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Allscripts, North Shore-LIJ Extend Contract

Sreemoyee Pyne

Allscripts Healthcare Solutions, Inc. (MDRX) has extended its relationship with North Shore-LIJ Health System, a large healthcare system serving the New York metropolitan area. The five-year outsourcing contract to manage North Shore-LIJ’s IT services is expected to generate $400 million of revenues for Allscripts.

Allscripts has implemented the Sunrise Clinical Manager, Enterprise Electronic Health Record (:EHR) and Care Management in North Shore-LIJ’s network. In addition, the leading player in the health care information technology (:HCIT) market has joined forces with North Shore-LIJ to set up an Innovation Lab to develop advanced technology solutions and tools to cater to the region’s healthcare market.

Our Take

Allscripts’ recurring revenues reflect its ability to retain its existing client base. Recently, the company won several new clients such as Liberty Hospital, Salford Royal NHS Foundation Trust and UK-based ProMedica, among others.

However, Allscripts lost significant market share in 2012 due to a number of factors, such as, failed strategic initiatives, overhauling of top management and a significant fall in bookings. As Allscripts is no longer a take-over candidate, as per the reversal of their strategic plan, growth of the company under a new management remains uncertain. Further, a potentially challenging selling environment, higher R&D investment, legal expenses along with client support and infrastructure investments raise concerns for Allscripts.

The stock carries a Zacks Rank #4 (Sell) based on declining estimates. We remain disappointed with management’s outlook for 2013. The HCIT market is competitive and price sensitive. Among others, Allscripts faces strong competition from Cerner Corporation (CERN), Quality Systems Inc. (QSII) and Athenahealth, Inc. (ATHN).

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