Allscripts reaches $145M settlement with DOJ over subsidiary business practices

By | August 9, 2019

Dive Brief:

  • Allscripts has reached an agreement with the Department of Justice over its investigation of subsidiary Practice Fusion. The Chicago-based health IT vendor reported a $ 145 million charge in the quarter to settle claims related to allegations that the unit falsified EHR certification and violated anti-kickback laws.
  • The company posted a 31% jump in second quarter bookings to $ 276 million. As a result, Allscripts raised its 2019 bookings guidance to between $ 1.05 and $ 1.1 billion, citing a pipeline of new deals in its second quarter earnings announcement Thursday afternoon.
  • Revenue of $ 445 million was up 1% from the second quarter of 2018, but slightly below Wall Street expectations. The company currently has $ 3.9 billion in backlog it hasn’t yet converted to revenue, contributing to its failure to turn a profit in the quarter. Allscripts reported a net loss of $ 150 million compared with income of $ 65 million in the same quarter last year.

Dive Insight:

Allscripts sells EHR, financial and population health management platforms to providers and healthcare facilities. It acquired Practice Fusion, another EHR company, in January for $ 100 million, roughly a year after Practice Fusion was informed a district attorney in Vermont was looking into its compliance with the EHR certification program.

The DOJ began investigating Practice Fusion prior to Allscripts’ acquisition over “actions that occurred prior to our ownership,” Allscripts president Rick Poulton said on a Thursday call with investors. “As such, we were highly motivated to close this with the DOJ.”

For the full quarter, Allscripts paid $ 154 million in transaction and legal costs, mostly related to the agreement. In contrast, in the second quarter last year, Allscripts spent only $ 43 million.

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Several EHR vendors have gotten into trouble with the government for allegedly falsifying certifications and provided kickbacks to clients in exchange for promoting their products to other companies. In May 2017, Allscripts competitor eClinicalWorks settled with federal prosecutors for $ 155 million — the first time the DOJ pursued an EHR vendor for falsifying Meaningful Use certification.

On the late Thursday earnings call, Allscripts execs fielded analyst questions about the timing and breakdown of the settlement, but all they’d say is the two arrived at the settlement following protracted negotiations.

“We got to a place where both parties could stomach it,” Allscripts CEO Paul Black, previously of Cerner and IBM, said. Allscripts and the government are still hashing out details of the agreement. 

Allscripts has been looking to diversify its business outside of EHR offerings for a while. In June, Allscripts purchased prescription drug monitoring startup ZappRx for an undisclosed amount, jump-starting their presence in the specialty pharmacy marketplace.

Microsoft currently has a clinical partnership with Allscripts‘ life sciences arm Veradigm. The goal of the partnership is to develop a research model allowing trial data to be collected through point-of-care tech platforms. It aims to speed therapies to market.

In July, Allscripts and Microsoft also partnered to allow the transmission of patients’ EHR data from Microsoft’s HealthVault to Allscripts‘ FollowMyHealth portral before HealthVault is retired in November.

Allscripts spent $ 63.4 million on research and development in the quarter.

Revenue, which was mostly driven by software delivery, support and maintenance, was within the company’s guidance though in the lower end.

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Although Allscripts execs said M&A didn’t affect revenue in the quarter, overall consolidation has negatively affected the vendor. In 2018, Allscripts lost 14 hospitals (nine from one system) from its Sunrise Clinical Manager platform to Epic, and another 16 switched from its Paragon EHR to a competitor.

Also Thursday, Allscripts affirmed full year guidance. In 2019, the IT company expects between $ 1.05 and $ 1.1 billion in bookings and earnings per share between $ 0.65 and $ 0.70. The company expects revenue to grow every quarter in 2019.

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