1. 2014 HIS Vendor Review
Part 2: High-end Vendors
© 2015 by H.I.S. Professionals, LLC, all rights reserved.
By Vince Ciotti, Principal
HIS Professionals, LLC
Cerner McK Epic Allscripts GE

2. High-End Vendors
• After summing up the market last week, these 3 episodes delve
into the details of each vendor by their size & target market:
– High-end = large hospitals of 300+ beds, AMCs and IDNs
– Mid-Range = community hospitals of 100-300 beds in size
– Low-end = hospitals of under 100 beds, including CAH
• Interesting how the large size of these high-end vendors’ annual
revenue corresponds to the bed size of their target market…
• For high-end vendors, we’ll now cover their:
- Annual revenue in 2014, growth/decline
over 2013, and $ HIS-tory over 20+ years
- Product line and target markets for each
- Key statistics: # of employees, offices, etc.
- Candid assessment of future prospects

3. • It’s staggering to visualize below how much this HIS giant has
grown since its humble beginnings in 1979 as “PGI,” the initials
of its three founders: Neal Patterson, Paul Gorup, and Cliff Illig.

4. • Equally impressive is to see how they grew over time to pass
every other HIS vendor in annual revenue to become #1 today:
Today’s #1 Vendor

5. Key Cerner Stats
• Equally impressive are their other numbers besides revenue:
– Increase in annual revenue from 2013 of 17% (without
Siemens’ $1.2B in revenue that closed in February, 2015)
– 16K total FTEs worldwide (without ≈6,000 Siemens FTEs)
– 18K client “facilities” (includes rest rooms?) in 30 countries
• How did they do it? Like many other high-end vendors, they are
diversifying their products and services far beyond pure HIT:
– Medical Devices, Patient Engagement, Physician Practices,
Pharmacies, Population Health, Workplace Health…
– Like Medhost & CPSI, their “RevWorks” outsources RCM, and
like many HIS vendors, they will outsource the whole IT shop.
– They learned the $ value of “remote hosting” from SMS many
years ago, and now run most clients from 2 giant sites in KC.
Remote hosting brings in far more revenue than inhouse…

6. Next Year?
• We are bullish on Cerner maintaining this #1 position for years:
– Cerner’s recent acquisition of Siemens offers them unfettered
access to the C-suites of almost 1,000 hospitals on Siemens 3
legacy products (Invision, MedSeries, and Eagle), which they
will only support for the next 3-5 years, plus Soarian clients
who have been promised 10 years of support so far...
– Granted Epic will do well in large Siemens clients that go to
market, as will Meditech and Paragon do well in Siemens
mid-sized clients that look. But between them, Cerner &
Siemens have the two best Sales & Marketing organizations
in the industry and they’ll scoop up many with nary an RFP…
• So here’s the new “normal” – after 15 years of
annual revenue being dominated by McKesson
(which ended a 15 run by SMS), Cerner is now
king of the hill, just as its stock is on Wall St!

7. • Slipping to 2nd place is pharmaceutical giant McKesson whose
total revenue in FY 2014 was $138 Billion, up 13%, but whose
Technology division reported “only” $3.2B in revenue.
– Like Cerner, McKesson Technology Solutions offers many
products and services beyond traditional HIS systems, eg:
Relay Health, InterQual, Business Intelligence, Imaging, etc.
– To add to the complexity, their fiscal year end is March,
whereas most other vendors are calendar year-end only
(exceptions are Siemens & NextGen/QSI), so comparing
revenue figures is a bit of an apples to oranges challenge...
• But if we waited until June to see McK’s 2015
annual report, by then Cerner will be a Billion
$s higher after the Siemens deal closes! So
what the hey, we’ll go with each vendors’
annual report issued during 2014, period.

8. • Like Cerner, McK has staggering numbers of clients, FTEs, offices,
countries, etc., but hard to tell what’s from pharmacy versus IT.
Unlike Cerner, however, McKesson has a plethora of products:
– “Legacy” = Series (IBAX 4000, DCC…) & Star (HBOC) in
hundreds of small to mid-sized hospitals up to 300 beds.
– Horizon’s suite of systems is gradually being sunset in several
hundred large facilities, AMCs and IDNs of 300 beds and up.
– Paragon = their “go forward” product for all bed sizes (!?),
built on a pure Microsoft platform with about 300 clients.
• Like Cerner sucking up Siemens’ clients,
McKesson will probably do very well
converting many Series, Star & Horizon clients
over to Paragon, especially now that they are
working on an integrated Paragon physician
practice system to replace Practice Partners…
McKesson Product Prognosis

9. • In 3rd place is Judy Faulkner’s incredible machine that has sold
almost every large AMC & IDN for the past 5 years (except IHC).
• Their revenue only went up a bit from $1.7 to $1.77 Billion, but
with this CMS MU audit paranoia, everyone’s sales are slow...
• They will probably win as much as Cerner from Siemens large
hospital clients on Invision & Soarian, at least those who look.
– They are starting to sell internationally as well (eg: Dubai),
and have an interesting contract clause called Epic Connect
that lets their large clients process smaller hospitals.
– Their new “remote hosting” data center surprised everyone,
so future revenue prospects are as solid as WI’s frozen lakes.
• About their only down side would be Judy retiring
and her successor changing the company’s
winning philosophy, which she has prepared for
with her recent charity plan to keep Epic private.

10. • Epic’s revenue growth is the easiest to explain of all vendors: UP!
Epic Revenue HIS-tory

11. • In 4th place is Allscripts, a leader in physician practices (both
practice management and EHRs), per these recent CMS figures:
• Their “Sunrise” suite of HIS apps should finally score a few sales
from Siemens & Horizon client hospitals who actually look...
• Paul Black was one of the driving forces at Cerner during their
recent climb, so Allscripts future prospects are fairly positive.

12. • Hard to remember how long the HIS-tory of this firm is, going
from Lockheed to TDS to Alltel to Eclipsys… Here’s the recent $s:
• Alltel had a small
revenue jump with
the Y2k run-up,
• Eclipsys built up
revenue with a
series of product
acquisitions,
• Then a huge jump
in 2011 when
Allscripts added
their huge
physician practice
revenue
Allscripts Revenue HIS-tory
(Y2K)
Allscripts
Eclipsys
TDS
Alltel

13. • In 5th place among the high-end HIS vendors is GE, who got into
the HIS market when they acquired IDX’s “CareCast” solid HIS
and physician practice products, which GE combined with
Logician’s hot physician EHR to build their “Centricity” suite.
• A strong player in the physician practice market
(ranked #5 on CMS’ list on the previous page),
they have lost a large portion of their IDX HIS
clients to leaders like Epic & Cerner over the
past 5 years without a single recent win.
• They recently sold off BDM’s Pharmacy system, which seemed
like the start of their demise in HIS, but their recent acquisition
of API (a leader in PR, HR and T & A systems) is quite positive.
• Like other high-end vendors, they have a wide array of non-IT
products in their $18B Healthcare division, and we estimate their
HIS revenue to be “only” around $800M and probably declining.

14. Next 2 Weeks
• We’ll delve into the details of the remaining 7 HIS vendors’
performance over then next 2 episodes of this review, covering
the 2 smaller market segments (in terms of beds and revenue):
– Mid-Size – vendors whose target market includes mainly mid-
size hospitals of 100 to 300 beds in size, including Meditech
(all 3 product lines), NTT Data (Keane) and QuadraMed.
– Small – vendors whose client base consists of mostly under
100 bed facilities, including CAH (Critical Access Hospitals) of
under 25 beds: CPSI, Medhost, Healthland and NextGen.
• With a subject area so wide and deep, I’m sure I got a few things
wrong or missed important points, so feedback is welcome at:
vciotti@hispros.com
505.466.4958