HIE Market Consolidation

The Inevitable has Arrived
For: eHealth Initiative Webinar Date: March 30, 2011 By: John Moore, Managing Partner Chilmark Research LLC
March 31, 2011 Copyright: Chilmark Research¥ For internal use only, not for distribution without expressed permission 1

Chilmark Research
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Founded in 2007
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Based in Cambridge, MA

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Chilmark¶s Sole Focus is Healthcare IT Current Research Areas Include:
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Cloud Computing, Connected Health (biometrics, Clouds, & HIS), Health Information Exchanges (HIEs), mHealth, Platform as a Service (PaaS), Engagement Strategies Market Research - Adoption & Technology Trends
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Services Offered:
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Self-sponsored and client sponsored reports Market landscape, trends, vendor viability, business plan development, go-to-market strategies
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Strategic Advice
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March 31, 2011

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Agenda
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Market Drivers
È HIE

Vendor Landscape

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Consolidation
È The

Good, the Bad and the Ugly

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What¶s Next
È And

How to Prepare

2011 HIE Market Report: Analysis & Trends
Copyright: Chilmark Research¥ For internal use only, not for distribution without expressed permission

March 31, 2011

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Significant, Unprecedented Money Flowing Into Market
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Billions in Federal Funding
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EHR Incentives Establish State HIEs Beacon Grants New, Bundled Payment Models (ACO)
Shared risk/reward ¡ Manage transitions in care
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Healthcare Reform
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Business Alignment
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Align Affiliates to Mothership

March 31, 2011

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HIT/HIE Waters Have Been Chummed

March 31, 2011

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Multitude of Vendors Claiming They Have the HIE Solution for You
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HIMSS¶11 Lists 189 HIE Vendors
Providers È EHR Vendors È PACS Vendors È Tools Vendors È ISPs È Etc. È Core HIE Vendors
È Service
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subdivisions
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March 31, 2011

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EHR Vendors:
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Target:
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Existing Enterprise Clients Some Exceptions Allscripts, Cerner, eCW, Epic, GE, McKesson Limited Traction for Closed Systems

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Walled Garden
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Examples:
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Prognosis:
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March 31, 2011

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Service Firms
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Target: Public & Enterprise
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Slight edge to Pubic Partner for Software Play on Customization ACS, AT&T, CSC, Dell, IBM/PWC, Verizon, etc. Success in Large, Complex Environments

Focus on Service Play
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Large Firms Dominate
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Prognosis
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March 31, 2011

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Core HIE Vendors
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Target all Markets
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Partner for Large HIEs Services Secondary Rapidly Consolidating Increasingly Dominated by Large Firms
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Focus on Software
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Most are Small Firms
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Prognosis
È Resources to invest

These are the Targets for Acquisition
March 31, 2011 Copyright: Chilmark Research¥ For internal use only, not for distribution without expressed permission 9

Nine Significant Acquisitions in 3 Years
Acquired Accenx Axolotl Carefx DocSite Healthvision HX Technologies Initiate MEDecision Medicity
March 31, 2011

Acquirer Initiate Ingenix Harris Corp. Covisint Lawson MEDecision IBM HCSC Aetna

Details 2009 acquisition by Initiate to move beyond just MPI and provide a complete HIE offering. Now Initiate Exchange Acquired in 2010 as move to combine Axolotl HIE platform with Ingenix¶s analytics & reporting tools Acquired February 2011 to strengthen Harris¶s capabilities for DoD & Florida HIE ± services play Acquired in 2010. Strengthens Covisint¶s platform to address quality/analytics (PQRI reporting) needs of HIEs. Acquired in early 2010, Lawson, strong in back office/admin apps looks to expand into clinicals Acquired in 2009, provides MEDecision with foundation for HIE platform Acquired in 2010 to combine Initiate¶s best-in-class MPI solution with IBM¶s deep analytics & global sales force Acquired by 4th largest health insurer Health Care Services Corp, in 2008, link admin & clinical data Acquired in late 2010, like other payers, link admin & clinical data in support Research¥ quality-based payment models of new Copyright: Chilmark
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Plenty of Future Targets
Company
Care Evolution dbMotion ICA InterSystems Kryptiq Misys MobileMD Orion Health PatientKeeper

Ownership
Private Private Private Private Private Public Private Private Private

Notes
Low market profile, partner with Thomson-Reuters Israeli company, decent technology, good for service play, 30% equity stake by UPMC Good product, growing in certain sectors/regions Fiercely independent, broad HIT portfolio Partnerships with Surescripts, GE & Sage. Surescripts does have an equity stake UK parent, challenge gaining traction in US market, parent may spin-out Mid-market play, simple, low cost HIE, has a couple of key accounts, good entry New Zealand Co., good tech, talk of IPO, good target for larger company, e.g. Dell, Oracle, etc. Mobile play, good client base, burdened by heavy VC investment

March 31, 2011

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Consolidation: Good or Bad?

It All Depends«
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Consolidation Brings Many Benefits
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Resources
È Investments

in R&D È Complimentary Apps & Services
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Scale
È Distribution

& Service

Viability
È Stability

& Support

March 31, 2011

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Consolidation Can Bring Frustration
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Change in Priorities
È Focus

Reflect New Parent

Decreased Investment ¡ Partnerships Pulled
È Partners

Become Competitors

Pricing Increase ¡ Cultural Change
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March 31, 2011

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Consolidation is Inevitable
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Market Moving too Rapidly
È Stretching
¡ Difficult

Resources of Small Vendors
to keep up

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Payment Reform
È Co-mingling
¡ Analytics

of Data

becoming crucial

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Pressure from Larger Vendors
È Difficult

to Compete

Prediction: Consolidation Continues Apace for Next 12-18 Months
March 31, 2011 Copyright: Chilmark Research¥ For internal use only, not for distribution without expressed permission 15

What to Watch
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Keep an Eye on Partnerships
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Often Harbingers Strategy Synergies
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Why the Acquisition
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Does it make sense?

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Acquirer¶s Acquisition History
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Successes, Failures« Significant Departures

Changes in Management
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March 31, 2011

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´There are two kinds of fools. One says: ¶This is old and therefore good.· And one says: This is new and therefore better.·µ
- Dean William Inge

March 31, 2011

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