News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel

News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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New Player in Market for Laboratory Information System Products Acquires Orchard Software

Sale of respected laboratory information system company may be an early sign that investors believe clinical laboratories and pathology groups are ready to upgrade their LISs and add needed capabilities

In the past 10 years there has been little disruption to the laboratory information systems (LIS) market that clinical laboratories and anatomic pathology groups use. Yet, over that same 10-year period, almost every hospital and physician group practice adopted an electronic health system (EHR), primarily because of federal financial incentives that encouraged such adoption.

For medical laboratories and pathology groups, this widespread—nearly universal—adoption of EHRs by the nation’s hospitals and physicians was disruptive. Labs were required to expend resources building digital interfaces to the EHRs of their parent hospitals and client physicians to support electronic test ordering and test reporting.

However, because that wave of EHR adoption is now over, clinical labs and pathology groups have an opportunity to assess the current state of the health information technology (HIT) that they use daily, primarily in the form of the classic laboratory information system that handles nearly all the primary functions needed to support testing and other operational needs.

This opportunity to help medical laboratories enhance and/or upgrade the capabilities of their laboratory information systems may be one motivation behind the recent sale of a well-known LIS company.

Private Equity Firm Buys Orchard Software

On Oct. 7, 2019, Orchard Software Corporation of Carmel, Ind., announced its acquisition by Franciscan Partners, a private equity firm based in San Francisco.

Orchard Software, founded in 1993, has grown steadily over the past 20 years, primarily by serving physician office laboratories, community hospital labs, and independent clinical laboratory companies. With each stage of growth, Orchard added functionality to its LIS and related software offerings and moved up-market to serve larger hospitals and larger labs.

The purchase price and the terms of the sale were not announced. Orchard’s Founder, President and CEO, Rob Bush, will retire. The new CEO is Billie Whitehurst, who came to Orchard from Netsmart Technologies, where she was Senior Vice President. The remainder of Orchard’s management team will be kept in place.

“Francisco Partners will provide capital and expertise to enable Orchard to grow at a faster pace and continue to develop its newer web-based products in an industry that has lagged behind in adoption of cloud-based software,” says Rob Bush (above), Orchard Software’s Founder and exiting CEO, in a press release. (Photo copyright: Twitter.)

Is the LIS Market Heating Up?

What makes the purchase of Orchard by a multi-billion-dollar private equity company noteworthy is the fact that it is the first significant transaction in the LIS sector probably since the mid-2000s, which saw several significant mergers and acquisitions.

During that period, Cerner Corporation (NASDAQ:CERN) purchased Siemens Health Services and Misys acquired Sunquest information Systems. Then, Roper Technologies purchased Sunquest Information Systems from Mysis. Roper later also acquired PowerPath, an anatomic pathology LIS owned by private equity company Thoma Bravo.

Other acquisitions or investments involving LIS companies need to happen before it would be appropriate to say that investor interest in the LIS sector is heating up. However, it is accurate to say that many professional investors will be watching to see whether Franciscan Partners succeeds with its investment in Orchard Software. If Orchard’s revenue and operating profits increase substantially in the next few years, that may encourage other investors to look for LIS companies and products that they can buy.

If this were to happen, that would be a positive development for both clinical laboratories and anatomic pathology groups, because these investors would have a motive to add new functions and capabilities to their LIS products. It would also wake up a sector of lab information technology that has been relatively quiet for several years.

—Michelle Robertson

Related Information:

Orchard Software Gains Boost from Francisco Partners

Orchard Software to Be Acquired by Private Equity Firm

Francisco Partners to Acquire Orchard Software

Francisco Partners, a Technology-Focused Private Equity Firm, Announced Sept. 30 Its Intent to Acquire Orchard Software

Elekta Sells Its PowerPath Pathology Software to Sunquest

Two Lab Leaders Present Different Ways to Help Physicians Get Greater Value from Clinical Pathology Laboratory Testing

In response to healthcare’s transformation, a pathologist and a lab CEO describe two powerful ways that medical laboratories can collaborate with physicians, patients, health systems, and health insurers to deliver more value

DATELINE: Phoenix, Arizona—It may be appropriate that, with the pace of change heating up in both healthcare and the clinical laboratory industry, it was here in the hot Sonoran Desert that more than 500 medical laboratory professionals gathered last week for the annual Sunquest User Group Conference (SUG) hosted by Sunquest Information Systems. (more…)

Medical Laboratory Middleware Provider Data Innovations to Be Sold to Roper Industries, the Owner of Sunquest Information Systems

Following the acquisition, Data Innovations will become a business division of Sunquest and the two companies will work to integrate their clinical laboratory information systems

There’s more change in the clinical laboratory marketplace. Yesterday it was announced that Data Innovations—a major player in medical laboratory middleware systems—had been acquired by Roper Industries, Inc. (NYSE:ROP), the owner of Sunquest Information Systems.

Executives at Roper Industries said that Data Innovations will become a business division of Sunquest. The acquisition is expected to close in February, subject to regulatory approvals. Roper also announced yesterday that it was acquiring SoftWriters, a company that sells software for long-term care pharmacies.

In its press release, Roper said that “the combined purchase price for these two acquisitions is $450 million. …The Company expects the three acquisitions to contribute approximately $100 million of annual revenue and provide over $110 million of gross cash tax benefits.” (more…)

Pathologist Michael LaPosata, M.D., Delivers the Message about Diagnostic Management Teams and Clinical Laboratory Testing to Attendees at Arizona Meeting

Conducted by Sunquest, the meeting introduced medical laboratory professionals to  ideas and improved patient outcomes that result when pathologists actively help physicians select the right lab tests and understand how to act upon the results

PHOENIX, ARIZONA—Most pathologists and clinical laboratory scientists are quick to agree that overutilization of medical laboratory tests is a major problem in healthcare. But underutilization of medical lab tests is an equally significant problem. That’s the message delivered here last Monday by pathologist Michael Laposata, M.D., Ph.D., during a presentation he delivered at the Sunquest Executive Summit.

Laposata, who recently assumed new duties as the Chair of Pathology at the University of Texas Medical Branch in Galveston, Texas, was speaking about the value of what he calls “diagnostic management teams,” or DMTs. In recent years, while at Vanderbilt University Medical Center, Laposata and his colleagues introduced DMTs in support of several medical specialties. These DMTs proved quite successful at improving patient outcomes, while reducing the overall cost per healthcare encounter for these patients.

Part Two on Cost-Cutting Trend in Nation’s Clinical Laboratories and Pathology Groups: How Innovative Labs Are Responding to Falling Lab Test Prices

In today’s tough financial environment, medical laboratories with effective Lean and Six Sigma improvement programs are showing the best financial performance

When Dark Daily wrote about how cost-cutting is now a major clinical laboratory industry trend last Wednesday, publication of that ebriefing triggered a flow of emails and commentary from readers far and wide.

Pathologists and medical laboratory managers who read Dark Daily tell us that they are facing painful decisions about where to cut. This is particularly true when labs cut expenses by reducing staff, laying off FTEs. This approach brings much emotional pain—along with the loss of valuable technical skills and extensive organizational experience that cannot be easily replaced.