Tag Archives: Financials

Signify Premium Insight: Vendor Financials Round-up – The Health of the Imaging Sector Q1 2023

Whisper it, if you must, but it seems that for the first time in several years, medical imaging vendors have been able to enjoy a comparatively uneventful quarter. Since the Covid-19 pandemic first took hold in early 2020, it has seemed that every quarter has been rocked by some global macroeconomic drama. Whether the pandemic itself and its resultant restrictions on elective procedures and non-urgent imaging, the supply chain disruption and logistics nightmares, spiraling energy prices as Russia invaded Ukraine, or the dramatic inflation which has rocked much of the world, it has not been an easy period to steer a medical imaging vendor forward.

Now, however, in the first quarter of 2023 many of these disruptions seem to have abated somewhat, enabling medical imaging vendors to return their focus to business as usual, rather than fighting fires as they arise. Further, some vendors had to make difficult decisions, downsizing workforces and adjusting strategies following the beatings the previous years doled out, with these changes made, vendors are better equipped to face the year to come.

Signify Premium Insight: Butterfly Network’s Problem with Popularity

The handheld ultrasound market is the fastest growing product segment in ultrasound and among the fastest growing in medical imaging. Solutions have become more refined over recent years, offering better image quality, wireless probes and advanced software, all of which are facilitating their uptake by new and experienced users alike.

Despite the segment’s growth however, one of the market’s most high-profile names, Butterfly Network, is facing a difficult spell. The vendor’s latest financial results were disappointing and its share price is just a fraction of what it was in 2021. The vendor is looking to change its fortunes, and, with the appointment of a new CEO, it hopes to rally, but is it too late?

Signify Premium Insight: EHR/VBC Vendor Financials Q4 / FY 2022

Several overarching themes provide the backdrop for the latest EHR/VBC Q4 and full year (FY) 2022 vendor financials. More than ever, the move by hospitals to consolidate IT procurement around single EHR vendors favours larger companies with broader portfolios and deeper resources. Smaller vendors are vulnerable, especially those unable to adapt. 

Another significant trend is underway in the US, where large retail pharmacies are moving into primary care. This is a threat to those EHR vendors serving the tens of thousands of small, independent practices in the US. Again, it is a case of adapt or wither for these vendors.   

Overall, and with the odd exception, it was a good quarter for the vendors we track in both EMEA and US inpatient and primary care markets. Quarter-on-quarter growth averaged 7% overall, while year-on-year growth averaged 6%. See chart below.

Revenue Performance (Select EHR/VBC-Related Business Lines/Vendors)

Source: Signify Research, Vendor Investor Relations. Note: Oracle Cerner financials are not like-for-like in terms of reporting periods as reporting periods differ by one month compared to pre-acquisition periods. EMIS Health revenues are for 1H, not 1-3Q)

Inpatient EMEA: Consolidation Continued 

Consolidation of IT procurement continues to leave an indelible mark on EMEA EHR inpatient vendors. The impact is particularly pronounced in the UK, where hospital trusts within each of the country’s 42 Integrated Care Systems are encouraged to align EHR vendors over the medium-term and to some extent bring IT procurement under one roof. UK providers are also required to roll out electronic patient records (EPRs) on top of patient administration systems (PASs), with significant budgets being allocated to this. The winners here are large vendors like Epic and Oracle Cerner, the latter reporting record total quarterly revenues of $1.5B.   

It is a similar story in France, where hospital IT procurement is being centralised around regional hospital groups (GHTs) and in Italy, where purchasing is organised on a regional basis.  

Another trend reflected in Q4 2022 and FY 2022 EHR/VBC vendor financials revolves around patient safety. In the UK several large EPMA/CPOE contracts for medication management modules have been issued while in Germany, significant funding is being allocated to patient safety and medication management, two of the 11 pillars of Germany Hospital Futures Act (KHZG) hospital digitisation initiative. To date, a large percentage of KHZG funding applications from German hospitals are in medication management and Clinical Decision Support. 

Among EMEA inpatient EHR vendors, CompuGroup Medical (CGM) provides the standout results for the quarter. Its Hospital Information Systems (HIS) revenues dropped 5% year-on-year, while growing 8% for the year. For FY 2022, CGM’s margins shrank year-on-year from 17% to 9%, which it attributes to ‘increased investments in 3G technology and large projects’ – a probable reference to KHZG, where CGM aims to double its revenue target, having already secured $90M-worth of contracts.  

Despite consolidation favouring the larger vendors, they do not have it all their own way. TietoEvry’s 10% Q4 2022 revenue growth (4% for FY 2022) for its TietoEvry Care business line is proof of its sustained ability to fend off Epic and Oracle Cerner in its ‘domestic’ Swedish and Finnish inpatient markets. In both markets, TietoEvry has a deep and long-established footprint, while Epic and Oracle Cerner continue to face considerable ‘push back’ and delays on large contracts.  

Primary Care EMEA: Contrasting Fortunes 

France is currently the epicentre of EMEA primary care investment, with government-backed programmes such as Segur supporting strong Q4 2022 results for Cegedim, Equasens and CGM. Greater revenue growth spikes are expected in France than in any other EMEA market in the medium-term. Unlisted telehealth vendor Doctolib is also well placed to win share from the incumbents. 

Like inpatient EMEA, consolidation is also a primary care theme, and this is especially true in the fragmented French market, where vendor growth comes primarily via acquisitions (for example, CGM). 

The buoyant picture in France contrasts starkly with a UK market in the doldrums as a Covid investment boom, led by initiatives such as GPIT Futures, tails off. The financials reflect this: number one primary care vendor EMIS’s quarterly revenues fell, while number three vendor Cegedim reported a sharp drop in international business (the UK being its biggest market outside France), having performed well at home. Neither EMIS nor Cegedim are currently equipped to take advantage of new integrated care funding streams in the UK, although this could change when the planned acquisition of EMIS by Optum, an integrated care-focused business, is complete. Indeed, with potential for organic growth limited, acquisition will be the principal pathway for growth for EMEA primary care vendors going forward.   

Primary Care US: High Single Digit Growth Amid Change 

Public vendors serving the US primary care market enjoyed mid- to high digit growth in Q4 2022. However, the primary care landscape is changing, with rapid scaling taking place and a new breed of provider emerging in the form of large retail pharmacies and even big tech giants.  

While independent practice markets are already under threat by Integrated Delivery Networks (IDNs), they now have the additional challenge of primary care being provided by retail (e.g. CVS, Walgreens) and other organisations becoming national primary care providers. Just this month Aledade, the largest independent primary care network in the US, announced it had added more than 450 primary care practices to its nationwide network for 2023, the most of any VBC practice network. Small contracts with individual practices are becoming rarer, and developing relationships with these larger entities will be vital for EHR vendors in the longer-term.    

This especially applies to vendors like NextGen, Veradigm, eClinical Works, athenahealth, eMDs, Modernizing Medicine and Greenway, whose models were built on selling solutions to tens of thousands of small, independent practices rather than large health systems. To support the large deployments demanded by rapidly-scaling primary care providers, these vendors will also need to scale, develop new solutions or reinvent their models. 

Some vendors are responding.  Veradigm, for example, is pivoting from EHR to real world data (RWD) (see this Insight), and NextGen is developing tools in-house. athenahealth and Oracle Cerner are also well positioned to capitalise on the new era in primary care. However, the nature of the challenge facing EHR vendors will evolve as well-resourced primary care providers start to develop their own technologies. 

Inpatient US: Oracle Effect Kicking in at Cerner? 

The most eye-catching quarterly result was at Oracle Cerner, which broke the $1.5B revenue barrier for the first time in Q4 2022, a sudden spike after several consecutive quarters of near-zero growth. 

The result comes amid protracted, and highly publicised, problems for its $10B Department of Veteran’s Affairs (VA) Millennium EHR contract. Just last month, the VA delayed yet another scheduled go-live from July 2023 to early 2024, this time in Michigan. Usability issues, infrastructure problems and incompatibility with critical VA clinical functions have beset the project, and threatened knock on effects on revenues. It doesn’t help that Oracle Cerner is also steadily ceding share to Epic on IDN contracts. 

Oracle Cerner’s cloud business is behind the quarterly revenue spike, an indication that, for the first time, the benefits of Oracle’s 2022 acquisition of Cerner appear to be kicking in.  

At the other end of the spectrum here is CPSI, which supplies EHR solutions to small hospitals. It suffered a 2% revenue drop in Q4 2022, a victim of the dominance of IDNs and hospital IT procurement being increasingly consolidated around single (large) EHR vendors. With a narrow portfolio and no footprint in larger health systems, CPSI faces significant revenue challenges going forward. 

2023 Growth Predictions  

CGM: 5.0% organic growth (4.1% organic growth in 2022) 

Cegedim: 6-9% growth in 2023, v 5.5% organic growth, 5.9% actual growth in 2022. The Group does not expect to make any significant acquisitions in 2023.  

TietoEvry: 5-7% organic growth in 2023. Whole company organic growth in 2022 was 6%.  

NextGen: 5.6% to 7.3% organic growth (7.1% in 2022). NextGen FY 2023 ends in March 2023, so this is not full year guidance. Revenue is expected to be in the range of $642 million to $650 million, an increase from prior guidance range of $630 million to $640 million.  

Veradigm: Reduced its 2023 guidance in early March while delaying its annual report due to ‘internal control failures over the last six quarters of financial reporting’. Revenue is expected between $625 million and $645 million, versus the previous range of $640 million to $660 million. 2023 prediction is in the 3% growth range, versus (assuming they come in roughly on target for 2022) approximately 6% growth in 2022.   

CPSI: 2023 revenue in the range of $340 to 350M (4-7% growth). Compared to 16% in 2022. Most 2022 growth was RCM, not EHR.     

Bigger is Better 

Many EHR/VBC vendors seem to imply with their predictions above that 2023 will be tougher than, or at best similar to, 2022, with most seeing low single-digit growth. CGM’s bullish outlook is based on its German hospital business. 

Amid the changes wrought by consolidation, large hospital investment schemes and a rapid scaling of primary care come challenges, and for some (particularly smaller) vendors, some will be insurmountable. In the shifting sands of EMEA and US EHR, it is the bigger, better resourced players who will typically take the spoils in future. 

Click here to read our full analysis file of the public vendor results.

Signify Premium Insight: Q4 Vendor Financials Round-Up – A Firm Footing and the Stability it Demands

As medical imaging vendors headed into 2023, there was considerable change afoot. Aside from the broader healthcare challenges that beset providers such as a shortage of physicians, staff burnout and the backlog of elective procedures resulting from the Covid pandemic, vendors also had their own specific strategic goals.

For some, this meant difficult times ahead, with sizable staff lay-offs; for others the focus was on new opportunities, with GE HealthCare spinning out of the broader GE conglomerate; others still had to address challenges beyond their control, with supply chain and logistics issues all playing their part. Despite these differing priorities, vendors’ financial performances were, overall, positive in Q4 2022, albeit with some very dark clouds on the horizon.

Signify Premium Insight: Vendor Financials Roundup: The EHR/VBC Sector Q3 2022

This Insight is part of the Signify Premium Insights (SPI)-Digital Health service, which will launch on 9 January 2023. From that date, this and all SPI-Digital Health Insights will be available only by paid subscription. Click here for a free one month trial of this service. 

On the face of it, publicly-listed EHR/VBC vendors performed well in the latest reporting period. Quarterly year-on-year (y-o-y) and year-to-date (YTD) revenues confirm that the vast majority are riding the crest of the post-Covid healthcare investment wave across Europe and the US. While barriers to sustained revenue growth exist, these are generally good times to be an EHR/VBC vendor in these two key markets.

Revenue Performance for Select EHR/VBC-Related Business Lines/Vendors
Revenue Change – Local Currencies

Source: Signify Research, Vendor Investor Relations
Note: Oracle Cerner’s financials are not like for like in terms of reporting periods, as reporting periods differ by one month compared to pre-acquisition periods. EMIS Health revenues are for 1H, not 1-3Q

The Signify View
Almost across the board, EHR and VBC vendors in Europe and the US reported higher revenues than in the same quarter a year ago. In some cases, gains have been strong: CPSI (serving US inpatient EHR), Health Catalyst (US VBC-focused) and Tietoevry (serving European hospital IT EHR) with 18%, 11% and 10% growth respectively (in local currencies).  

The majority of gains have been healthy, if unspectacular. For example, Nexus (9% growth), CompuGroup Medical’s (CGM) Hospital Information Systems (HIS) business (7%) and NextGen (also 7%).  

Notably, of all business units we display here, only Oracle Cerner’s healthcare business, EMIS Group’s EMIS Health business and CPSI’s System Sales and Support business saw revenues dip (in terms of both y-o-y and YTD performance). Note, EMIS Health reports only half-year results and these relate to the first half of 2022.  

Riding the Wave: Hospital IT EHR (Europe) 

The most striking quarterly y-o-y results were from Tietoevry Care, the healthcare unit of the Nordic software giant (10% revenue growth), and Nexus (9% growth). Nexus’ YTD growth (first three quarters of 2022) was similarly impressive, at 10%. Tietoevry’s YTD growth, by contrast, was a much more modest 2%. 

CGM’s HIS business completes the picture here. Its y-o-y quarterly revenues rose 7% and its YTD revenues jumped 13%. 

The positive results above broadly reflect the impact that post-Covid recovery programmes – such as the EU Recovery and Resilience Plan – are having on hospital IT and digitisation spending. One example is Germany’s €4.3B, four-year hospital digital transformation project (KHZG), launched in October 2020 (see our recent Insight on this here) and similar hospital IT upgrade schemes in France, Italy, the UK and the Netherlands. 

Tietoevry Care’s results make for interesting reading. Its revenues are up despite Epic and Oracle Cerner’s move into its core Finnish and Swedish markets. Compared to these multibillion-dollar vendors, Tietoevry’s healthcare business is relatively small. As hospital IT procurement further consolidates around large vendors like Epic and Oracle Cerner, it will become increasingly challenging for Tietoevry to maintain its position. However, it does have significant advantages over larger international vendors: highly-localised solutions and a long history serving its Nordic customer base. Product development is key to fending off the threat from Epic and Oracle Cerner, particularly in VBC. Many contracts being won by these companies in the Nordics include IT to support integrated care and VBC (e g Oracle Cerner’s HealtheIntent) and so it is essential that Tietoevry develops its solutions further in these areas to maintain its leadership position.  

Nexus is on comparatively firmer ground. The bulk of its revenues come from Germany, where KHZG contracts will drive the hospital IT EHR market until 2024/25, although it is less well positioned than CGM and Dedalus on this.  

Nexus’ strongest revenue growth, however, comes from Benelux, where it is a second-tier vendor in terms of market share, along with Epic and Cerner. As in Germany, the Netherlands is undertaking widespread hospital IT system upgrades, and Nexus is well placed to secure contracts. Dutch software firm ChipSoft is the big incumbent in its home country, and Nexus’ revenue growth in this market is despite its inability, to date, to seriously erode ChipSoft’s share. 

For CGM HIS business, the picture is different. It’s headline 13% YTD revenue spike can be partly attributed to several acquisitions the company has made (e. g. several EHR solutions from Oracle Cerner that have boosted CGM’s position in Germany, France and Spain and more recently Visus Group and KMS). Organic growth for HIS is still important, however and stood at 6% for YTD and for the last quarter. Again, this relates to revenue upsides from KHZG funding.   

Mixed Bag: Primary Care EHR Vendors (Europe) 

Compared to the buoyant European hospital IT EHR market, the revenue  landscape for listed primary care EHR vendors is more mixed.  

The software and services business of French company Cedegim, the unit which serves primary care EHR, reported healthy 5% y-o-y growth on the quarter, and 4% YTD growth (first three quarters of 2022). On the other hand, EMIS Health (the company’s more EHR-focused unit) of UK-focused vendor EMIS Group saw both its y-o-y and YTD revenues contract 6% in the latest reporting period, although its overall business did grow across these periods. 

Cedegim continues to perform well across its core markets (France, UK, Belgium, Spain and Italy (where they have a primary care joint venture with Dedalus)). Like its hospital EHR counterparts, Cedegim is taking advantage of EU Recovery and Resilience Plan-led healthcare infrastructure investment programmes. In France this includes MaSante (MyHealth) 2022, where Cedegim is supporting upgrades to primary care EHR software. Equasens, which operates in similar markets to Cegedim, has also performed well, but in its case largely via acquisition.  

The 6% contraction in revenues of EMIS Health over the first half of 2022 reflects an overall reduction in primary care EHR spend in the UK compared to 2021 (when Covid-related IT demand peaked), rather than any loss of market share.  

CGM’s AIS revenue growth can best be described as mediocre, certainly in terms of quarterly y-o-y growth, which was just 1%. 

5% YTD growth is attributed almost exclusively to acquisitions (it bought French primary EHR vendor Altantide at the end of Q1 2021), as organic growth was 0%. Organic revenues in the last quarter fell 4% y-o-y, as the Covid IT support boost that a lot of primary/ambulatory EHR vendor businesses benefitted from in 2021 tailed off. 

Steady if Unspectacular: Ambulatory Information Systems (US) 

Overall, in terms of public companies this segment is dominated by Allscripts’ independent practice primary care EHR and life sciences business, along with NextGen Healthcare. The other non-public vendors that make up the big six in this sector being Epic, Oracle Cerner, athenahealth and eClinicalWorks. NextGen reported 7% y-o-y quarterly growth, and 6% YTD growth, in the latest period. Allscripts posted 5% y-o-y and 6% YTD growth. Both sets of results were similar, solid and at growth rates higher than we have historically seen. 

Allscripts’ solid growth here follows the 2021 split of its hospital EHR, VBC and international business into Altera Health. Allscripts’ growth now relates solely to its independent practice primary care EHR and life sciences business. 

Allscripts, NextGen and the private players must confront the reality that the US ambulatory/primary care market is saturated. All providers have systems in place, and new revenue opportunities are limited to increasing the range of modules taken by each customer and eroding competitor market share. 

NextGen and Allscripts have both responded to this reality, developing patient-facing telehealth, VBC and revenue-cycle modules (helping practices use EHR to maximise reimbursement from vendors). These new modules are helping generate new revenues for these two companies, and this strategy is also being employed among other big US vendors. These large vendors continue to gain market share at the expense of small, independent tier 2 and 3 vendors who lack the money and muscle to invest in R&D and product development. 

This is a key challenge facing CGM in the US. While acquiring eMDs provided CGM with a US footprint, the AIS EHR competitive landscape is sharper in the US, where eMDs is a tier 2 vendor in terms of market share. Breaking into that elite tier 1 group will be hard without significant investment in new product development. 

For US vendors that are predominantly only focused on ambulatory EHR markets, the biggest threat is their shrinking total available market (TAM). As shown below, the share of physicians working in the US for independent practices is decreasing. Increasingly these physicians are working for hospital systems. The drive towards VBC is encouraging health systems and IDNs to acquire independent practices to offer services spanning a patient’s entire health journey.

As the number of independent practices decreases and the number of hospital-owned practices increases, it plays directly into the hands of larger EHR vendors that can offer solutions spanning all health settings and specialties. Epic, Oracle Cerner, Meditech and Altera Health are the only vendors that really cater to this increasing requirement. Although Altera Health’s position here was somewhat weakened when Allscripts split earlier this year into two entities.  

The diagram below describes this trend and provides a hypothetical simplified example where a large IDN acquires independent hospitals, community hospitals and physician practices to grow its network (Step 2). Epic is used as an example, but the trend applies to other vendors offering a portfolio of EHR solutions addressing a wide range of care settings.  

As new providers are integrated into the network, their EHR solutions are gradually migrated to a common vendor (Step 3). In the case of Epic in the US, even providers that don’t belong to the IDN, but are part of the broader ecosystem, can piggyback on the IDN’s contract with Epic (using Community Connect) to also implement a common EHR (Step 4). This has resulted in Epic being one of the most used EHR vendors for independent physician practices in the US, despite it not historically marketing heavily directly to independent physicians. It also recently announced it would sell directly to independent practices via ‘Garden Plot’. 

There are some counter-trends. Particularly in the US, specialty-specific ambulatory vendors are holding ground/gaining share with providers in their specialty (e. g. Modernizing Medicine in gastro and dermatology). However, holding back this migration to EHR vendors addressing a variety of care needs will be the biggest challenge for amublatory-only EHR vendors in the US in the medium term.   

Arresting the Slide: Inpatient EHR Market (US)  

We wrote recently about Oracle Cerner’s financial, strategic and product challenges (see Insight here). Any anticipated boost in Cerner’s financial performance from its $23.8B acquisition by Oracle is yet to happen. Oracle CEO Safra Katz declared recently however that, as Oracle fully integrates Cerner into its business, the latter would ‘positively impact’ revenue and earnings per share growth in the coming quarters. She added that Oracle expects Cerner to perform ‘even better’ in the coming quarters as it develops new healthcare cloud services.  

In terms of US inpatient EHR, the interesting story is CPSI. It reported sharp 18% revenue growth for both y-o-y quarterly and YTD periods. However, its Systems Sales and Support business unit (focused on the US inpatient EHR market) had very different fortunes. It fell 2% in the latest quarter and 4% in terms of the first three quarters of 2022.  

The company’s business in the US has historically been focused on smaller community hospitals. However, its TAM here is shrinking (see below) as IDNs and health systems acquire these independent hospitals and over time migrate to a common EHR (as discussed earlier in relation to ambulatory markets, but the trend also applies to community hospitals).   

Epic, Oracle Cerner and Meditech dominate in the system-owned space in terms of EHR provision, and to a lesser extent Altera Health. Their wide range of EHR solutions spanning a health system’s complete EHR and VBC needs makes it increasingly difficult for companies such as CPSI to compete. In a similar vein to the ambulatory EHR vendors, the greatest medium-term challenge for inpatient only EHR vendors, particularly those that largely serve only independent hospitals, will be stemming this migration.  

No Time to Rest on Laurels  

Almost across the board, EHR and VBC vendor revenues are in good shape. Multibillion-Euro EHR investment schemes in Europe, along with the shift to VBC in the US, continue to underpin growth.  

These dynamics comfortably mask the everyday challenges facing hospitals and ambulatory and primary care providers: staff shortages, inflation, soaring energy costs and logistics and supply chain issues. For now, at least. 

And while overall revenues are healthy, Oracle Cerner is a warning to other vendors that acquisitions are not always the key to short-term revenue joy. EHR vendors may rarely have had it so good, but this is no time to rest on their laurels.  

Click here to download our full analysis file of these public vendor results.