[HealthsystemCIO.com has had numerous inquiries about the importance of Allscripts’ recent stock collapse, so we turned to the pro — Vince Ciotti, Principal and co-founder of HIS Professionals LLC — for his opinion]
The Allscripts stock collapse? It’s sad news for the investors, but the impact on the many former Eclipsys clients is a different story entirely. Just what is the relationship between a company’s stock performance and its products and services? That’s a different matter entirely. Let’s look at just two historical antecedents for brevity’s sake (there are dozens more):
1993: The name in computer hardware, IBM sees its stock collapse in a big way, with losses of $8B on total revenues of $62B, causing the stock to drop from $43 to $12. Big Blue only had 100 days of cash on hand when they fired their CEO and brought in a new management team. If you were a hospital CIO back then and were running IBM’s PCS/ADS or Mediflex’s Medipac on an in-house mainframe, should you have jumped ship and replaced them with a proven HBO mini system or SMS’s brand new Invision? Well, a year later IBM turned the ship around. The firm earned nearly $3B on $64B in sales, and the stock rose 34%. Whoops — would have been hard to get rid of that HBO mini or SMS phone line and buy a new mainframe again…
1998: After HIS industry leader HBOC was acquired by drug giant McKesson in a billion dollar deal, within a few months it turned out HBOC was as creative in its accounting practices as it was in its programming… McKesson’s stock collapsed $9B in a single day, a staggering hit for thousands of investors who filed lawsuits. Three HBOC executives were indicted and eventually convicted, and McKesson started the slow process of rebuilding its stock price and reputation. What was the impact on the ≈1,000 hospitals running Star, Series, Pathways and brand-new Paragon? Well, they could have swapped them out and gone back to an IBM mainframe, but most kept them to this very day, receiving good service and support for all these years. Yes, Pathways morphed into Horizon, which was recently sunset, but that decision had little to do with the stock collapse of 10 years ago…
And, indeed, that is the lesson Allscripts/Eclipsys clients should take away: a company’s stock price is a volatile reflection of many things:
- The vagaries of Wall Street: see the movie Margin Call about our recent 2008 market collapse – a wonderful expose on stock insiders!
- Financial management of the firm, the same delicate balance of income versus expense every hospital struggles with today in this age of reduced reimbursement.
- Earnings per share – being publicly held makes a firm subject to the 90-day treadmill of meeting earnings forecasts quarter by quarter…
Whereas a company’s products and service are a reflection of a whole different set of parameters:
- Features and functions: do their products have all the bells and whistles your users desire, and in a user-friendly interface?
- Regulatory requirements: are they investing enough in R&D to keep up with these challenging times – HIPAA 5010, ICD-10, Meaningful Use, etc.
- Is there a sufficient support staff, with enough bodies and experience to help you in times of need — both onsite as well as via phone/internet?
- Technology: is their data base “open” and ODBC compliant, are their servers virtualized, are interfaces HL7 version 3.0 compliant, and can they talk to iPads and the plethora of PDAs easily?
Yes, a company’s financial performance is a factor to consider when deciding to stay with them or not, but the hour-by-hour vagaries of Wall Street are only a tiny part of what a hospital should consider when making such a momentous decision. With most of the nation’s 5,000 hospitals struggling to achieve Meaningful Use by next summer’s deadline, now is hardly the time to switch systems, especially with many leading vendors having a “line” for implementations that is already well beyond that deadline!
My advice to former Eclipsys clients who bought Sunrise because of its functionality and user friendliness: how many of your RNs and MDs have complained recently that their pension funds have been damaged by Allscript’s stock collapse? If the answer is few to none, then stay the course. For whatever vendor you may pick to replace it, at some future point, their stock will fluctuate as wildly as the market does; which in our lifetime has been, and will continue to be, a pretty wild ride! It should make a CIO happy that she has a much more sane job than trying to predict what the bulls and bears will come up with next.