Electronic health record developer Allscripts Healthcare Solutions is acquiring a stake in Netsmart Technologies, a private-equity backed behavioral health information technology provider. The deal is expected to boost Netsmart's IT capabilities as changes to privacy laws that could open up the flow of records from behavioral healthcare providers are being considered.
Chicago-based Allscripts and private equity firm GI Partners, in San Francisco, will each acquire stakes from Genstar Capital, another San Francisco-based private equity firm, for a combined $950 million, said Michael Valentine, CEO of Netsmart.
Allscripts will invest $70 million in cash and merge its home-care software business into the new joint venture, which will create a company with annual income of $60 million on revenue of $250 million, according to Allscripts. Valentine will remain CEO of the new company, which will merge Allscripts' 30,000 customers with 23,000 Netsmart's clients.
The two companies previously announced a collaboration in 2014 to integrate Netsmart's behavioral health electronic records with Allscripts' EHRs.
Netsmart's executives say the deal capitalizes on new incentives for hospitals and clinics to reduce costs and better coordinate medical care. The new joint venture will diversify Netsmart's business into home care and also compliment the company's existing business in behavioral health and social service information technology.
“If you think about the lowest-cost venue to deliver care, it is the home,” said Kevin Scalia, executive vice president of corporate development for Overland Park, Kan.-based Netsmart. Many patients have both behavioral health and chronic conditions for which care could be better coordinated with information technology, he said.
There are also some possible regulatory changes that could make it easier for data to flow from behavioral health providers and that would increase the already strong demand for patient data—and EHRs that handle that data. So, any companies working on improving interoperability between those two information silos would have a leg up on the competition.
Allscripts would be the largest owner under the deal, but will not hold a majority stake, said Valentine. Management retained some ownership in the company.
Allscripts said the deal is expected to be accretive and add $150 million to the company's 2016 revenue. It must first, however, clear regulatory review. It is expected to close in April.