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Will 2018 Be The Year Of The Health IT/Non-Health-IT Merger?

Posted on December 1, 2017 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.

Within the last several days, the news broke that Amazon Web Services would probably be doing some sort of far-reaching cloud deal with Cerner. Given that AWS is a nearly $20 billion cloud organization, and Cerner one of the largest health IT players in the game, a lot could happen here.

My guess, not that it’s any leap of imaginative genius, is that if the currently-rumored deal between the two partners works, Amazon will make a serious bid to buy out Cerner as a whole. Given the massive profits potentially at stake in health IT, the idea of such an acquisition seems credible to me, at least if Cerner’s stockholders approve. After all, isn’t Amazon the company that just did a multibillion-dollar buyout of Whole Foods to fuel its growing (but still relatively small-scale) efforts in food retailing?

Not only is this particular deal interesting, I think it may portend some major structural changes in the health IT business as a whole. Specifically, I think we’re reaching a point where there will be a lot of pressure on companies with adequate cash and compatible goals to target HIT organizations, particularly if they need to scale up quickly and don’t have much internal knowledge on the subject.

And there’s no question that as healthcare settles into being a digital business, a range of digital businesses outside of healthcare will see that as an opportunity to step into such an important market. After all, how could they not want to be part of any organization that’s competing effectively in an industry that consumes a double-digit portion of the US GDP?

Over this period, many small internal workgroups outside healthcare will be transformed into scouting units seeking the next big digital healthcare deal. At the same time, these divisions will start forming quiet alliances strategic to their business, not only with giants like Cerner and Epic but also well-positioned startups in hot areas such as, say, blockchain security or supply chain management. (How could an ERP vendor not wonder how a healthcare supply chain management company running over blockchain could enhance their business?)

Then, of course, there are the more obvious moves which will bring a new critical mass of health IT customers, knowledge and talent to companies with a giant market presence already, such as Apple and Samsung.

Such M&A efforts won’t be optional. As Microsoft’s experience has proven in the past, and Amazon has apparently found more recently, you can’t just storm into the enterprise healthcare world and demand your cut, no matter how big a player you are. Getting there will take a well-finessed, mutually-fruitful agreement, if not an acquisition, even for a mega-company like Google/Alphabet.

Now, can I tell you which companies will be executing on such deals next year? I have a few theories, but no specific intelligence to share that you couldn’t pick up on your own by skimming industry headlines. But I do stand by my prediction that by the end of 2018, we’ll have seen a few spectacular deals between HIT vendors and digital companies outside the industry that will have a major influence for years to come.

Study: Opportunities Still Available For HIT Vendors

Posted on October 28, 2013 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.

Not long ago, my colleague John Lynn wrote a piece arguing that the era of easy EMR money and abundant customers is over. In that post, he contends that the “Golden Age of EHR Adoption” has fled, leaving vendors with the unenviable task of attracting the late adopters to the table.

Well, at least one research firm seems to disagree. According to a trend report from Berkery Noyes, there are still many openings in the HIT marketplace for entrepreneurs who can address pain points, Healthcare IT News reports.

The Berkery Noyes report analyzes M&A activity in the healthcare sector taking place during the first three quarters of 2013, and compares it with data from 2012.  Markets covered include information and technology companies servicing the pharmaceutical, payer and provider sectors.

At present, the researchers say, the healthcare market is highly fragmented, offering many opportunities for entrepreneurs that find areas of need.  These opportunities include healthcare IT startup, the researchers say.

The market clearly seems interested in HIT plays. Healthcare IT dealflow is strong, seeing a 56 percent volume increase on a quarterly basis, according to Healthcare IT News. HIT deals also accounted for almost half of the industry’s aggregate M&A volume, as opposed to just 31 percent in the previous quarter.

In fact, the standout deal of the quarter. booking the overall industry’s highest value, was Vitera Healthcare Solutions’ planned $644 million acquisition of EMR vendor Greenway Medical Technologies. And this may not be this year’s biggest deal; researchers note that “large strategic buyers” are looking to buy unique content/software solution in the healthcare market.

All that being said, it’s worth noting that it’s not as though every promising healthcare technology company has suitors at the door.  Buyers want companies with proprietary technology/content, scale in their markets, high (double digit) revenue growth, a high percentage of recurring revenue and a large total addressable market opportunity, noted Tom O’Connor, managing director at Berkery Hoyes, in a recent press release.

So, net net, it looks like there’s money out there for the right health IT play, but not so much for startups early in their growth path, or health IT players struggling to capture the rapidly shrinking Meaningful Use-fueled market. So I’d argue that the report’s enthusiasm for entrepreneurial opportunities should be qualified a bit. Still it’s good to know that investors are bullish on health IT generally.