On April 2, Veritas Capital, a leading private equity investment firm, and General Electric (GE), announced that an affiliate of Veritas entered into an agreement with GE to acquire the assets comprising GE Healthcare’s value-based care division for $1.05 billion in cash. Products included in this deal are the Enterprise Financial Management (Revenue Cycle and Centricity Business), Ambulatory Care Management (Centricity Practice Solution) and Workforce Management.
Ramzi Musallam, CEO and Managing Partner of Veritas Capital said of the agreement, “We see a tremendous opportunity to invest in this business and partner with management to take advantage of a $9 billion market that continues to benefit from favorable sector trends. Similar to our previous healthcare technology investments, all of which have been corporate carve-outs, we will be deeply customer focused, and invest significantly in people, technology, and infrastructure to support the evolving requirements of the company’s diverse customer group.”
Jon Zimmerman, Vice President and General Manager of Value-Based Care Solutions at GE Healthcare explained, “Veritas Capital is the ideal firm to provide the focus and investment to take our business to the next level of scale and performance. Our team has significant knowledge and expertise in the healthcare IT space, and by operating as a stand-alone business under Veritas’s ownership, we now have the opportunity to further revitalize our product portfolio and pursue complementary acquisitions to better serve patients, providers, and payers.”
EHR Market Turbulence
In recent years, we have seen several significant transactions in which legacy EHR systems have been divested or acquired with varying results. The Centricity product line itself was the result of GE’s 2006 acquisition of IDX for $1.2 billion. Other recent examples include the 2017 acquisition of McKesson’s Enterprise Information Systems (including Paragon EHR, STAR and HealthQuest revenue cycle applications, and other departmental systems) by Allscripts for $185 million and the 2015 acquisition of Siemens Health Services (including the Soarian EHR) by Cerner for $1.3 billion.
Navigating the Waves
Transactions of this kind can be very unsettling for the original vendor’s customers, who may feel uncertainty regarding the future of the applications they rely on daily. While the new owner may make investments and grow the platform’s capabilities, customers are often concerned that the new owner may not fully understand what they have acquired (or how to support it effectively), that they may lose key personnel who are not comfortable with their new situation, or that the acquiring team will materially alter or discontinue development in some or all of the acquired software.
A recent example is Cerner, which has now owned the Soarian products for three years. It has maintained support and development of Soarian financials, which it markets as a stand-alone enterprise revenue cycle solution in its portfolio. However, Cerner has encouraged existing Soarian clinicals clients to transition to the core Cerner Millennium EHR, describing it as “a more robust and connected health IT solution model” (John Glaser, Senior Vice President of Cerner, April 2017). Cerner is not treating Soarian clinicals as a long-term investment.
How Should a Centricity PM Client React to This Acquisition?
There is no immediate red flag that Veritas intends to shut down the solution. Unlike the Cerner and Allscripts transactions, Veritas does not currently own similar products with which Centricity would compete for business or create confusion in the market. However, while Veritas has been involved in the healthcare data space since 2012 when it acquired Truven Analytics (sold to IBM in 2016), this is its first venture in the EHR marketplace. Veritas has made other recent healthcare technology acquisitions, including Verscend Technologies (formerly Verisk) in 2016, signaling a strategic interest in the healthcare technology market, but it is currently unclear what that strategy will look like in the longer term.
Chart the Course
Centricity clients should pay close attention to the quality of the support they are receiving over the coming months (the transaction is expected to close in Q3 2018) and keep a close watch for any subsequent Veritas announcements or acquisition (or divestiture) activities that may provide further clues regarding its larger plans in the healthcare technology space. It may also be prudent to develop a preliminary strategy for how to respond if satisfaction with the Centricity platform declines following the acquisition. Changing to a new PM and revenue cycle system is a complex task that takes considerable planning and commitment of resources over a period of many months (more than a year if including the time it takes to complete a vendor selection and contract for a new solution). Some steps clients should consider include:
- Mapping out a plan that includes how you would determine if service is declining (what should you pay attention to or measure?).
- Understanding what alternative options are available (do you have an existing vendor you trust that offers similar products, or will you need to scan the market?).
- Investigating what it would take to make a switch (how should you budget for the potential cost, and do you have the skilled resources in house to manage the transition?).
By thinking through these steps, clients will ensure they have the basic building blocks in place to actively manage their situation rather than react to a potential crisis.
Prepare for Ongoing Change
We are in a period of constant change in healthcare, and this transaction is just one of many that signal the reorganization of the healthcare technology market to ultimately deliver products that are more finely attuned to a data-driven, value-based delivery system. We can’t avoid the turbulence, but we can prepare to deal with it.
Published April 27, 2018