Allscripts revenue, earnings dip; CEO airs concerns about Xerox deal

Electronic health-record developer Allscripts Healthcare Solutions saw a big increase in first-quarter business bookings; however, those came while revenue and earnings were falling. And CEO Paul Black hinted in a call with analysts that there are financial challenges in a current deal with a Xerox subsidiary, one of Allscripts' biggest clients.

Bookings in the first quarter of 2014 hit $223 million, up 26% compared with the same period last year. Bookings reflect the value of executed contracts for the company's various services. The increase was attributed to new sales of EHR-related software, revenue-cycle management, population health management solutions and managed IT service offerings to new and existing clients.

Overall, however, revenue was down $3 million from last year, hitting $345 million in the first quarter. The decline was tied to a major client that moved some services in-house and a drop in hardware revenue, company Chief Financial Officer Richard Poulton said. Net income for the quarter hit $12 million, down from $16.2 million in the same quarter last year.

During the call, attention was called to the company relationship with its client Affiliated Computer Services (ACS), a subsidiary of Xerox. In 2011, ACS signed a $500 million, 10-year agreement with Allscripts to provide hosted IT services for healthcare providers using Allscripts' Sunrise Enterprise suite to support EHRs.

“There are some aspects of that agreement that have challenging economics for us, and so over the longer term, we need to fix that,” Black said during the Thursday call with analysts. “We're very actively discussing with them some alterations to the agreement to allow us to, first and foremost, make sure we can ensure we can deliver a very reliable and consistent level of service to clients.”

When it came to the impact that the Patient Protection and Affordable Care Act is having on clients, Black noted that clients are capital constrained and are looking for a way to leverage their existing investments. As a result, Allscripts has been offering options such as its Connected Community of Health, dbMotion, FollowMyHealth platforms that combine population health management connectivity and analytics.

“They need to have the capabilities to survey and understand what the populations are and what the conditions that are present in those populations that they are now going at risk for,” Black said. “So their appetite is not one of ripping and replacing systems. Their appetite is to say I'd like to keep what I have if I can and I'd like to go iterate on the layers above and I'd like to go work on the population health management pieces that they need to put in place in order to help them be a relevant player in their marketplace.”

Follow Virgil Dickson on Twitter: @MHvdickson