Allscripts Fires CEO as Company Says It Won’t Pursue Sale
Allscripts Health Solutions Inc. (MDRX)’s new chief executive officer said the provider of electronic health records should rebound now that it’s no longer up for sale. The shares fell the most in about eight months.
Paul Black, named CEO yesterday in a management shakeup, said he wanted to move quickly to improve operations at the Chicago-based software maker and make the company more responsive to clients. He said he’d also maintain research and development spending at current levels.
“We’re going to benefit from having clarity,” Black, 54, told analysts on a conference call today. “There’s been a lot of disruption in the marketplace from people wanting to understand what this company was going to look like by the end of the year, a lot of people who were hesitant about making a decision. I think that’s a very big piece of the missteps during the course of the year.”
Allscripts tumbled 14 percent to $9.14 at the close in New York, its biggest single-day decline since April 27. The company has dropped 52 percent this year.
Allscripts yesterday fired former CEO Glen Tullman, who had led the company since it first sold shares to the public in July 1999. The company also said in a regulatory filing that it would end a process of considering “strategic alternatives,” including a sale, that began earlier this year.
“I fully understand that this is an important time in the company’s history,” said Black, a current Allscripts board member and former chief operating officer of Cerner Corp. (CERN), a competing health-care information company. “What’s clear to me is that we have a good strategy, a robust set of solutions to offer” to doctors and hospitals.
Still, he said, “Right now I don’t think all our clients are happy. We’ve got a lot of work to do in that space.”
The shares will face “significant pressure” as investors who had piled into the stock waiting for a deal “crowd out the door,” said David Windley, a Jefferies & Co. analyst in Nashville, Tennessee, in a note to clients.
While Allscripts’ third-quarter results showed “deteriorating fundamentals,” the company introduced new software products in the fourth quarter that give some hope for a turnaround, Windley wrote. “Unfortunately, though, these likely won’t contribute much in the way of bookings or revenue” until next year’s first quarter.
Allscripts began seeking a sale after a board upheaval and a shareholder lawsuit earlier this year that questioned its leadership. In September, the company lost a bid for a $302 million contract from New York City’s public hospitals and last month reported third-quarter revenue declined.
The company, with a market value of about $1.9 billion before today’s trading, had received bids from private equity firms, including Blackstone Group LP (BX), Carlyle Group LP (CG) and Silver Lake Management LLC, Bloomberg News reported Oct. 8. Allscripts said it hired Citigroup Inc. to advise it.
“The board concluded, however, that the best course at this time is to develop Allscripts’ long-term potential under the direction of our new management team,” Dennis Chookaszian, the board chairman, said yesterday in a company statement announcing the changes.
Allscripts has struggled since its acquisition of Eclipsys Corp. in 2010, a purchase intended to bolster the sale of technology to hospitals. The combination promised to take advantage of the 2009 U.S. economic stimulus law allotting $27.4 million to help health-care providers buy electronic records systems.
Instead, Allscripts said in April that customers had delayed commitments during the merger, waiting for new releases of the company’s software. On April 26, the company revealed a board dispute that led to the firing of its then-chairman, Phil Pead, and the departure of three directors.
In addition to Tullman’s departure, Allscripts said Lee Shapiro, the company president, was fired and will serve as a consultant to Black for as long as six months.
Black worked at Cerner, a Kansas City, Missouri-based health-care information technology company, for more than 12 years. He was recently an operating executive with Genstar Capital LLC, a private equity firm, responsible for its health- care and software practices, Allscripts said in the statement.
“Paul possesses a unique blend of operational, health-care and IT sector expertise, and we are pleased that he has agreed to lead the company at this critical juncture,” Chookaszian said.
Black said one of his priorities would be enticing Allscripts clients to use a wider variety of the company’s products, which help with administration as well medical records. On its website, Allscripts said its network includes 180,000 physicians at 50,000 practices and 1,500 hospitals.
“It’s hard to go out and build the install base like this company possesses,” he said. “I see that as kind of the mother lode upon which you want to build and expand the organization.”
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