By tomorrow, Optum Health must respond to the UK’s Competition and Markets Authority (CMA) objections over its planned acquisition of EMIS. If approved, the £1.24B ($1.52B) deal for the UK’s leading primary care EHR vendor promises to have wide-reaching implications for the NHS.
The Signify View
The CMA’s principal objections to the acquisition, announced last June, revolve around its potential impact on the competitive landscape of the UK’s drug Clinical Decision Support (CDS) and population health management (PHM) markets.
To completely address CMA concerns, Optum realistically has two options: sell its UK drug CDS business, or exit from its UK PHM activities. But is either option viable? Investors we have spoken to about this in recent days speculate that United Health/Optum is so fixated on getting the EMIS deal done that it will offer to ‘sell its UK business’ to assuage CMA objections. The question is: what does this actually mean?
To answer this, it helps to consider why Optum is so ‘fixated’ on EMIS. We wrote shortly after the acquisition was announced (see this Insight) about the magnitude of such a deal, and its potential ramifications for the NHS and UK healthcare.
We can understand why acquisition would be agreeable for both parties. As part of United Health, Optum has a massive US insurance and provider network footprint, and would bring unparalleled scale, portfolio breadth and financial heft to the table.
EMIS, meanwhile, sells its EHR solution to an estimated 55% of UK NHS GP practices. The company also leads UK community pharmacy IT, inpatient EDIS and community EHR markets, and provides the patient-facing digital front door, booking management system and virtual care platform for many primary care practices via its Patent Access business. Revenues continue to grow at mid- to high single digits, and in the last three years the company brought its EMIS-X analytics platform to market, supporting Primary Care Networks (PCNs) and Integrated Care Systems (ICSs) in addressing care management analytics and PHM.
Optum has, to date, achieved limited traction for its PHM products in the UK. But the combination of EMIS-X, Optum’s US PHM products (which, largely, have not yet been localised for the UK market) and EMIS’ broad UK footprint offers several synergies and routes to market for both companies.
In the CMA’s objections document, two (of many) points stand out. One relates to the UK’s drug CDS/Medicines Optimisation (MO) software market. Here, Optum’s ScriptSwitch business and competitor First Databank are shared beneficiaries of a £100M ($123M) contract with NHS Shared Business Services for medication cost-optimisation CDS solutions used in primary care.
The CMA is concerned that Optum and EMIS would wield excessive power over the market by bringing together ScriptSwitch’s cost optimisation tool with EMIS’ clinical safety-focused solution. Many EMIS EHR customers already buy this solution, and the CMA considers that this large installed base could dramatically alter market dynamics.
A second key objection raised by the CMA makes for more uncomfortable reading for Optum. The CMA notes that the NHS Health System Support Framework, and other frameworks such as GP Futures, mandate open APIs and free data sharing. The CMA argues that, by buying EMIS (which effectively holds 55% of primary care patient data), other vendors will be denied the opportunity to custom-integrate their technologies to the degree they need to, despite the regulations enforcing data sharing.
This could have the effect of pushing up costs to the NHS. Reinforcing this point, vendors we speak to speculate that Optum could exploit loopholes in these frameworks to block data sharing and aggregation, should it acquire EMIS. Vendors have a vested interest in flagging such concerns: Oracle Cerner, Graphnet, Patients Know Best, Orion and InterSystems have all benefitted from PHM contracts to date and would view an Optum-EMIS portfolio as a competitive threat. This is especially true given EMIS’ massive installed base of customers (to which the combined entity will be looking to upsell their PHM solutions).
While the CMA acknowledges that Optum is a small player in the UK PHM market at present, it is mindful of its potential should it have a vehicle (i e EMIS) to localise and scale its solutions.
From Optum’s perspective, the most obvious response is to offer to sell ScriptSwitch, which has been steadily losing share to First Databank’s more innovative cost optimisation solution under the NHS Shared Business Services contract. Optum would need to invest to make the product more competitive and, with the five-year contract up for renewal at the end of 2023 (and no guarantee it would be renewed), Optum will feel ScriptSwitch is a suitable sacrificial lamb.
But selling ScriptSwitch does not address the CMA’s more weighty objections about the impact of the acquisition on the UK PHM market.
As mentioned previously, Optum is a small player in UK population health at present. It sells a handful of PHM tools to ICSs and PCNs under the NHS Health System Support Framework, partners with some PHM vendors and provides some consultancy services, but little else of note.
Yet the UK integrated care/PHM market is of great strategic interest to the American company.
For example, ICSs have signed contracts, leveraging the NHS’ approximately $600M Health System Led Investment (HSLI) programme, for data integration platforms supporting the development of regional shared or integrated care records. Although neither Optum nor EMIS have featured significantly in major shared care record contracts over the last three-plus years, Optum has been involved from an IT consultancy/system integration perspective throughout. EMIS, meanwhile, has been developing its EMIS-X Analytics portfolio of solutions designed specifically for PHM and analytics used by ICSs, PCNs and other agencies involved in supporting a multidisciplinary approach to integrated care.
Optum will also hope to overcome the challenge of localisation and replicate in the UK the success it has had with its PHM IT solutions in the US, which generate hundreds of millions of dollars in revenues. Combining with EMIS’ expanding local solution set will, in its eyes, help it achieve that.
Between a Rock and a Hard Place
This places Optum in a quandary. Ultimately, the fate of the EMIS acquisition will boil down to Optum’s ability to overturn the CMA’s objections. While selling ScriptSwitch is the easy (and most palatable) option for Optum, the CMA might think differently.
Addressing CMA objections around population health will be far harder. It is unclear how ‘selling Optum UK’ would address this. The CMA’s concerns relate to future PHM products offered by Optum in the UK, not only current solutions, which presumably refers to PHM products the company currently sells in the US and could localise for the UK. This is a substantial business for Optum and one it will not sell to address the CMAs concerns. It’s on this point the decision is likely to pivot. Perhaps Optum can make a credible case to the CMA that it can establish some sort of framework agreement on open access to its data. Outside a strong commitment to continue to provide EMIS data to other PHM providers this appears to be the only option.
Optum will also be well aware that it is just another actor in the long-running ‘US companies profiteering from NHS funding’ show. A £1BN-plus acquisition of a successful UK technology firm by a profit-driven US healthcare insurer/provider was always going to re-stoke the fires of debate around large US organisations extending their tentacles into the NHS. There will almost certainly be an element of political grandstanding at play here, too.
Tomorrow, the CMA will have its responses, and it will not be long before Optum’s finds out if its fixation with EMIS becomes business reality.