Allscripts, makers of electronic health records for physician practices will buy healthcare information technology company Eclipsys, which provides technology for hospitals and clinicians. The all-stock deal is valued at $1.3 billion.

Allscripts CEO Glen Tullman will serve as CEO of the combined company. Phil Pead, president and CEO of Eclipsys, will become chairman of the combined company and, on a full-time basis, will focus on key client and strategic relationships.

According to Allscripts, the merger will:

• Form one company with the industry's largest network of clients on one product platform, resulting in a single patient record
• Make for a combined client base that includes 180,000 physicians, 1,500 hospitals and 10,000 post-acute organizations
• Reduce Misys ownership in Allscripts through share buyback and secondary offering
• Be accretive to Allscripts non-GAAP earnings starting in calendar year 2011

"We are at the beginning of what we believe will be the single fastest transformation of any industry in U.S. history, and the combination of the Allscripts EHR portfolio in the physician office and leadership in the post-acute care market, with Eclipsys's market-leading hospital enterprise solution creates the one company uniquely positioned to execute on this significant opportunity," said Tullman.

The merger positions the combined company to help its clients more effectively access the approximately $30 billion in federal funding for hospital and physician adoption of EHRs provided by the American Recovery and Reinvestment Act (ARRA), Tullman noted.

Driven in large part by the ARRA incentives, which begin in 2011, EHR adoption by physician practices is projected to grow from 12 percent to 90 percent by 2019, according to the Congressional Budget Office's March 2009 report. The CBO report also projects hospital adoption of acute-care EHRs will increase from 11 percent to 70 percent during the same time period.

"Our vision and the vision behind ARRA is to leverage information technology to create collaboration between providers in all care settings, helping to improve the quality and lower the cost of care," said Tullman.

"Both Eclipsys and Allscripts share a vision of a connected system of health in which critical information follows the patient and informs all providers that assist the patient across the complete care continuum," added Pead. "This merger will turn that vision into a reality. Healthcare isn't confined to the four walls of any single location, yet traditional healthcare IT companies deliver monolithic 'information silos' that fail to connect to other systems. Our approach is to instead focus on creating a single patient record connecting all applications used within an organization and across a community."

Both the Eclipsys Sunrise Enterprise and Performance Management solution for hospitals and the Allscripts portfolio of solutions for physician practices currently leverage common platforms, such as Microsoft.NET. This will accelerate delivery of an integrated hospital and physician practice offering. The companies also share an 'open architecture' approach, which simplifies connection to third-party apps across care settings, resulting in a single patient record.

"The combined company will be unique among healthcare IT companies not only in our ability to drive utilization, but also in our ability to quickly integrate our solutions and connect clinical information across every link in the healthcare chain," said Pead. "In combination with our powerful analytics and revenue cycle solutions, healthcare organizations will finally be able to realize the true promise of information technology, improving both clinical and financial outcomes across the entire community of care."

The merger agreement has been approved by the Boards of both Allscripts and Eclipsys. The Board of Directors of the combined company will initially consist of a combination of the current directors of Allscripts and Eclipsys.
The merger will be subject to stockholder approvals from both companies.

In addition, the transaction is subject to the completion of a secondary offering of Allscripts shares owned by UK-based Misys, currently the majority stockholder of Allscripts, and the completion of the Allscripts buyback from Misys of additional Allscripts shares owned by the company, which will substantially reduce Misys's share ownership of Allscripts prior to the closing of the merger.

The companies expect the merger to close in approximately four to six months. The combined company will have more than 5,500 employees.