GE Healthcare made a big grab for the healthcare information technology market last week when it announced plans to acquire IDX Systems Corp. in Burlington, Vt.-in a deal valued at $1.2 billion.
Officials boast that the combination of IDX, an healthcare IT giant with a commanding share in the physician group-practice market, and GE, a behemoth in medical technology, will create a leading healthcare IT vendor, offering a comprehensive package of clinical, imaging and information systems.
Industry observers wonder if the deal signals a new round of consolidations in healthcare IT, one of the remaining areas in healthcare manufacturing that still offers a bevy of players (May 16, p. 6). Subject to regulatory approval, the deal is expected to close in early 2006.
"It's a big market, so I think any professor at any business school would tell you that there is great potential for further consolidations," said Janet Dillione, chief operating officer of the healthcare IT division for Siemens Medical Solutions, a GE competitor. "It absolutely validates the strategy we've been about for five years, which is the integration of healthcare imaging data ... I think each of the three (major) players has clearly identified healthcare IT as an important piece and important growth opportunity in their market."
GE's giant step forward into IT follows Siemens' acquisition of Shared Medical Systems in 2000. Short of a merger, the third player in the diagnostic imaging space, Philips Medical Systems, formed an alliance with Epic Systems Corp. in late 2003 to provide fully integrated systems that can easily move information between hospital and physician organizations. Then last August, Philips acquired Stentor, a developer of picture archiving and communication systems.
"We feel well-positioned with our lines with Epic," said Stan Smits, chief executive officer of healthcare IT at Philips.
James Thrall, chairman of the radiology department at Massachusetts General Hospital, Boston, which is both a GE and IDX customer, welcomed the news. Five months ago, Thrall predicted that now that the diagnostic imaging business had merged into three major players, IT was ripe for consolidation. He hopes GE's move will better integrate the flow of information between the clinical side and administrative sides of radiology, which is struggling under two IT standards.
"I don't know on the front end if it will make systems more or less expensive but from my perspective as a user, anything that provides a higher level of integration reduces operating costs and improves quality and safety," Thrall said. "It's another manifestation of the trend toward consolidation and the recognition by the big three that customers are looking for solutions, not components."
IDX will bring to GE its core market of 150,000 physicians that are using its clinical and financial systems, said Don Woodlock, vice president and general manager of inpatient clinicals for GE Healthcare.
IDX also has 500 hospital customers compared with GE's market share of 2,000 hospitals and 24,000 physicians.
As IDX's strength is on the administrative side and GE's strength is on the clinical side, the product lines are "very complementary" with little overlap, he said.
"The strategy is to build a much broader product line across the two companies" with the first integrated offerings available on the closing date in early 2006, Woodlock said.
The acquisition is "a great deal for IDX shareholders ... but from a strategy and execution perspective, it seems confusing," said George Hill, senior analyst for Leerink Swann and Co., Boston, a healthcare financial services firm.
GE already offers an electronic medical record, inpatient clinical information systems, and medical imaging systems, he said.
Also, in July, GE announced a 10-year, $100 million agreement with 22-hospital Intermountain Health Care to develop and commercialize healthcare information products for hospitals.
"The strategy seems a little unclear. They'll have three competing assets and how they integrate those assets remains to be seen," Hill said.
Intermountain Health Care said the addition of IDX would likely have a positive effect on its partnership with GE.