Allscripts (MDRX) At Important Moment In Its History

Posted on May 21, 2015 I Written By

Anne Zieger is veteran healthcare consultant and analyst with 20 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. Contact her at @ziegerhealth on Twitter or visit her site at Zieger Healthcare.

Allscripts has announced plans to move more of its software development and operations to India, while cutting 250 jobs in the U.S., or about 3.5% of its 7,200-member workforce.  While this is significant enough as it is, it’s an even more important leading indicator of how Allscripts may perform going forward. Here’s how I think things will net out.

Making a “rebalancing”:  The company has called the changes a “rebalancing” of staff which will allow it to respond more effectively and efficiently to shifts in its software design and product dev plans.

But the decision didn’t happen in a vacuum, either. Allscripts recently reported taking a $10.1 million loss for the first quarter ending March 31. That’s down from a loss of $20.7 million for Q1 2014, but the company still appears to be struggling. Allscripts’ overall revenue dropped 2% to $334.6 million for the quarter ending March 31, compared with Q1 of 2014.

What’s next? What should providers draw from these numbers, and Allscripts’ plan to shift more development work offshore? Let’s consider some highlights from the vendor’s recent past:

* Despite some recent sales gains, the vendor occupies a difficult place in the EMR vendor market — neither powerful enough to take on enterprise leaders like Epic and Cerner directly, nor agile enough to compete in the flexibility-focused ambulatory space against relentless competitors like athenahealth.

* According to an analysis of Meaningful Use data by Modern Healthcare, Allscripts is second only to Epic when it comes to vendors of complete EMRs whose customers have qualified for incentives. This suggests that Allscripts is capable of being an effective provider business partner.

* On the other hand, some providers still distrust Allscripts since the company discontinued sales of and support for its MyWay EMR in 2012. What’s more, a current class action lawsuit is underway against Allscripts, alleging that MyWay was defective and that using it harmed providers’ business.

* Partnering with HP and Computer Sciences Corp., Allscripts is competing to be chosen as the new EMR for the U.S. Department of Defense’s Military Health System, and is still in the running for the $11 billion contract. But so are Epic and Cerner.

The bottom line: Taken together, these data points suggest that Allscripts is at a critical point in its history.

For one thing, cutting domestic staff and shifting dev operations to India is probably a make or break decision; if the change doesn’t work out, Allscripts probably won’t have time to pull back and successfully reorient its development team to current trends.

Allscripts is also at a key point when it comes to growing place in the brutal ambulatory EMR market. With players like athenahealth nipping at its heels from behind, and Epic and Cerner more or less controlling the enterprise market, Allscripts has to be very sure who it wants to be — and I’m not sure it is.

Then when I consider that Allscripts is still in the red after a year of effort, despite being at a peak level for sales, that tears it.  I’m forced to conclude that the awkwardly-positioned vendor will have to make more changes over the next year or two if it hopes to be agile enough to stay afloat. I believe Allscripts can do it, but it will take a lot of political will to make it happen. We’ll just have to see if it has that will.