How Allscripts ended up with an $9.75M class action settlement
Allscripts Healthcare Solutions Inc. is set to pay nearly $9.75 million to settle claims of securities fraud, after the company allegedly overstated its ability to integrate its systems and products with those of Eclipsys following their $1.3 billion merger in 2010. Documents were filed on Thursday and the settlement is now awaiting preliminary approval.
While the legal arguments swirl around exactly what was stated regarding progress after the merger, the real question from an IT perspective is where the attempts at integration went wrong. (Allscripts isn't yet discussing it.)
While the lawsuit itself provides only one side of the argument, it does reveal the technical and personnel issues that allegedly occurred behind the scenes.
The court documents outline how the merger was intended to fill the need for integrated EHR products that "would enable access to a single patient record across the continuum of the patient's care—for example, data from hospitals, physician practices, rehabilitation centers, pharmacies, etc."
They note that Allscripts was under time pressure to deliver due to federal stimulus funding for healthcare providers that would only remain available until 2016.
At the time of the announcement, Allscripts stated in a press release that the merger would result in the most comprehensive set of products and create a "clear leader in healthcare information technology, with the most comprehensive solution offering for healthcare organizations of every size and setting."
Former Allscripts CEO Glen Tullman told investors that the integration of the two companies' products would be quick and seamless because of their common Microsoft platform, and soon after the merger, he told industry media that the products were already working together.
Former Eclipsys CEO Phil Pead told Healthcare IT News, "We're both Microsoft.NET and SQL Server. That makes the level of integration far less complex as a result of the platforms being the same… Allscripts has an architecture called UAI and we have Helios. The similarities are quite amazing… both of us have abilities to actually integrate levels of applications at a speed that would be very difficult if they were Oracle, Linux, MUMPS."
Apparently it wasn't that simple.
What went wrong
In a nutshell, the lawsuit states, "product integration was far from easy and was never accomplished during the Class Period, leading to customer defections, disappointing financial results and the eventual abandonment of products."
The court papers also highlight extreme discord between management teams, evidenced by a series of axings and departures among the senior staff that included the head of sales, the CTO, the COO, three directors, the CFO, Tullman, Pead and president Lee Shapiro.
Here are some of the specific technical failings according to confidential witness accounts from former employees:
- Allscripts' goal was to use native integration to allow its Sunrise products to seamlessly integrate with its Enterprise, Professional and MyWay products, and to allow the products to update patient health records without the use of industry standardized codes. Allscripts branded its native software as ADX.
- During the Class Period, Allscripts had to completely rework ADX 1.0 and the company never achieved integration for its key products—including MyWay—which it abandoned in the fall of 2012.
- An upgrade known as ADX 1.5 changed the method and interface for data integration, with one specific goal being to allow users to approve changes before they were entered into the system.
- Before the merger, Eclipsys was utilizing Medicity as its third party vendor for the interface, but Allscripts switched to dbMotion, a move that caused internal dissent.
- A proposed integration solution named Helios was never released after being "touted as the 'magic' connection on data exchange for all products, including Sunrise Clinical Manager 5.5, dbMotion, other vendor products and all other Allscripts products."
The lawsuit alleges that in late April 2012, after Allscripts revealed difficulties with integration and disappointing earnings, as well as the departure of several board members, the value of the company's stock plummeted 35% as a result.
The papers add that several months after the disclosures, disgruntled clients filed a class action lawsuit against Allscripts for failing to follow through on integrating the MyWay EHR product and then abandoning it.
In the end, the reason Allscripts faces its current deal of providing $9.75 million to the proposed class is its alleged misrepresentation of its technical abilities, according to the suit. The plaintiffs argue that the defendants "repeatedly touted that they had demonstrated and achieved product integration... when in truth the products were not integrated and they would not achieve product integration until July 2012 and even by December 2012 only one client site was live on a beta version of the product."
The case, Bristol County Retirement System et al. v. Allscripts Healthcare Solutions Inc. et al., was filed in the US District Court for the Northern District of Illinois.
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