Thoughts on GE's Acquisition of IDX

GE's announced acquisition of IDX will obviously have a major impact on the healthcare IT marketplace. I don't know what it means, but let's try to talk it out.

IDX's business is mostly large group practice management software, hospital systems, and imaging-related systems. How do their products stack up against those of GE? Pretty well, but only because both companies have offerings near the bottom of their respective category ratings. GE's healthcare strategy is oddly different from its "acquire the #1 or #2 best company or product" focus in other industries. Even among their stable of nags, their core HIS application is a poster child for underachievement (it's a trivia question to most CIOs that they even have one.) They seem to have just bought whatever was available on the periphery of healthcare where their high-margin instruments can connect (lab, rad, etc.) IDX gives them (on paper, at least) a fairly broad, fairly widely depoyed "suite," as they're already calling it.

If you're an optimist, you might assume that a mega-conglomerate like GE will pump R&D into the old warhorse IDX products, make them wonderful in a way that a small player like IDX never could, marketing the heck out of them as Centricity Whatever and dominating the world.

Pessimists would ask for even one example where that has ever happened, including with prior GE acquisitions. Conglomerates have a way of screwing up products (McKesson, Siemens, and maybe even Misys.) At least in GE's case, their commitment to healthcare should be unwavering (especially given Jeff Immelt's history) and its favorable organizational alignment with GE's biosciences companies under the GE Healthcare banner means it will continue to show rosy profits and prospects, despite the fact that their HIT products specifically aren't very good, exhibit no industry leadership, and don't seem to sell well. At least they don't have financial struggles and a healthcare indifference like other conglomerates have in the past.

GE's integration has been about like McKesson's, and that's not much of a compliment. A big stable of so-so products running on a science fair of hardware is not easy to integrate, particularly if all of them continue to be sold standalone and some of them compete with each other. It's almost certain that GE will need to trim the product line and obvious that headcount will go down, as it always does once the smoke has cleared and the "don't worry, nothing will change" announcements have been e-mailed to nervous employees.

On the other hand, GE was already laying out strategy that didn't include IDX. They've invested resources in their partnership with Intermountain Healthcare, which has always been a hotbed of developing products that ended up being vendor offerings. Much of CareCast was written 20 years ago by that little band of Phamis employees in Seattle. Does it contain enough intellectual property or technical excellence such that a quick spit-and-polish treatment will make it a world-beater? I don't think so, but maybe GE does.

On the other hand, maybe GE doesn't really care all that much about CareCast. Was IDX worth $1.2 billion without it? Maybe. CareCast wasn't selling, so other than milking the maintenance revenue (not insigificant given the size of its installs,) IDX profits don't assume any CareCast sales anyway. Anything they make at this point is gravy, with nearly 100% marginal profit. If GE can bring a couple of big deals home (and the IDX call hinted that they're a finalist in a couple) they at least neutralize the short-term cost of CareCast's care and feeding, free to pluck benefits from IDX's more successful lines. And, they're covered short term with a credible EMR product while waiting for the Intermountain tree to bear fruit.

IDX needed a white knight. It was devaluing itself day by day, with an embarrassing UK performance and no CareCast sales. The acquisition announcement mentioned that IDX needed a partner with global reach, but it had already created its own opportunity in the UK and blew it. Cerner and Epic were threatening to run the table on them. In addition, Rich Tarrant wants to be a Senator, so he can cash in (over $100 million) and concentrate on those aspirations instead of trying to revive a slumbering IDX against formidable competition.

From HITPundit: "I think you hit it right that GE bought a mediocre company with mediocre products. IDX's 2 major owners wanted out once the UK thing happened, they can say what they want, everybody else saw what was happening, no Carecast sales, a saturated physician market, no UK which meant global deals were going to be harder to get. On the call they said global reach, depth or resources, scale - sounded like they gave up. GE will send Carecast offshore to be rewritten and fully integrated with the other IDX products, to create interoperability. Why else buy a company that can not sell its biggest potential system Carecast. On the Allscripts front, you have to wonder if they are next - Allscripts can not stand alone, and GE is not a company to stand around and wait for the IDX alliance to end - so I would suspect that something is going to happen there - so I would rate MDRX (Allscripts) a BUY! HIMSS will be interesting!! But you have to wonder, and maybe some CIO's can answer, do or can conglomorate companies make good partners in our industry?!?!?"

The real losers in this deal might be QuadraMed and Eclipsys, since everyone was assuming that someone would buy them and the major possibility has just played its cards differently. Eclipsys would have been a better fit, in my opinion (product trending up instead of down, better technology, cheaper) but rumor always had been that GE (and Philips) had looked them over and passed. Ditto QuadraMed.

Thought: does this deal cause Philips to run wildly into the streets, arms akimbo and wads of cash fluttering in the breeze looking for its own acquisition? Is it happy enough to remarket Epic with its main imaging and diagnostic system competitor is building a wall of applications under its own control? Or does it look at GE, then Siemens, then snicker quietly to itself?

From Anonymous Reader: "What do they do with the Picis and Allscripts relationships? GE still owns the MedicalLogic Logician EMR, so maybe Allscripts gets tossed to the side by IDX and has to buy a physician practice management base to keep up its momentum. This does solve GE's lack of a financial offering, while at the same time indicating that there is no way GE will buy QuadraMed now."

The real questions don't change: does GE really want to revolutionize healthcare, or sell high-margin diagnostic equipment? Does it want to be a leader in quality, or just in sales and size? Will they provide a compelling reason to buy CareCast that IDX couldn't, such as easy financing and Six Sigma consulting, or is it just the same old product with a shiny new nameplate? Can an expensive product running on ultra-expensive hardware compete globally against Wintel-based and even open source applications, particularly since its UK experience was an unhappy one?

I wrote on August 11, referring to QuadraMed and IDX: "Both will someday be trivia questions in HIT history, I expect." Will we miss IDX? CareCast was probably better than sales would indicate and the last time I looked at IDXrad (years ago) it seemed pretty good. Certainly they've had a long history in the industry and it will be odd to see their name disappear (no different than that of Phamis when a smaller IDX shark ate them years ago.) I'm sure a bunch of IDX long-timers will be seeking other career opportunities, either by choice or not. Competitors will surely fear GE more than IDX, so there's probably little celebration in Kansas City and Madison. Maybe the best comparison is Misys, which gave everyone high hopes with MisysCPR but has underwhelmed since, rarely being at the table with the big boys. Somehow HIT companies seem to lose their passion when swallowed up by multinational firms selling everything from lightbulbs to Jay Leno. That's kind of sad, don't you think?