Duff & Phelps
Healthcare Services:
Healthcare IT Services Insights
Healthcare M&A Post-Affordable Care Act:
Front-Row Insi...
Healthcare Services: Healthcare IT Services Insights – February 2014
Healthcare MA Post-Affordable Care Act: Front-Row Ins...
Healthcare Services: Healthcare IT Services Insights – February 2014
Healthcare MA Post-Affordable Care Act: Front-Row Ins...
Healthcare Services: Healthcare IT Services Insights – February 2014
2013 MA Activity
Duff  Phelps	  4
Source: Capital IQ
Healthcare Services: Healthcare IT Services Insights – February 2014
2013 MA Activity (cont.)
Revenue Cycle Management Ind...
Healthcare Services: Healthcare IT Services Insights – February 2014
2013 MA Activity (cont.)
Duff  Phelps	  6
Source: Cap...
Healthcare Services: Healthcare IT Services Insights – February 2014
Selected Publicly Traded HCIT Companies
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Duff-Phelps Healthcare IT Insights

  1. 1. Duff & Phelps Healthcare Services: Healthcare IT Services Insights Healthcare M&A Post-Affordable Care Act: Front-Row Insights from California to Inside the Beltway February 2014 Inside 1 Healthcare MA Post- Affordable Care Act: Front-Row Insights from California to Inside the Beltway 4 2013 MA Activity 7 Selected Publicly Traded HCIT Companies 8 Contacts On October 3, 2013, Duff Phelps hosted an interactive discussion on the healthcare MA environment post-initial implementation of the Affordable Care Act (ACA), drawing perspectives from top leadership across the healthcare industry. The diverse panel included experts from the healthcare information technology sector (HCIT); a view from inside the Beltway; and insights from a prominent practicing physician who administers a medical enterprise at the forefront of what many believe will become a new model for healthcare delivery – an entity that serves as both provider and payor. Led by Duff Phelps’ Managing Director Brooks Dexter, panelists included: yy Paul Holt, Chief Financial Officer of Quality Systems, Inc., which provides EHR solutions to approximately 85,000 physicians, with over 4,000 group practice customers nationwide; yy Darin LeGrange, Chief Executive Officer of Aldera, a leading provider of cloud- based and on-premise core administration solutions for healthcare payors and administrators; yy John Kelliher, Senior Managing Director of the Marwood Group, a healthcare- focused strategic advisory and financial services firm with offices in Washington, D.C., New York and London; and yy Dr. Howard Fullman, Area Medical Director of Kaiser Permanente West Los Angeles. Panelists discussed a number of important issues related to healthcare implementation in the post-ACA era, the highlights of which are summarized below. The Real-time Landscape and Tangible Drivers of Change While opinions of the ACA vary widely and are considered a cause of unprecedented political discord, the one point most everyone will agree on is that technology can – and will – play a tremendous role in reshaping our nation’s healthcare system. Since passage of the Health Information Technology for Economic and Clinical Health Act (HITECH) as part of the 2009 Stimulus Bill, healthcare providers and eligible physicians have been working diligently toward implementation of full Electronic Health Records (EHR) and the Centers for Medicare Medicaid Services’ (CMS) Meaningful Use (MU) Rule. With implementation of MU’s Stage I data capture and sharing requirements well underway, most providers have shifted their focus to Stage II’s advanced clinical processes, including the exchange of more rigorous health information; increased requirements for e-prescribing and incorporation of lab results; electronic transmission of patient care summaries across multiple settings; and more patient-controlled data. These Stage II requirements, along with conversion to
  2. 2. Healthcare Services: Healthcare IT Services Insights – February 2014 Healthcare MA Post-Affordable Care Act: Front-Row Insights (cont.) Duff Phelps   2 ICD-10 protocols, have set the stage for increased reliance on information technology and are a source of increased MA activity across the healthcare services industry. Structural issues such as scale, efficiency and costs also are driving change. Many expect consolidation, especially in the acute care setting, to continue in the post-ACA environment. In just the last 12 months, the median market value of the acute care hospital sector has risen 49.0 percent (Duff Phelps Healthcare Update, December 2013). Our panelists believe these changes in our healthcare system are being driven by a number of intangible – but very real – shifts in the industry, including aging of the US population; cyclical reform tied to future election cycles and federal budget cuts; the convergence of financial and clinical risks across the continuum of care; and an increasingly robust demand from consumers for greater access to information from and integration among healthcare payors and providers – all giving rise to an increase in mergers, acquisitions and other transactions. Marwood Group Senior Managing Director John Kelliher believes the first of these shifts represents significant uncertainty for the healthcare industry, with both the 2017 and 2021 post-election cycles having major potential to disrupt the system as cost savings are pursued and changes to the healthcare system are incorporated. Despite a concerted effort among providers to eliminate unnecessary costs from the system, the uncertainty remains strong, as government analysts expect healthcare spending as a percent of GDP will continue to grow from the current 17.9% to 19.5% by 2021 (CMS, Office of the Actuary, September 2013). With respect to the convergence of financial and clinical risks, Kaiser Permanente Area Medical Director Dr. Howard Fullman notes that because healthcare has become so expensive, government and commercial payors can no longer afford the current levels of payment and reimbursement rates will shrink. As a result, payors are increasingly moving away from volume- oriented reimbursement and developing reimbursement models based on improved outcomes and quality of care. Similarly, Aldera Chief Executive Officer Darin LeGrange and Quality Systems, Inc. Chief Financial Officer Paul Holt agree that the lines between clinical and financial risk will continue to blur through the convergence of providers and payors, and the establishment of Accountable Care Organizations (ACOs). Like most, Fullman, LeGrange and Holt believe that for payors, the future of healthcare must extend beyond simple transactions and claims processing to actually tracking patients through the continuum of care. With the help of highly-functional and integrated technology, adherence to a post-discharge plan, for example, can be tracked through a technology-enabled exchange with the patient-centered medical home view, and ultimately, help contain the future cost of caring for that patient. Whether it’s through the general shift from fee-for-service to fee-for-performance, or through increased integration across settings, technology and consolidation will play a significant role in reshaping the system. Fullman attributes the third shift to rising consumerism among the American public and a demand for greater information, integration and improved service and outcomes. Though the marketplace has talked about consumer-driven healthcare for the better part of a decade, Fullman predicts greater access to care will lead to a much-increased awareness among consumers around wellness and disease prevention as part of the care continuum. Fullman and others believe this higher level of engagement also will contribute to containing costs. Though each shift is uniquely powerful in its own right, collectively (and alongside the ACA’s legislative mandates), they are leading industry players to seek unprecedented solutions – and opportunities – through increased transactional activity in both healthcare IT and delivery. Is This “New” Model of Healthcare Delivery Really All That New? LeGrange thinks Kaiser Permanente may have had it right all along. The model they began building more than 65 years ago is more or less what we’re seeing emerge as a result of the shifts described above, especially in terms of managing clinical and financial risk under a single umbrella. Benefits of Kaiser’s “early ACO” laid the groundwork for transforming the United States’ highly- disparate healthcare system into a more integrated one by bringing together hospitals, payors and providers. In addition to streamlining the process for patients, this more-integrated approach facilitates better preventative care and management of patient populations – both of which ultimately result in lower costs for patients, payors and providers. Having invested in technology early on, Kaiser quickly learned that not all technology automatically adds value, so it’s important that the industry select carefully and deliberately as it invests. In addition to the high capital costs, users cannot overlook the amount of time and human capital required to fully leverage their investments in technology. Moving forward, the enormous advantage and long-sought ROI of a more integrated healthcare delivery system – at Kaiser and elsewhere – will come from convergence, technology and analytics. Post-ACA Sub-Sector Growth and Consolidation As the industry continues to evolve in the post-ACA environment, the panelists expect we will see a great deal of activity – transactional and otherwise – in two distinct sectors and for virtually opposing reasons. Growth in the first sector, healthcare IT, is being spurred by a number of demand drivers (such as the implementation of MU and conversion to ICD-10), prioritization for efficiency and interoperability and patient tracking. Aldera’s Le Grange recently completed a roadshow with private equity investors where 30 out of
  3. 3. Healthcare Services: Healthcare IT Services Insights – February 2014 Healthcare MA Post-Affordable Care Act: Front-Row Insights (cont.) Duff Phelps   3 30 private equity groups approached were interested in investing in this convergence thesis. Ultimately, Aldera raised $14 million from two investors in a placement that was oversubscribed. He attributed this investor interest in the company’s future to the anticipated growing demand for IT platforms – like Aldera’s – that have unlimited configurability and are capable of mass customization. Growth among HCIT companies is – and, according to the above panel of experts – will continue to be – strong. On the other hand, while acute care hospitals also are experiencing increased transactional activity, it’s not because the sector is growing – it’s because consolidation is a way to enhance economies of scale, rationalize capacity and manage reduced payor reimbursements. In just the last 12 months, the acute care hospital sector has seen more than 45 MA deals (SP Capital IQ as of December 31, 2013). What Legacy Companies Need to Consider Now Our panelists agree that if legacy players hope to survive the changing face of healthcare, they must consider where, in the reimbursement environment, they stand, and then adjust accordingly regardless of whether they’re a payor, provider or services company. As Medicare dollars become increasingly scarce, there will be clear winners and losers. Legacy players must also think about their respective customer bases. Are their customers being impacted similarly by reimbursement risks? And if so, does that provide more opportunity or risk for you? Either way, it’s important to always think a step ahead. In other words, it’s not too soon to begin thinking about the implications of MU Stage III. Risk Insights As investors look for opportunities within the industry, Kelliher suggests they must first determine their tolerance for risk. Kelliher has observed investors with significant tolerance focusing on the post-acute care space (home health companies, inpatient rehab facilities, long-term care hospitals and skilled nursing facilities). Despite having the highest direct reimbursement risks, the sector appears to be providing value. Kelliher notes that investors with a moderate tolerance for risk are more apt to consider managed Medicare plans or durable medical equipment, where risks to reimbursements largely are behind them (Medicare), or where competitive bidding processes are already in place and known (durable equipment). And finally, he sees investors who want to avoid government reimbursement risks altogether investing in outsourced service providers such as HCIT companies, or outsourced hospital services or in payors, sectors somewhat removed from direct reimbursement risk. So whether it’s through an existing entity or an emerging one (think ACOs), Kelliher believes there is plenty of opportunity, especially in the areas of case management, cost management and population management. The question for investors, according to Kelliher, really becomes, “Who can create the next-generation company that’s going to provide a real material impact in these areas?” Healthcare IT Insights With more than three-quarters of eligible physicians having already adopted some form of EHR, Holt believes many mid- to large-sized practice groups are now looking for technology solutions to help mine data from all those health records. This next wave of investment in healthcare IT will be around ACOs and how you manage the analytics, data sharing and interoperability to actually deliver better healthcare – how a payor or provider reaches out to patients, for example, to remind them about taking their medicines, coming in for appointments and doing all the things that they need to do for their healthcare. Meeting the population where they are – including social media – may be the future of increasing touches within the healthcare system. Holt proposes the HCIT companies that can support these efforts are the ones set to benefit the most. The pending conversion to ICD-10’s expanded set of billing codes also provides tremendous opportunity for HCIT companies. Because conversion to ICD-10 presents a monumental challenge to virtually everyone across the healthcare spectrum, Holt anticipates an increase in demand for outsourced collections and revenue cycle management services. What’s Next? Despite all the noise surrounding the ACA and healthcare exchanges, our panelists are confident that abundant transactional opportunities lie ahead. The demand is there. The money is there. And payors, providers and health IT and services companies see a need to be part of the “post-ACA” solution. Technology and consolidation were driving improvements in our nation’s healthcare system before implementation of the Affordable Care Act began and they will continue driving opportunity post-implementation (particularly as we draw closer to the 2015 MU penalty). As LeGrange deftly notes, “The proverbial cat has been out of the bag for quite some time, and there’s no way it’s going back.”
  4. 4. Healthcare Services: Healthcare IT Services Insights – February 2014 2013 MA Activity Duff Phelps   4 Source: Capital IQ 2013 Healthcare IT MA Activity 107 HCIT transactions were announced during the second half of 2013, in line with the 108 transactions announced during the second half of 2012. Strong transaction activity in the sector was supported by acquirers pursuing capabilities such as interoperability and population health management. Strategic buyers, including portfolio companies of financial investors, represented 88% of activity with new platform acquisitions by financial investors representing the remaining 12% of announced deals. HCIT MA activity driven by buyers with strategic ambitions. The 2013 MA activity was largely driven by purchasers seeking new technologies to broaden their product portfolios and expand their market presence. HCIT vendors continued to target companies with data analytic, practice management and health information exchange capabilities. Looking forward, 2014 MA activity should be strong as providers and payors look toward acquisitions to address challenges including payment and cost pressures, evolving regulatory standards, changing demographics and quality of care measures. Private equity portfolio companies continue product expansion through acquisitions. In the second half of 2013, Vista Equity Partners, Waud Capital, Thoma Bravo, ABRY Partners and Altaris Capital were among the private equity groups whose HCIT portfolio companies completed add-on acquisitions. The companies acquired operate across a range of industry segments, including receivables management outsourcing, practice management software and integrated EHR solutions. Several private equity sponsors completed multiple add-on acquisitions during the year – see below for details. In September 2013, Vitera Healthcare Solutions, LLC, a Vista Equity Partners portfolio company that provides end- to-end clinical and financial technology solutions to physicians and medical professionals, followed its earlier acquisition of SuccessEHS, Inc. by acquiring Greenway Medical Technologies, Inc. (NYSE:GWAY) for an enterprise value of approximately $632 million. Vitera expects the acquisition to not only expand its market share in the EHR space, but also enhance its product platforms to support providers seeking ways to navigate payment reform and meet new regulatory requirements. According to Matthew J. Hawkins, Vitera president and CEO, the combined company will remain “focused on growth and [its] commitment to [providing] current and prospective customers with proven, integrated and easy- to-use solutions they need to grow profitably, increase practice efficiencies and improve patient outcomes in this ever-changing healthcare environment.” In August 2013, Adreima, Inc., a portfolio company of Waud Capital Partners that provides hospitals with Medicaid eligibility and revenue cycle management services, purchased Optimum Outcomes, Inc., a national provider of patient-focused account resolution services. This transaction followed Adreima’s earlier acquisition of National Healthcare Review and marked its fourth add-on acquisition under Waud’s ownership. Bob Wilhelm, CEO of Adreima, noted, “The merger of Adreima and Optimum Outcomes better positions the company to lead our clients through the challenges presented by the ever-increasing complexities of the healthcare reimbursement landscape. Our combined expertise, resources and capacity will enable the company to better assist providers to realize the full value of the services they deliver.” In July 2013, Mediware Information Systems, Inc., a Thoma Bravo portfolio company that designs and implements specialized software solutions to automate complex healthcare processes, acquired Definitive Homecare Solutions Ltd., a provider of business and patient management software solutions. Mediware has been an active acquirer and this acquisition marks its third under Thoma Bravo’s ownership, second in 2013
  5. 5. Healthcare Services: Healthcare IT Services Insights – February 2014 2013 MA Activity (cont.) Revenue Cycle Management Index Quarterly LTM EBITDA Multiples (Q4 2010 - Q4 2013) Duff Phelps   5 Source: Capital IQ * Multiples calculated based on the average daily LTM EBITDA multiple of each company for the fiscal quarter. Note: Excludes Accretive Health, Inc. for the periods Q4’12-Q4’13 as the company is in the process of restating its historical financial information. The above chart includes multiples for all other selected companies in the RCM index and thus differs from the multiples presented elsewhere in this report. * Multiples calculated based on the average daily LTM EBITDA multiple of each company for the fiscal quarter. Information Services Index Quarterly LTM EBITDA Multiples (Q4 2010 - Q4 2013) and twelfth since 2008. Thomas Mann, Mediware’s president and CEO, stated, “Market conditions are ripe for consolidation in the homecare technology sector… Health reform, aging populations, prevalence of chronic disease and other factors are triggering rapid growth in homecare, increasing the need for providers to access software products and services that drive down costs, maximize safety and efficiency and support business growth.” Strategic buyers look to HCIT to fuel growth. Leading public HCIT vendors including The Advisory Board Company (NasdaqGS:ABCO), WebMD Health Corp. (NasdaqGS:WBMD) and Quality Systems Inc. (NasdaqGS:QSII) were among the strategic acquirers that made acquisitions in the second half of 2013. Additionally, companies such as Experian plc (LSE:EXPN), Reed Elsevier plc (LSE:REL) (through its subsidiary LexisNexis Risk Solutions) and The Hearst Corporation made acquisitions, believing the HCIT sector will provide momentum and be a source of future growth. Some of the key transactions from the period are highlighted below. In November 2013, Experian acquired Passport Health Communications, Inc., a provider of data analytics and software in the U.S. healthcare payment market for a reported $850 million. Since entering the U.S. healthcare payment market in 2008, Experian has completed a series of transactions to expand its product portfolio and broaden its market reach. According to Don Robert, Experian CEO, “We are now taking the next step and the acquisition of Passport Health will make us a clear leader in this high-growth and attractive market. With our newly combined product range, we will offer our clients in the U.S. healthcare industry a competitive one-stop shop to manage risk and to satisfy their payments requirements.” In October 2013, WebMD acquired Avado, Inc., a developer of cloud-based patient relationship management tools allowing patients and physicians to interact remotely. The acquisition is expected to improve WebMD’s current patient connectivity platform, Medscape, and solidify its position in the connected care space. David Schlanger, WebMD’s CEO, noted, “Our acquisition of Avado demonstrates WebMD’s commitment to playing a leading role in the emerging patient relationship management space because we believe that connectivity has the potential to make the delivery of care more efficient and improve patient outcomes.” In October 2013, The Advisory Board Company (“ABC”) acquired Care Team Connect, Inc. (“CTC”), a web-based software-as-a-service care management workflow solutions company. ABC plans to merge CTC’s product with its existing software, Crimson, to analyze physician behavior data and develop better care management programs. Robert Musslewhite, ABC CEO, stated, “We are excited to add CTC’s outstanding care management technology and exceptional talent to [ABC’s] portfolio of solutions, particularly given our members’ need for effective population health capabilities in the current health care environment… This provider-oriented workflow tool for care management allows [ABC] to offer a more comprehensive array of research, technology and services to help members with all aspects of population health management.”
  6. 6. Healthcare Services: Healthcare IT Services Insights – February 2014 2013 MA Activity (cont.) Duff Phelps   6 Source: Capital IQ Stock Price Change June 30, 2013 – December 31, 2013 Source: Selected companies as detailed on page 7. Data from Capital IQ. Stock Price Index January 1, 2013 - December 31, 2013 Selected Publicly Traded HCIT Companies HCIT companies outperform the broader market in 2013. In 2013, both the RCM and Information Services indices outperformed the SP500 index. The RCM index outperformed the SP500 by 4%, while the Information Services index outperformed the SP500 by 35%. In 2013, athenahealth (NasdaqGS:ATHN) was the leading performer in the RCM index, gaining 84%, and Medidata Solutions (NasdaqGS:MDSO) led the way for the Information Services index, gaining 209%. EBITDA growth lags revenue growth. In Q3 2013, 82% of the HCIT public companies experienced year-over-year revenue growth, averaging 9% across all companies in the index; however, fewer companies were able to generate EBITDA growth over the same period. Nonetheless, athenahealth (NasdaqGS:ATHN), Accelrys (NasdaqGS:ACCL), Medidata Solutions (NasdaqGS:MDSO) and WebMD (NasdaqGS:WBMD) all generated year-over- year EBITDA growth greater than 30%. Significant investor interest drives valuation multiple expansion. The median LTM EV/EBITDA multiple for the RCM companies in the index increased from 9.9x at 6/30/2013 to 13.3x at 12/31/2013. (Note: The data for 12/31/2013 excludes Allscripts (NasdaqGS:MDRX) and athenahealth (NasdaqGS:ATHN). The data for 6/30/2013 and 12/31/2013 exclude Accretive Health as it has not released financial information for these periods.) The median LTM EV/EBITDA multiple for Information Services companies increased from 21.0x at 6/30/2013 to 22.7x at 12/31/2013.
  7. 7. Healthcare Services: Healthcare IT Services Insights – February 2014 Selected Publicly Traded HCIT Companies Duff Phelps   7 Source: SP Capital IQ Note: Revenue multiples greater than 10.0x and EBITDA multiples greater than 100.0x are deemed not meaningful. (1) Accretive Health, Inc. has not filed financial data since Q3 2012 and is currently in the process of restating historical financial data. (2) LTM 6/30/2013 EBITDA multiples exclude Allscripts and athenahealth. Company Name Ticker Price 12/31/13 % Change 6/30/13 LTM Mulitples (as of 12/31/2013) Rev EBITDA LTM Mulitples (as of 6/30/2013) Rev EBITDA Change in Mulitples Rev EBITDA Revenue Cycle Management Accretive Health, Inc.(1) AH $9.16 (15.3%) NM NM NM NM NA NA The Advisory Board Co. ABCO 63.67 16.5% 4.5x 39.1x 4.1x 33.2x 9.9% 17.6% Allscripts Healthcare Solutions, Inc. MDRX 15.46 19.5% 2.3x NM 1.9x 26.1x 21.2% NA athenahealth, Inc. ATHN 134.50 58.7% 9.6x NM 7.0x 76.8x 36.7% NA MedAssets, Inc. MDAS 19.83 11.8% 3.0x 9.8x 2.9x 9.3x 2.5% 5.6% Quality Systems Inc. QSII 21.06 12.6% 2.6x 13.3x 2.2x 9.9x 22.3% 34.5% Mean(2) 17.3% 4.4x 20.7x 3.6x 17.4x 18.5% 19.2% Median(2) 14.5% 3.0x 13.3x 2.9x 9.9x 21.2% 17.6% Market Capitalization Weighted 25.5% 5.7x 9.5x 4.2x 40.3x 37.2% (76.5%) Information Services Accelrys Inc. ACCL $9.54 13.6% 2.6x 38.7x 2.2x 34.5x 14.8% 12.4% Cerner Corporation CERN 55.74 16.0% 6.7x 22.7x 5.9x 21.0x 12.3% 7.7% Computer Programs and Systems Inc. CPSI 61.81 25.8% 3.4x 13.5x 2.8x 11.6x 22.4% 16.9% HealthStream Inc. HSTM 32.63 28.9% 6.4x 34.1x 5.3x 26.3x 20.9% 29.6% Healthways Inc. HWAY 15.35 (11.7%) 1.2x 20.1x 1.3x 15.1x (6.6%) 32.7% HMS Holdings Corp. HMSY 22.70 (2.6%) 4.3x 14.7x 4.6x 15.5x (7.8%) (5.2%) Medidata Solutions, Inc. MDSO 60.50 56.2% NM 73.1x 8.4x 52.5x NA 39.3% Merge Healthcare Incorporated MRGE 2.32 (35.6%) 1.8x 27.2x 2.2x 22.3x (14.9%) 21.9% National Research Corp. NRCI.B 34.71 (0.7%) 5.5x 17.7x 5.6x 17.6x (2.0%) 0.4% Omnicell, Inc. OMCL 25.53 24.2% 2.2x 15.6x 1.9x 13.4x 15.2% 16.2% WebMD Health Corp. WBMD 39.50 34.5% 3.4x 27.7x 2.6x 36.5x 29.6% (24.3%) Mean 13.5% 3.7x 27.7x 3.9x 24.2x 8.4% 13.4% Median 16.0% 3.4x 22.7x 2.8x 21.0x 13.6% 16.2% Market Capitalization Weighted 17.9% 5.2x 27.9x 5.4x 23.8x (4.6%) 17.4%
  8. 8. To subscribe to Industry Insights, visit: www.duffandphelps.com/subscribe About Duff Phelps As a leading global financial advisory and investment banking firm, Duff Phelps leverages analytical skills, market expertise and independence to help clients make sound decisions. The firm advises clients in the areas of valuation, MA and transactions, restructuring, alternative assets, disputes and taxation - with more than 1,000 employees serving clients from offices in North America, Europe and Asia. For more information, visit www.duffandphelps.com. Investment banking services in the United States are provided by Duff Phelps Securities, LLC. Member FINRA/SIPC. Transaction opinions are provided by Duff Phelps, LLC. MA advisory and capital raising services in the United Kingdom and Germany are provided by Duff Phelps Securities Ltd., which is authorized and regulated by the Financial Conduct Authority. Duff Phelps Copyright © 2014 Duff Phelps LLC. All rights reserved. Contacts: Jim Hesburgh Managing Director T: +1 212 871 5970 jim.hesburgh@duffandphelps.com Brooks Dexter Managing Director T: +1 424 249 1646 brooks.dexter@duffandphelps.com Paul Kacik Managing Director T: +1 424 249 1652 paul.kacik@duffandphelps.com John Pollock Managing Director T: +1 212 871 6670 john.pollock@duffandphelps.com Healthcare Services: Healthcare IT Services Insights – February 2014