The deal positions GE as a major player in the health care IT world–a market in which it sees great potential for growth as hospitals and health care providers begin to warm up to computerized information systems for patient care, office administration, and financial transactions. The health care sector has historically lagged behind other industries in IT adoption.
Both companies pointed to the compatibility of their offerings as a major reason behind the deal. GE Healthcare, a $15bn company that provides a range of products from diagnostic equipment to drug research, also specializes in imaging systems, such as for radiology and cardiology departments. The company is also world’s leading provider of picture archiving and communication systems, or PACS in health care IT lingo.
IDX, which reported revenue of $521m last year, offers electronic medical records, revenue and specific workflow systems for the health care industry. In a conference call with investors, IDX CEO Jim Crook said that his company’s workflow offering for clinical specialties, particularly its image management systems for radiology, would integrate nicely with GE’s position in the imaging market.
Crook said the big strategic advantage for GE will be the addition of IDX’s Carecast clinical IT system to its product line. GE has lacked a core clinical data repository, according to Crook, and the Carecast system will now serve as the basis for GE’s new integrated healthcare IT offering. Crook also said IDX’s revenue cycle systems for physician will get a healthy boost from GE’s resources and scale. But he cautioned that it was too early in the acquisition process to determine which product offerings would be the centerpiece of GE’s new business.
However, several questions around product offerings and strategy will still have to be worked out before the deal’s expected close date early next year. One big issue haunting IDX has been its apparent troubles working on the NHS’ nationwide IT modernization program. One of the project’s regional contract leads, Fujitsu, booted IDX off its $1.6bn contract in June and replaced it with IDX competitor Cerner. IDX continues to work under BT Group to install clinical records for the London region of the program, but not without criticism from NHS program director Richard Granger.
Crook said the GE deal would improve IDX’s poisiton in the UK–after all, GE Healthcare is headquartered there. But he was unable to comment on the company’s progress with BT on the London project, saying that all communication regarding the program’s status comes from the NHS, not the vendors.
And there’s also the question of both companies’ partnerships. IDX, for example, is now in the middle of its 10-year strategic alliance with fellow health IT vendor Allscripts Healthcare Solutions. Under the exclusive arrangement, Allscripts markets its ambulatory clinical system to IDX customers and IDX markets its practice management software to Allscripts clients. Now with the acquisition, GE won’t be able to market its ambulatory systems to IDX’s existing client base during the term of the IDX-Allscripts partnership, Crook explained.
IDX also has a partnership with Philips Medical Systems, which, like GE, is a top provider of diagnostic and care systems and also has a health IT business. Philips’ acquisition of PACS vendor Stentor in July put it in second position in the PACS market, behind GE. How the IDX-Philips partnership will play out under the acquisition is yet to be known.
As for the nitty-gritty of the transaction, the deal has been approved by the boards of both companies but is subject to the approval of regulators and IDX shareholders. Shareholders accounting for some 20% of IDX stock have already agreed to will vote for the merger. Crook said there was “keen” interest at GE in keeping around the IDX management team, and although he didn’t offer details as to the integration of IDX’s 2,400 employees into GE Healthcare’s headcount of more than 43,000, he assured investors that GE’s purchase was in the interest of customers, shareholders and employees alike.
IDX shares soared on the news, up 23% to close at $43.25. Other health care IT stocks performed well today, perhaps boosted by the market prospects that led a heavyweight like GE to enter the medical records domain. Cerner drifted up 2.1% to close at $86.80, IDX competitor Eclipsys saw shares jump 6.8% to $18.19, and Quality Systems was up 1.8% to $69.35.