Allscripts Sues NYC Health & Hospitals Over Contract Award

Allscripts Healthcare Solutions Inc. (MDRX), a provider of electronic medical records, sued New York City Health and Hospitals Corp. over a $303 million contract given to another company.

The complaint was filed today in New York State Supreme Court in Manhattan over a contract for computer hardware and software awarded this year to Epic Systems Corp., a closely held medical-software provider based in Verona, Wisconsin.

The award is “arbitrary, capricious, an abuse of discretion and lacks a rational basis,” according to the complaint.

“HHC failed to follow evaluation criteria which required that award be based, in part, on the comparative total cost of ownership of offerors,” according to the document. “Properly calculated, the TCO of Allscripts’ proposal represents savings of up to $535 million in comparison to Epic’s proposal.”

New York City Health and Hospitals Corp. said in a statement that it will “defend its well-supported decision” and prevail in the lawsuit.

“Allscripts’s claim that it underbid Epic by more than half a billion dollars is absurd and strikes us as an ill-fated attempt to reassure investors and inflate its sagging stock price,” the corporation said in the statement. “Unfortunately, as our multi-year review has revealed, Allscripts lacks a truly integrated EMR solution and has repeatedly lost business to Epic and other vendors as a result.”

Board Upheaval

Allscripts, based in Chicago, began seeking a sale earlier this year after a board upheaval and shareholder lawsuit earlier this year that questioned its leadership. In September, the company lost the New York City contract, and last month it reported third-quarter revenue declined.

Epic Systems is also named as a defendant in the complaint. Shawn Kiesau, a spokesman for Epic Systems, declined to comment on the suit in an e-mail. The company was founded in 1979 by Judy Faulkner, who is listed 764th on Forbes Magazine’s list of billionaires with a net worth of $1.7 billion as of September, according to the magazine’s website.

The case is Allscripts Healthcare Solutions Inc. v. New York City Health and Hospitals Corp., 654362/2012, New York State Supreme Court, New York County (Manhattan).

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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