2. 2018 macro vendors 3 30

1. 2018 Top 10 HIS Vendors
Part 2: High-end Vendor Details
© 2018 by H.I.S. Professionals, LLC, all rights reserved.
By Vince Ciotti & Elise Ames
HIS Professionals, LLC
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2. High-End Vendors
• After the market overview last week, the next 3 episodes delve
into the details of the vendors by size & target market, first:
– High-end = vendors with over $1.5B that primarily target
large hospitals of 300+ beds, AMCs and multi-IDNs. Then:
– Mid-Range = vendors with ≈$.5 to $1.5B in revenue,
generally targeting small to mid-size hospitals under 300
beds.
– Low-end = vendors with annual revenue under ≈$.5B that
mainly target small hospitals of under 100 beds & CAH.
• Interesting how the size of vendors’ revenue
corresponds to bed size of their target market...• For each vendor, we’ll give details on their:
- Annual revenue and growth/decline
- Product line and target markets
- Recent developments & future prospects.

3. • Amazing how much Cerner has grown since its humble beginnings in 1979 as
“PGI,” the initials of its founders: Neal Patterson, Paul Gorup, and Cliff Illig:
#1 =
• Sad that Neal died last July: he’d be so proud of $s topping $5B!
And equally sad, his wife Jeanne died just 2 months later; she
came up with the name Cerner in 1984, far better than PGI!

4. • An 7% increase in revenue kept Cerner at the top for a fourth
year in a row, its $5B+ passing all other vendors in HIS-tory:
4th Year in a Row as #1!
• Note how former leaders McKesson & Siemens both sold out,
while GE is now primarily a physician practice vendor...

5. Revenue Details
• Several major deals in the past 2 years helped Cerner grow:
– Winning the huge DoD $8B deal in 2016, although Leidos,
gets most of the $s through “consulting” (implementation).
– Scoring a $5B win for the VA in 2017 without even an RFP! It
is very logical for the DoD and VA to have the same E.H.R…
– Continued strong sales to Siemens Soarian & Invision clients.
• How does Cerner earn so many $s? Like many vendors, they
have diversified their products and services far beyond pure HIS:
- Medical Devices, Patient
Engagement, Physician Practices, RX,
Pop. Health, Workplace Health, etc.
– Selling “the works” to clients:
– RevWorks outsourcing RCM
– ITWorks outsourcing IT, etc.
– Remote hosting data centers in KC…

6. CEO Replacement
– Promote the strong #2, President Zane
Burke, who has 20 years experience since
leaving KPMG for Cerner in 1996,
• Brent Shafer – former CEO of Phillips, a giant tech vendor, but
not in the HIS market. Brent’s 12 years at Phillips included a
diverse product line of imaging, clinical informatics, etc., but no
EHR, RCM, etc. Despite his lack of pure HIS experience, he will
probably do well thanks to Neal’s strong legacy & sales team…
- Or search for a replacement among the
many candidates outside of Cerner?
• They chose the latter, and after 6 long months
of internal suspense picked an outsider:
• CEO Neal’s sad departure forced Cerner’s
Board to make the difficult replacement
decision:

7. Next Year?
• We are bullish on Cerner maintaining its current #1 position:
– Cerner has access to the C-suites of hundreds of Siemens’
clients on Soarian, Invision, Eagle & Medseries.
– The VA win worth ≈$5B was a major coup in 2017, and those
$s are likely to grow as in any government project. If it’s ever
signed, estimates are the cost could grow as high as $10B…
• Downsides? Yes, like all vendors, Cerner faces challenges too:
– Epic always does well with large AMCs and IDNS, and has
displaced several Cerner clients at the Mayo Clinic.
– And as in the past, Cerner has experienced a number of
troubled projects, lately Vancouver Island and Agnesian…
• So Cerner is now the new “normal” – after a 15
year run by HBOC/McKesson, and 15 by SMS/
Siemens. Will Cerner’s dominance last so long?

8. • In 2nd
place for the 2nd
year is Judy Faulkner’s epic journey that has
climbed from 3 employees in 1979 to over 9,000 last year!
• Their revenue went up 9% from $2.5 to $2.7 billion in 2017,
amazing considering almost every hospital by now has an EHR so
the number of system selections has been relatively slim…
• They will probably win as much as Cerner from Siemens large
hospital clients, as well as Allscripts/McKesson Horizon clients.
– They also offer “Community Connect,” which allows large
AMC/IDNs to host neighboring CAH & smaller hospitals.
– Their new remote hosting data center is fully operational, so
future revenue prospects are as solid as WI’s frozen lakes.
• As SMS & Cerner have proven, remote hosting
increases revenue enormously over inhouse
processing; like Meditech, Epic never sold
hardware, about 20-30% of most HIS costs...

9. • Epic’s revenue growth is the easiest to graph of all vendors: UP!
Epic Revenue HIS-tory
• Epic is likely to continue violating Newton’s law of gravity due to:

10. EpicCare Re-packaging
• All Terrain
– For large facilities over ≈400 beds
• Full suite of EpicCare applications, modules & features
• 2 FTEs per app for implementation, both for the hospital & Epic
– The full EpicCare run either inhouse or remotely
– Primarily for large complex hospitals, AMCs & multi-hospital IDNs
• Sonnet
– For small hospitals <200 beds
• Minus many apps & features that small hospitals don’t need
– Only 1 FTE per app/dept., lowering Implementation & travel costs
– Remote hosted from Verona, saving hardware & staffing costs
At HIMSS this year, Epic first demo’d the new packaging of their
“EpicCare” EHR for three different tiers of hospitals by bed size:
• Utility
– For mid-sized hospitals of ≈200-400 beds
– Minus some apps & modules that mid-size hospitals rarely use, e.g.:
• “Kaleidoscope” for Ophthalmology
– Only 1 FTE per app/dept. for implementation, lowering fees & travel costs
– Remote hosted from Verona, lowering hardware & staffing costs

11. • In 3rd
place by revenue is AllscriptsAllscripts with $1.8B, a 17% increase
from 2016; they are major players in physician practices (large =
Enterprise, mid = Professional, small = Practice Fusion), and now a
larger player in the HIS market due to their 2017 shocker:
• An amazingly low price for what the wide range of HIS products
& services of what was the number one HIS vendor for 15 years!
• Turns out McKesson, like so many other HIS vendors, had
diversified its revenue stream to come far more from services
than products. And there were few sales of its Paragon small-
hospital system to larger clients on Horizon & HealthQuest...

12. • Before we get into the details of the McK EIS products Allscripts
acquired, here’s the $ HIS-tory from the days of its predecessors:
• Alltel – sold a few
TDS prior to Y2K,
• Eclipsys – replaced
TDS with Sunrise,
• AllscriptsAllscripts -- added
their enormous MD
practice revenue
• McKesson EIS’
impact on $s?
Allscripts Revenue HIS-tory
(Y2K)
Allscripts
Eclipsys
TDS
Alltel
- Probably somewhere around the $185M purchase price,
which is a surprisingly small # considering McKesson was a
$3B vendor, but much of McK’s revenue had come from
other systems they sold to eMDs and Change Health…

13. • There were three groups of EIS products Allscripts acquired:
• “Go-Forward” = Paragon is the product that McKesson had
sold strongly for ≈15 years, to over 150 small hospitals, which
Allscripts will use to compete in their new market niche.
• “Supported” = 2 systems with large client bases & revenue:
- StarStar - a mid-size hospital HIS, mainly RMC in ≈100 clients
- HealthQuestHealthQuest – ex-Medipac large hospital RCM, ≈100 sites
• “Sunset” – Allscripts sticking to McK’s 1st
Qtr 2018 end date:
- Series – inhouse mini with roots back in the 70s, ≈20 sites
- Horizon – formerly Pathways, probably few clients left…
Allscripts Acquired Products
• Future revenue prospects? Support and R&D for Paragon is
paramount for this perfect partner to Sunrise. Key issue – when
will the long-promised integrated MD practice component get
out of beta and be “GA” to keep clients & sell to prospects!?

14. • As we review all of this years top 10 vendors, their products and
the bed sizes they target will get rather complicated, so here’s a
handy table that lists each product and primary market so far:
Products by Bed Size
• Next week we’ll review the three leading mid-sized vendors:
- #4. athenahealth, #5. eClinicalWorkseClinicalWorks and #6. Meditech
vciotti@hispros.com eames@hispros.com
505.466.4958 413.329.6925