Chandresh Shah

AdvancedMD to be acquired by Marlin Equity Partners (from ADP)

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What does EHR merger and acquisition activity mean for providers?

The latest in a series of M&A activity related to EHR companies is AdvancedMD, which is being acquired by Marlin Equity Partners. In other words, ADP is dumping AdvancedMD.

I was surprised when ADP acquired an EHR company and I wrote about it. Before it became AdvancedMD, it was called PracticeOne. What will it be called now?

I think ADP got into the EHR business because of data. ADP is a data mining giant. There is tremendous value in being able to generate meaningful big data from healthcare companies. Isn’t that the reason why Practice Fusion is free? ADP may have seen value in having physicians as clients to whom it can sell additional services. I don’t think ADP services and EHR every connected in the physician’s mind. Perhaps ADP did not succeed in creating products that manage an entire Clinic.

ADP pumped in tremendous amount of marketing dollars to generate business. Unfortunately, the market is extremely fragmented and perhaps did not succeed in meeting the goals it set for itself in acquiring AdvancedMD.

What happens to AdvancedMD now?

Marlin Equity Partners currently has three EHR products (companies).

  • e-MDs
  • MDEverywhere
  • AdvancedMD

Marlin is not talking yet about what they will do until the acquisition is complete. Private equity companies are notorious for acquiring, merging and creating a resultant entity that looks so different that you would not recognize it. End result is that usually customers suffer most.

Clinics that currently have e-MDs or AdvancedMD would be in a good position to evaluate their options. I may sound skeptical, but I have no appetite for standard prepared statements such as this (especially if I am an AdvancedMD user):

Raul Villar, ADP/AdvancedMD’s Presicent called Marlin a “perfect fit” for AdvancedMD because the firm is committed to the company’s vision of enabling small medical practices to increase cash flow, reduce administrative burdens and focus more on patient care.

For all practices looking for a new EHR system or looking to switch, a very important evaluation criteria should be the possibility that the vendor may be acquired by someone else. How do you determine that possibility? If possible, have one-one conversation with the leaders of the vendor rather than just sales or marketing people.

How do you evaluate vendors?

I talk to many vendors. There are some that constantly complain about the market, growth, costs, profitability. Many others seem to be ok with how they’re doing. Of course, everyone wants to do better.

But if you analyze these two profiles, I always find the first category of vendors as being open to being acquired, or finding an investment partner. These are the ones that have shot themselves by overspending on marketing or product development. The second category owners run a better ship. They are generally profitable. These are also generally true cloud vendors where they have always been with the monthly subscription model of revenue. Their costs are under control and they have a predictable cash-flow and are able to plan future investments in product.

It is going to be very interesting because I foresee merger and acquisition activity to accelerate in the coming few years.

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