EHR for small practices and the Veradigm analytics solution, which has faster growth (up 4.6% to $552M in 2021) and healthier margins than the legacy EHR business.
- Veradigm houses one of the largest EHR-linked patient databases available for research, transforming data from Allscripts’ clients into insights that help connect providers and payors to life sciences companies. The data flow won’t be affected by the hospital EHR division’s new ownership, and the platform will now serve as the core of the company’s operations moving forward.
Allscripts has been committed to refining its offerings since posting a wide net loss in 2019, a process that included similar sales of its 2bPrecise genetic research arm and its CarePort patient coordination services. Offloading the business segment that generates a majority of its revenue highlights just how committed Allscripts is to focusing its portfolio on high growth areas, and the uptick in the company’s stock price following the announcement is a good indication that investors agree with that strategy.