The companies said they are in a period of exclusive negotiations, and they plan to reach a definitive agreement on the deal next year.
Allscripts, based in Chicago, develops and sells software for electronic medical records, electronic prescribing and practice management, among other areas. Its competitors include Cerner Corp. and the privately held Epic Systems.
The deal means Allscripts might lose Baylor as a customer over time, Citi analyst George Hill said in a Monday research note. He noted that Scott & White works with Epic Systems, and he expects the combined company "to deploy Epic across the enterprise."
"We suspect that incremental technology purchases from Baylor will likely decelerate immediately while the organizations jointly develop an enterprise technology plan," he wrote.
Hill also said Allscripts shares have fallen the last several days because investors are losing hope that it will be acquired.
Down 2.8 percent, or 30 cents, to $10.48 in afternoon trading while the Nasdaq exchange climbed 1 percent. The company's stock has fallen steadily since closing at $13.75 on October 15, and shares are down about 45 percent so far this year.