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JEGI Sector Insights Presented by Chris Calton Healthcare IT

July 2013

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Since 1987 Healthcare Information Technology Issues, Trends & M&A Outlook Healthcare Information Technology Issues, Trends & M&A Outlook

JEGI has established an impeccable reputation in the marketplace though its industry knowledge and superior performance on behalf of its clients. The firm’s investment bankers have senior‐level industry experience and relationships across the markets it serves. As one of the leaders in middle‐market advisory services, JEGI provides:

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The Jordan, Edmiston Group is the leading provider of merger and acquisition advisory services for the technology, information services, marketing services, and media sectors. Since 1987, JEGI has completed over 500 transactions for:

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The Information Age Comes to Healthcare

Overview The U.S. healthcare system is undergoing unprecedented change as a result of the Patient Protection & Affordable Care Act (ACA) signed in March 2010, and these changes have created opportunities for companies across the entire healthcare landscape. Healthcare information technology (HCIT) is a critical piece to many of the government’s changes, and government‐sponsored programs have created large incentives for the adoption of information technology solutions, spurring even greater tailwinds for the industry. With the large scale adoption of electronic health records (EHR), massive amounts of data are being collected, stored and utilized for better decision making. The amount of healthcare data is expected to increase 50x the current load to 25,000 petabytes(1) annually, creating even greater amounts of information, as well as demand for technology that can put this information to use. As a result, we are at the dawn of the information age in healthcare, and data and information solutions will lead the transformation of healthcare by addressing many of the industry’s major issues and challenges. Although the rising tide has raised most ships, the HCIT industry has been characterized by sector rotations. Consequently, JEGI has examined the current trends in the healthcare industry and their implications on the healthcare IT market, identifying four major trends – we call them Market Catalysts – that will impact healthcare IT over the next decade: (i) increasing patient volumes at lower reimbursement rates, (ii) growing demand for informatics and data‐driven decision making, (iii) emergence of the consumer patient, and (iv) the transformation of the healthcare insurance market.

In order to survive, yet alone thrive, in the post‐reform healthcare environment, healthcare companies and other service providers will have to change their protocols and invest in solutions that address these trends. Recognizing this, JEGI has identified compelling information and technology solutions that will benefit from the changes in the way healthcare is delivered and paid. While there are many trends that will impact healthcare over the next decade, we view these Market Catalysts as having the most profound impact on the healthcare IT market. Because of the value healthcare IT brings to some of the industry’s current challenges and the role it will play in healthcare reform, JEGI expects M&A activity in the healthcare IT industry, and particularly the specific sectors identified in this report, to accelerate in the next few years. The overhaul of the industry’s technology infrastructure needed to get us from today’s current delivery model to the model envisioned for the future remains in its infancy, especially for most healthcare providers and represents an attractive opportunity for hundreds of information and technology vendors. As a result, JEGI expects an active and highly competitive M&A market for the foreseeable future, as large companies seek to expand their footprint and gain market share; as smaller vendors scramble for relevance and scale; and as private equity investors seek compelling returns through growth.

“Digital Health feels like the PC industry in the early 1980’s.” John Sculley Former CEO of Apple and PepsiCo

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Exhibit 1: 2011 U.S. Healthcare Expenditures Sources and Uses

Overview of U.S. Healthcare Industry Healthcare expenditures in the United States are expected to increase from $2.8 trillion in 2012 to over $3.3 trillion in 2015, reaching 18% of GDP. The graph in Exhibit 1 shows percent allocations for sources and uses of healthcare expenditures for the 2011 fiscal year. The U.S. government currently accounts for 37% of total payments. Medicaid, which currently accounts for 16% of total payments, is expected to reach 20% by 2021, as a result of the additional enrollees as part of the ACA reform. Services for care delivery, including hospitals, physicians and other pro‐viders, account for 75% of payments received in the U.S. healthcare system. Prescription drugs account for 11% and medical products account for almost 3.5%. Expenditures are projected to increase 5.7% annually from 2010 to 2020. Total expenditures have slowed in recent years, although it’s still tough to understand if this is temporary or part of a larger trend. The U.S. healthcare market faces numerous systemic problems and has been described as a “burning platform,” due to the current unsustainable nature of the industry. These problems revolve around several overarching challenges impacting our current system:

Unsustainable Cost Spiral Healthcare expenditures continue to outpace growth in GDP and personal incomes. Since 1960, healthcare expenditures have increased over 10,000% and are

expected to reach 20% of GDP by 2020. Social issues, such as obesity and diabetes, continue to drive expenditures higher as the long‐term costs of treating the chronically ill compound the problem – a mere 1% of the population accounted for 22% of healthcare expenditures in 2009.

The Burden of the Uninsured The number of uninsured U.S. residents adds heavily to the overall cost of healthcare, as emergency rooms are used for primary care and health issues that can easily treated often go unchecked until they reach much higher levels of severity and related treatment costs balloon. The Census Bureau estimates that approximately 38.6 million people, or 16% of the population, were without health insurance in 2011.(2)

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Baby Boomers Turning Gray The aging demographics is adding more and more stress to the system, as 20% of the U.S. is expected to be age 65 or older (compared to just 8% in 1950) by 2050. This is expected to not only increase patient volumes (and the likely severity and comorbidity of their conditions), but also reduce the number of available physicians as many reach retirement age over the next several decades.

The Fee‐for‐Service Dilemma Finally, the U.S. healthcare system is a profit‐driven free‐for‐all, with all constituents (providers, patients, insurance payors, medical device companies, pharmaceutical companies) focused on their own economic gain, crippling the entire system. The fee‐for‐service model simply drives doctors, hospitals and ancillary service providers to do more procedures, especially in areas where reimbursement has the highest revenue and profit margins. This has created enormous challenges for individuals, employers and state and Federal budgets. The current structure of the U.S. healthcare system does not allow it to function like other industries, where customers know what things cost and decide where they can purchase the greatest value for their money, but rather encourages higher volumes and higher prices. In fact, the fundamental problem we currently face is that value, defined as the patient outcome per dollar spent, has not been a factor in our healthcare system, creating misaligned incentives.

Impact of Healthcare Reform On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act, one of the most sweeping changes to healthcare in the United States since the creation of Medicare. While a description of the ACA is beyond the scope of this briefing, the major highlights are provided below.

▪ Requires citizens and legal residents to have qualifying health coverage or face penalties (Individual Mandate);

▪ Creates state‐based American Health Benefit Exchanges with premium and cost‐sharing credits available and Small Business Health Option Program;

▪ Imposes $2,000 fee on employers with 50 or more full‐time employees that do not offer health care coverage (Employer Mandate);

▪ Expands Medicaid to all non‐Medicare eligible individuals under age 65 (children, pregnant women, parents, and adults without dependent children) who meet income level guidelines;

▪ Creates risk‐sharing accountable care organizations (ACO) that voluntarily meet quality thresholds with a share of the cost savings they achieve for the Medicare program;

▪ Imposes an excise tax of 2.3% on the sale of any taxable medical device.

In addition to these major enactments, the ACA also includes initiatives around the following objectives:

▪ Cost Containment; ▪ Quality Improvement/Health System Performance; ▪ Prevention/Wellness; ▪ Long‐Term Care and Aging at Home; and ▪ Others (e.g., Medicare improvement, workforce training,

community heath, trauma care). As the implementation of healthcare reform begins to take effect, the future of healthcare in the U.S. has become a little clearer. As a result, JEGI believes there are a few key “takeaways” that will have lasting impact on the healthcare and healthcare IT markets.

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“I got the bill for my surgery. Now I know what those doctors were wearing masks for.”

James H. Boren Political Scientist, Teacher & Humorist

Healthcare

expenditures will continue

to grow

The aging of the U.S. population and the healthcare system’s ingrained habits will drive healthcare expenditures higher in the near‐term. Despite the recent slowdown in growth, the systemic problems that have caused the steady rise in healthcare expenditures will likely take time to correct. As the economy continues to recover, patient volumes will rise, as consumers reconsider elective procedures they had put off. Furthermore, adding 20+ million people to the insurance market will move patient volumes higher. This continued financial pressure will help to accelerate the adoption of risk‐sharing models such as ACOs and Patient‐Centered Medical Homes.

Increased demand for

medical professionals

The swelling ranks of the insured will create an imbalance between available services and overwhelming demand. As access becomes more difficult, providers will have to improve work flow, achieve greater efficiencies, and enhance productivity. Much of the demand will be for services outside the traditional physician’s office and hospital settings, due in part to necessity but also as a result of lower‐cost, more user‐friendly alternatives.

Lower reimburse‐ment rates will require

greater operating efficiency

Although patient volumes will likely increase, hospitals, physician practices, medical device and life science companies will face lower reimbursements and greater scrutiny regarding the value delivered to patients. Medicaid rates are about 65% of Medicare(3) (which is substantially less than private insurance), creating increased price pressure on healthcare companies. Healthcare participants will also face greater market forces and be forced to think about value to the patient, leading to more efficient and nimble providers seeking ways to derive greater profit from lower reimbursement rates.

Transform‐ation of

healthcare insurance

The individual and employer mandates, as well as the formation of state healthcare insurance exchanges as part of the ACA, are changing the insurance landscape. Meanwhile, employers are struggling to manage their benefit costs due to rising healthcare prices. Even with the ACA’s Employer

Mandate looming on the horizon, employers are seeking more cost effective ways to provide health benefits to their employees. As a result, we see the health insurance market changing rapidly and the role of the employer changing with it.

Universal risk sharing

and the need for patient

engagement

The fee‐for‐service model is giving way to risk sharing, in the form of bundled payments and value‐based purchasing. Through ACOs and patient‐centered medical home models, healthcare providers are adopting a risk sharing approach and moving away from the traditional episodic nature of care. The emphasis on higher volumes will change to an emphasis on care coordination and cost containment. Value‐based purchasing will force healthcare providers, device manufacturers and life science companies to measure, track and report outcomes in order to prove the value in the marketplace.

Furthermore, healthcare participants will now have an economic stake in a patient’s recovery, creating a behavioral change focused on outcomes, not procedures. Patient engagement is already in high demand, through portals, personal health records and other means of delivering value to the patient and increasing the level of interaction.

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An Overview of the Healthcare IT Market

Healthcare IT includes hardware, software, hardware, connectivity/ telecom, IT services and internal or outsourced services. The size of the global HCIT market is estimated to be approximately $170 billion in 2012 and expected to grow 4% annually through 2016.

The U.S. healthcare IT market, which reached an estimated $65.6 billion in 2012, has grown at higher rates than the global market over the past decade. Meanwhile, solutions such as EMRs and clinical physician order entry are growing at even higher rates (15%‐20%). Other areas of growth include point of care information systems, specialty care information systems (cardiovascular information systems, oncology information systems), surgical and intensive care. Healthcare Informatics The proliferation of data in healthcare, coupled with technology innovation, has created a dynamic environment for all participants in the healthcare market. Healthcare informatics represents the intersection of information science, computer science and healthcare. According to the Journal of American Medical Informatics, “big data” techniques have three characteristics (known as the three Vs) to:

▪ manage large blocks of information (volume); ▪ handle a rapidly increasing flow of information (velocity); and ▪ combine data from a variety of sources (variety).

Value could also be added as a fourth “V” as the healthcare expenditures that produce the data represents an enormous piece of the economy.

The desired output from an informatics platform is relevant information and analytics to provide better decision making (i.e. decision support). The healthcare industry has two types of analytics applications: clinical intelligence and business intelligence. Business intelligence applications address the financial and operational aspect of a healthcare organization, such as cost accounting, staffing levels, budgeting and facility management. Clinical applications, meanwhile, address aspects of care delivery, drug efficacy and population health management. In order for healthcare organizations to succeed in the future, an integrated informatics platform that delivers both of these applications will be necessary. As shown in Exhibit 3, the data used in healthcare cuts across all segments of healthcare IT. There is a wide variety of information and data sources in healthcare – hospitals, insurance companies and retail

Exhibit 2: Global & U.S. Healthcare IT Market Size ($ in Billions)

Source: Gartner “Enterprise IT Spending by Vertical Industry Market, Worldwide, 2010‐16, Q1 2012 Update,” Various Authors, April 12, 2012

Global Healthcare IT Market U.S. Healthcare IT Market

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pharmacies – and the disparity of data makes the healthcare informatics opportunity even more powerful and valuable than in most other sectors. Doctors, pharma and de‐vice manufacturers and other healthcare providers can build a deeper and more accurate profile of the consumer patient through EHRs, prescrip‐tions, claims data and other registries, spurring continued expansion of the informatics and consumer health information market. While the informatics ecosystem has created a vast resource of information and intelli‐gence, the data derived from it has yet to be used to improve the delivery of care and the value de‐livered to the patient.

Emergence of Informatics Partnerships Information partnerships have recently become popular, as a range of healthcare participants, including large health systems, payors, data and technology vendors, and retail pharmacies, seek to use the information to provide broader information solutions.

Over the past eighteen months, several healthcare participants have announced information partnerships, highlighted in the table below. Healthcare systems and payors’ incentives are now more aligned, as they try to cut costs in the face of reimbursement pressure.

Exhibit 3: Healthcare Informatics Ecosystem

Source: JEGI

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Government Helps to Drive Adoption According to Healthcare Informatics magazine, most hospitals in the United States spend between 1.1% and 3.5% of their total operating budget on healthcare IT. These expenditures have typically been used to maintain anti‐quated IT systems and have not resulted in the “digitization” of healthcare. In 2000, the Institute of Medicine published “To Err is

Human: Building a Safer Healthcare System”, which disclosed that 44,000 to 98,000 people die each year from medical errors and recommended a greater adoption of HCIT in the healthcare system. Since then, the Federal government has been seeking ways to accelerate the adoption of EMRs and related technology.

Exhibit 4: Recently Announced Informatics Partnerships

Partners Ann. Date Objectives

AstraZeneca and HealthCore (WellPoint) February‐2011 Analyze real world EHR data to conduct comparative‐effectiveness research (United States)Highmark and West Penn Allegheny Health System June‐2011 Health insurer acquisition of Pennsylvania‐based health system will offer lower cost

alternative to bigger University of Pittsburgh Medical CenterPartners HealthCare and Neighborhood Health August‐2011 Massachusetts' largest hospital and physicians network to acquire Neighborhood Health Plan,

a nonprofit that insures more than 240,000 mostly low‐income residents across Massachusetts

Wellpoint and "Watson" September‐2011 IBM's data‐crunching and artificial intelligence technology, to suggest treatment options and diagnoses to doctors

Scripps Health and Allscripts October‐2011 San Deigo‐based health system will leverage Allscripts Community Record product to aggregate EHR data across locations

Microsoft and GE Health December‐2011 Joint‐venture aims to leverage Microsofts technology and GE Health's industry knowledge to generate one view of the patient

AstraZeneca and IMS Health January‐2012 Analyze real world EHR data to conduct comparative‐effectiveness research (Europe)Abbvie, Astellas, AstraZeneca, Biogen Idec, Boehringer Ingelheim, Braeburn Pharmaceuticals, Bristol‐Meyers Squibb, EMD Serono, Forest Laboratories, Inc., GlaxoSmithKline, Johnson & Johnson, Lilly, Onyx Pharmaceuticals, Pfizer, Roche amd Sanofi

September‐2012 In September 2012, ten leading pharmaceutical companies formed the non‐profit organization TransCelerate BioPharma Inc. (TransCelerate), with a focus on accelerating the development of new medicines – initially by identifying ways to make the clinical trial process more efficient. Six additional members joined in April 2013.

Blue Health Intelligence and Intelimedix January‐2013 BHI data and resources combinded with Intelimedix Web‐based analytic and data mining capabilities will allow BHI to improve healthcare experience for consumers

UnitedHealth Group and Humedica February‐2013 UnitedHealth to acquire Humedica, a Boston clinical data analytics firm with ties to the American Medical Group Association

Cerner, McKesson, Allscripts, athenahealth, Greenway, RelayHealth

March‐2013 Collaboration of rival vendors, uniting to form the CommonWell Health Alliance to enable care integration and data liquidity

Deloitte and Intermountain Healthcare March‐2013 Five‐year collaboration to help healthcare industry harness big data and analytics to reduce costs and improve patient outcomes

Carolinas Health System, Catholic Health Partners, Fairview Health Services, Texas Health Resources and IBM

June‐2013 Four healthcare systems and technology giantg IBM have joined the Premier healthcare alliance in a data analytics venture. Together the participants plan to develop data analytics methods to reduce healthcare costs and improve quality.

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The Health Information Technology and Economic and Clinical Health (HITECH) Act was signed into law on February 19, 2009 as part of the American Recovery and Reinvestment Act of 2009. The HITECH Act provides financial incentives for hospitals and eligible professionals (EP) including physicians, dentists, optometrists, podiatrists and chiropractors to demonstrate “meaningful use” of certified electronic

health records. This incentive includes approximately $22.5 billion of incentive payments and an additional $2 billion for the funding of the Office of the National Coordinator for Health Information Technology. It also revises and increases the penalty for violations of HIPAA rules and encourages prompt corrective action, critical to the further acceptance and adoption by payors, providers and patients.

The incentive payments are to be paid out to hospitals and EPs in three stages over four years, with Stage 1 having begun in 2011. The requirements for achieving Meaningful Use in stages 2 and 3 become more complex with each stage with the information technology requirements needed to achieve these stages also becoming more demanding.

As shown in Exhibit 5 to the left, Meaningful Use payments accelerated in 2011 and 2012, totaling $14.6 billion at the end of April 2013. According to CMS, just over 85% of eligible hospitals have registered for the program, and approximately 75% of EPs have registered, up from 17% and 9%, respectively, in 2008. The wave of Federal money attached to the EHR Incentive Program has drawn a large number of HCIT vendors into the market, and consolidation is already underway. JEGI expects this trend to continue in the near‐term, but will likely experience a slowdown once the large vendors have filled out their product portfolios and incentive payments begin to wind down. Several other regulatory programs are also driving additional HCIT spending (see Exhibit 6 for Federal program timelines). Although these programs will not have the impact that Meaningful Use is having, it will continue to

add growth to the overall healthcare IT market in the U.S. For example, the government has revised its Statistical Classification of Diseases and Related Health Problems from 17,000 codes to 150,000, to expand the data relating to patients’ medical conditions and hospital inpatient procedures. The transition to ICD‐10 (beginning October 2014) requires advance preparations and software upgrades

Exhibit 5: EHR Incentive Payments

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by providers and payors, creating another surge of software spending. Finally, an upgrade is being made to the existing form of HIPAA, replacing standard 4010A1, and the new standard enables improved data and facilitates the transition to ICD‐10.

Exhibit 6: Federal Program Timelines

"Isn't it a bit unnerving that doctors call what they do 'practice'?" George Carlin Comedian

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Impact on Healthcare IT Market and the Dawn of the Information Age

Understanding the current challenges facing the healthcare system and identifying some recent trends provides a view into the future of healthcare IT and potential areas of accelerated growth. JEGI expects healthcare IT and especially informatics to play a pivotal role in addressing some of the decades‐long problems plaguing the U.S. healthcare system and enabling healthcare companies to adapt the new, post‐reform competitive environment. In addition, the HITECH Act and Meaningful Use incentives have created a tipping point for the use of data in healthcare, ushering in the dawn of the industry’s information age. The amount of healthcare data is expected to increase 50x the current load to 25,000 petabytes(1)

annually, creating an even greater need to manage data across the healthcare enterprise. While we believe the entire HCIT market will continue to thrive, JEGI has identified four major “Market Catalysts” that will have an even greater impact on healthcare information and technology. We would also expect these catalysts to drive M&A activity in the high‐lighted segments, as a broad range of information tech‐nology vendors seek to expand their solution set and obtain greater market share.

Market Catalyst #1: Higher Patient Volumes at Lower Reimbursement Rates Due to a confluence of events, patient volumes are expected to increase dramatically over the next decade. With the expansion of Medicaid and insurance requirements implemented as part of the ACA, 20 to 40 million patients are expected to be added to the insurance roles. In addition, 20% of the population will be over the age of 65 by 2050, creating further demand as baby boomers require greater medical care. As the U.S. economy recovers, JEGI expects a

Exhibit 7: National Healthcare Expenditures ($ in Trillions)

Source: Centers for Medicare & Medicaid Services

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surge in the number of patients undergoing elective surgeries that they had postponed during the downturn. These trends will most likely overwhelm healthcare participants, creating access challenges and increased stress on the healthcare system. From a reimbursement standpoint, every patient is not the same. As discussed previously, Medicaid reimbursement rates are significantly below Medicare rates (with both below private insurance rates). The demise of fee‐for‐service and the rise of bundled payments will further pressure health systems to operate more efficiently. The

industry has begun to experience the emergence of operational and work flow solutions software tools that enable providers to improve financial performance by eliminating waste and streamlining operations. These solutions, which enhance the delivery of key operating information, such as peak volumes and patient throughput, as well as such next generation solutions for patient logistics and throughput management, are achieving meaningful traction in the market. Improved business intelligence and staffing software will also enable providers to make better decisions and utilize their assets and employees more efficiently. Aionex, a work flow software vendor

based outside of Nashville, provides solutions for hospitals that address areas such as patient throughput and operational bottlenecks.

Additionally, financial optimization – budgeting/ capital planning, next‐generation revenue cycle management and spend management – can also be achieved through improved software tools. The current reimbursement pressure is forcing healthcare participants to seek better data solutions to help in the decision‐making process, by providing business data from the traditional silos (patient registration, accounting, accounts receivable) to the proper decision maker in an integrated solution. Companies such as MD Buyline, a provider or capital equipment and purchased services market information, are enabling healthcare providers to better control costs and capital expenditures. Next generation RCM businesses are experiencing increased growth as well. Market research firm Frost and Sullivan is forecasting sales of next‐generation RCM solutions to increase 62% from 2012 to 2017 to almost $3.1 billion.(4)

Exhibit 8: Optimization Software Tools

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Although traditional HCIT vendors provide spend management and cost solutions, most healthcare systems still use in‐house solutions. Several emerging companies have introduced healthcare‐focused software solutions, such as Strata Decision Technology (business intelligence and operational efficiency), whose cost accounting and contract analytics solutions enable health systems to better understand the cost per procedure and operational profitability. These next‐generation business information tools represent a vibrant healthcare market opportunity, as providers seek improved performance through innovative solutions that enable the delivery of better care at a lower cost, while enhancing financial performance. Other resources in the healthcare company software toolkit include:

▪ Telemedicine – to enable physicians and nurse practitioners to see more patients, as well as departmental outsourcing;

▪ Human capital management – to maximize the efficiency of physicians and other health professionals These tools, offered by such vendors as HealthStream and Healthcare Source, will become vitally important, as patient volumes increase, creating greater demand for doctors and medical

▪ personnel at a time when the supply is unlikely to go up, as more doctors reach retirement age and decide to exit the system; and

▪ Referral management – While a smaller piece of the overall puzzle, referral management software, such as the software JEGI believes that given the immediate need to optimize operational and financial performance across healthcare offered by SCI Solutions, is enabling healthcare systems to track and retain patient referrals more effectively, companies that provide these next‐generation solutions will be in high demand by software vendors seeking to expand their presence in the market. Healthcare companies are seeking better business analytics tool, but do not currently have the right solutions. This demand, coupled with the current segment growth, will drive M&A activity in the sector. The table in Exhibit 9 presents some of the recent transactions in this segment, and we note the higher activity levels in revenue cycle management and the entrance of several “non‐traditional” RCM participants.

We believe HCIT vendors and other large enterprise vendors will continue to use acquisitions to expand their software offerings to include a broader range of solutions that address the current operational challenges. Acquirors will continue to include traditional players such as Emdeon, Allscripts and MedAssets, as well as relatively new market entrants.

Ann.Date Acquiror Target Description

6/10/2013 Parallon Business Solutions, LLC U.S. Collections, Inc. U.S. Collections, Inc., doing business as The Outsource Group, Inc., provides receivables management services to blue‐chip clients, hospitals, private physician practices, and hospital‐based physician practices in the United States.

6/3/2013 N. Harris Computer Corp (Constellation Software)

Quadramed, Inc. QuadraMed is a provider of mission critical information technology solutions for the healthcare information technology market. It's clinical, revenue cycle and access management solutions compliment Harris’ existing healthcare solutions in financial management, supply chain management, and human resource management.

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Exhibit 9: Optimization Software Precedent Transactions ‐ continued


5/21/2013 Healthland, Inc. American HealthTech, Inc. American HealthTech, Inc. provides clinical management, resident accounting, financial accounting, and enterprise management software suites for skilled nursing facilities, caregivers, partners, and healthcare networks.

3/18/2013 Cerner Corp. LABOTIX Automation, IncLABOTIX Automation, Inc. provides automation solutions for clinical laboratories in North America and internationally.

3/6/2013 Advantedge Healthcare Solutions, Inc. Hill Associates Healthcare Management Systems, Inc.

Hill Associates Healthcare Management Systems, Inc. provides revenue cycle management services and software for behavioral health providers.

3/4/2013 The Gores Group GE Healthcare Strategic Sourcing Corporation (nka:Meridian Medical Management)

Meridian Medical Management offers electronic billing and electronic medical records outsourcing solutions to the healthcare industry.

2/26/2013 Cymetrix Corporation CareClarity, Inc. CareClarity offers revenue cycle management SaaS solutions that help healthcare providers achieve better financial results. Teaming with HFMA, CareClarity

d h d l f h b b d l1/9/2013 Intermedix, Inc. Anesthesia Revenue Management and Practice Support Resources

Intermedix Corporation acquired three separate businesses: Anesthesia Revenue Management (ARM), Practice Support Resources (PSR), and ESi. ARM provides revenue cycle management services to anesthesiologists and CRNA’s, while PSR specializes in people management, financial management, and practice management solutions that enable physicians to focus on practicing medicine.

1/7/2013 Passport Health Communications, Inc. Data Systems Group, inc. Data Systems Group provides direct revenue cycle management to more than 200 hospital customers and 85 physician sites in 20 states.

1/2/2013 The Trizetto Group, Inc. Healthcare Productivity Automation, LLC

Healthcare Productivity Automation, LLC provides healthcare software development and consulting services. It offers Health Mason, a cloud‐based robotic automation technology that provides business process automation services.

12/21/2012 RelayHealth Corp. AHI Software, Inc. AHI Software, Inc. provides patient access management software solutions to healthcare facilities.

12/11/2012 Sutherland Global Services, Inc. Apollo Health Street Ltd. Apollo Health Street Limited develops information technology‐based solutions for healthcare organizations. It offers revenue cycle outsourcing, medical coding, patient accounting, data management, claims administration, and service desk support services.

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Market Catalyst #2: Informatics and Data‐driven Decision Making Although healthcare data has existed for a long time, the large scale adoption of EHRs has set the wheels in motion for greater use of informatics. The graph in Exhibit 10 shows the evolution of informatics platforms, with most healthcare providers still in the empirical medicine phase. In order to effectively compete in the post‐reform era, healthcare providers will need the IT infrastructure to evolve from today’s current approach to a value‐based approach. Collecting, aggregating, analyzing and distributing information requires a substantial commitment from healthcare participants, however. As a result, health‐care systems and other providers will have to build an integrated informatics platform in order to achieve the highest level of informatics needed to deliver value‐based solutions in order to fully utilize their data, operate more effectively and improve the overall care being provided. Moving to evidence‐based medicine requires moving data from individual “silos” to a centralized data repository (data warehouse). Progressing further to value‐based medicine requires additional investments in clinical and business intelligence platforms that enable enhanced use of a system’s data. The diagram in Exhibit 11 summarizes this architecture of an end‐to‐end informatics system, with each of these components representing a key element of the platform. Although some larger technology vendors have developed end‐to‐end systems, the market remains relatively fragmented with “best‐of‐breed” vendors securing contracts to provide a part of the overall solution.

Data Collection While the adoption of EHRs is allowing for better data collection at the point‐of‐care and enabling data aggregation and the use of health information exchanges, the biggest challenge remains integrating the disparate types of data (e.g., EHRs, videos, images, scanned documents and physician notations) into a unified database. The variability around healthcare terminology also presents further challenges. Several key standards have been established to better enable the use of healthcare data. To provide the “underpinning” of EHRs and allow for meaning‐based retrieval,

Exhibit 10: Informatics Platform Maturity

Source: Oracle Corp, “Enterprise Healthcare Analytics: Healthcare Data Warehouse Foundation,” Healthcare Information Management System Society, 2009

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Exhibit 11: Healthcare Informatics Work Flow

SNOMED CT1 was established to create a healthcare terminology standard. It has become a critical element of evidence‐based medicine and population health, as it provides a “bridge” to the larger issues surrounding a specific condition by mapping to particular industry classifications. Similarly, LOINC2, an industry‐wide coding system, enables raw patient data in the form of both clinical and laboratory measurements and observations to be “normalized” and aggregated in an organized manner. Finally, the Continuity of Care Document (CCD) specification is an XML‐based markup standard intended to specify the encoding, structure, and semantics of a patient summary clinical document for exchange. The CCD includes guidelines for both text and structured data and provides a framework for referring to concepts SNOMED CT and LOINC. An EHR must be able to generate a CCD in order to be recognized by CMS and its standards body as “Certified” and is a critical element in using clinical data to enable better decision making. While the adoption of these standards is esse ntial to the overall success of an informatics program, the ability to capture secondary data in unstructured formats remains critical to driving better outcomes. According to a 2011 IDC study, 90% of data created over the next decade will be unstructured.(5) In addition to

1 The Systematized Nomenclature of Medicine – Clinical Terms (SNOMED CT), established in 1999 2 The Logical Identifiers Names and Codes (LOINC®)

unstructured search capabilities, superior natural language processing technology and healthcare ontology capabilities will help distinguish the leading products in this category. Optum’s acquisition of Humedica is a good example of the identified need to utilize unstructured data as part of an informatics program. Computable Genomix’s Quire product has also proven its ability to manage unstructured data and is being used by several leading healthcare systems. Data Aggregation Once patient data has been collected and “normalized,” data aggregation is the next step in broadly sharing and utilizing health information. The HITECH Act requires that EHRs be “connected in a manner that provides…for the electronic exchange of

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health information to improve the quality of healthcare” in order to qualify for incentive payments. Therefore, healthcare providers not only must collect and aggregate data, but also share the information more broadly. The use of health information exchanges, therefore, is the next step in the informatics progression. In addition to interoperability and the technical requirements described above, data security is one of the primary challenges facing all entities seeking to share patient information. CMS and its Office of the National Coordinator recently announced a cooperative agreement with DirectTrust, an independent non‐profit trade association formed to establish and maintain a National Security and Trust Framework, to address these issues. While HIPAA compliance and security are major issues, JEGI does not currently view it as a business opportunity, due to the open standards being used. Included within data aggregation, data warehousing represents one of the most critical elements of an informatics solution and includes both data storage and data extraction. Healthcare companies have traditionally utilized department‐specific data marts that keep information relatively separated, but have begun implementing enterprise‐wide data warehouses in order to pull data from multiple departments and functions. The data warehouse is a basic element of an informatics platform with technology mainstays such as IBM and Oracle maintain dominant positioning. However, it also represents an area of innovation and differentiation. Health Catalyst, which recently raised almost $50 million from Kaiser Permanente, Indiana University and several other capital partners, is successfully deploying a “late‐binding” model of data warehousing. This allows for enterprises to combine disparate data sources quickly without locking the data warehouse into a predetermined model. Decision Support Decision support involves extracting multiple types of data – clinical, financial, operating, supply‐chain, human resources, among others –used to support and enhance decision‐making and includes business intelligence solutions as well as clinical analytics. As

part of decision support, cost and quality reporting includes both clinical reports and financial reports. An informatics platform enables the combination of all this data to understand the relational impact of changes in one area on other areas. Business intelligence and clinical decision support have traditionally been the realm of global data providers, such as Thompson Reuters (now Truven), Reed Elsevier, Hearst Business Media, Wolters Kluwer, and the large health insurance companies, such as UnitedHealth and Aetna. Recently, however, we have witnessed smaller participants, such as Explorys, Wellcentive, Atigeo, and Dimensional Insights, emerge on the analytics landscape and compete very effectively. Explorys completed a private placement last June (Austin Ventures, Santé Ventures, Heritage Group and Foundation Medical Partners) and resides between the data warehouse and the business intelligence tools. The company has gained market share through its network architecture and ability to manage large data sets quickly and at a relatively low cost. Similarly, Wellcentive has developed an informatics platform to enable smaller healthcare systems, large physician practices and ACOs to collect, normalize and exchange data. Wellcentive’s Advance Outcomes Manager solution includes a proprietary interface engine to streamline the exchange of healthcare data with a wide variety of other HIT systems and vendors. The company raised capital in 2011 and 2012 (Harbert Investment Partners and Noro Moseley Partners) and is well positioned to serve smaller ACOs and the broader healthcare provider market. Communication The final component of the informatics platform includes the communication of the analysis to all of the relevant primary healthcare constituents. The channels of communication include web portals, such as patient portals, physician portals and payor portals, as well as mobile platforms, messaging and social media. Communication among physicians and other caregivers, as part of overall care coordination, has become an increasingly valuable component of the overall healthcare strategy, given the proposed risk

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sharing models. Care coordination platforms are emerging, but vendors must also compete with proprietary, embedded systems. Patient communication is also rapidly growing in importance, as healthcare companies seek to improve their patient engagement tools, measure clinical outcomes and monitor and react to the emergence of the consumer patient as a growing market force. JEGI expects M&A activity in this segment to increase, as innovative solutions gain greater traction and large HCIT vendors seek to acquire

rather than build their own solutions. Exhibit 12 highlights some of the recent transactions in this segment. Given the large amount of capital that’s been invested in this area recently, we would expect M&A activity to increase substantially over the next several years. In our view, we are in a “gold rush” era for healthcare informatics with enormous dollars at stake and relatively few established competitors.

Exhibit 12: Informatics Precedent Transactions


5/9/2013 Altegra Health, Inc. TransUnion Corp., Healthcare Analytics Business

Healthcare Analytics unit (HCA) provides health plans, providers, and accountable care organizations (ACOs) access to a robust and dynamic l ibrary of quality metrics, performance analytics, and care management tools.

3/5/2013 Allscripts Healthcare Solutions, Inc.

dbMotion, Inc. dbMotion provides a strategic platform for care coordination and population health management that integrates discrete patient data from diverse care settings into a single patient record. It provides a longitudinal clinical data repository with semantically normalized patient data, point of care tools, a physician portal, population tools and an analytics gateway.

2/27/2013 Practice Fusion, Inc. 100Plus 100Plus provides interactive health application that leverages clinical datasets to show personalized predictions of future health.

2/19/2013 Liaison Technologies, Inc. Ignis Systems, Inc. Liaison Healthcare Informatics provides clinical data integration solutions for health laboratory and radiology orders and results in the US. Liaison will add Ignis’ EMR‐Link solution to its integration and data management services portfolio in order to offer customers a more robust set of solutions for health information exchange.

2/6/2013 The Advisory Board Company 360Fresh, Inc. 360Fresh Inc. provides clinical analytics over medical records.1/31/2013 Optum (UnitedHealth) Humedica Humedica, Inc., a health care informatics company, provides software‐as‐a‐

service‐based clinical business intelligence solutions to the health care industry.

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Exhibit 12: Informatics Precedent Transactions ‐ continued


1/29/2013 MEDecision, inc. (Health Care Service Corp)

Cerecons / Unlimited Innovations, Inc.

Cerecons is the leading provider of SaaS‐based care coordination and population management technology solutions to ACOs and other risk‐bearing provider organizations. The company provides innovative and scalable care coordination workflow, analytics and reporting, and point‐of‐care clinical content software to more than 70 leading provider organizations, coveringover 1.5 million patients.

1/8/2013 Blue Health Intelligence (Blue Cross BIntelimedix Intelimedix is a leading provider of market‐differentiating solutions in healthcare analytics with customizable solutions in employer group reporting, mass customized communications, medical cost containment and outsourced analytics powered by a common analytic platform.

1/7/2013 athenahealth, Inc. Epocrates, Inc. Epocrates, Inc. provides subscriptions for mobile drug reference tools and electronic health records to healthcare professionals, and interactive services to the healthcare industry.

11/5/2012 HearstCorporation Milliman Care Guidelines, LLC Milliman Care Guidelines LLC independently develops and produces evidence‐based clinical guidelines and software used by more than 2,200 clients including 1,200 hospitals and seven of the eight largest U.S. health plans.

11/1/2012 Deyta, LLC Amplicare LLC Amplicare is a provider of decision support tools and marketing software solutions for hospice and home care organizations.

10/17/2012 Wolters Kluwer Health Health Language, Inc. Provides software for managing and updating standard and localized healthcare terminology.

10/1/2012 Conifer Health Solutions, inc. InforMed LLC InforMed is an information management and services company that uses technology and proprietary data analysis tools to help healthcare providers, self‐insured employers and payers lower costs, while improving care for their patients.

9/24/2012 McKesson, inc. MedVentive, inc. MedVentive is a leading provider of population and risk management tools that drive transparency in healthcare cost and quality.

9/13/2012 athenahealth, Inc. Healthcare Data Services LLC Healthcare Data Services LLC provides ACO management, patient care, and data analysis software.

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Market Catalyst #3: The Emergence of the Consumer Patient

With more individuals realizing that they cannot stand on the sidelines as passive participants in their own health treatment, patients have become better consumers and are applying greater scrutiny to the care they receive. As part of this change, innovative companies are leveling the information imbalance in healthcare and enabling the consumer patient to better determine price, quality and ultimately value. CMS includes patient surveys as part of the quality evaluation, giving patients the ability to provide feedback on their care delivery process. All of this is giving rise to increasing consumerism in healthcare, and JEGI believes this trend will not only continue, but also shape healthcare over the next several decades. Emerging Transparency Imperative Pricing and quality transparency solutions have emerged onto the healthcare landscape and are enabling consumers to compare price and quality more effectively. Companies such as change:healthcare, Healthcare Blue Book and Castlight Health have developed pricing transparency tools, while other companies such as Vitals and Health Grades have developed critical mass with their physician review websites. JEGI expects consumer health information (CHI) platforms to achieve increased success, but only for those who are able to really deliver value to its targeted population. Venture investors have already taken notice and are investing in CHI platforms. According to Mercom Capital Group, healthcare IT firms raised nearly half a billion dollars of venture capital in 1Q2013, over 40% of all money raised in 2012, primarily in consumer‐focused companies, such as those offering mobile health, telehealth, social health and scheduling solutions. Healthcare Going Social Still in its infancy, social media is becoming an important factor in healthcare, as patients use the distributed information of the Internet to evaluate providers and proposed treatments. Healthcare companies are also using social media to gain a better understanding of their customers and/or patients. As an

example, Intermountain Health is reportedly seeking patients’ permission to use their Facebook pages as a means of developing a deeper profile. JEGI believes that social media will become a powerful force in the healthcare market, as patients discover their “voice” in determining value in this market and healthcare companies seek better engagement with their target audience. In addition to such social media mainstays as Twitter and Facebook, several healthcare specific platforms have begun to achieve scale. Emerging pure play companies such as Symplur are focused on helping healthcare companies improve their communication through social media. Similarly, Doximity and KevinMD are a social media websites that enables physicians to communicate with each other and consult specialists. The company raised approximately $17 million in 2012 from Morganthaler and existing investors Emergence Capital Partners and InterWest Partners. Similarly, social media platforms such as Patients Like Me also enable patients to communicate with each other and build social communities around specific conditions and disease states. Social media, therefore, enables healthcare companies to communicate to their consumer patients, as well as monitor and obtain feedback from the patient population. Although HIPAA laws will undoubtedly limit what a medical provider can communicate to patient, it has quickly become a powerful medium for physicians and other providers to disseminate health information. Enhancing Communications with Patients Healthcare systems, device companies and pharmaceutical companies have made patient engagement a priority, due to the financial implications of patient surveys, value based purchasing and the cost of readmissions. In addition, achieving Stage 2 of Meaningful Use requires patients to use the information they are offered from a provider, placing greater emphasis on physician‐patient interaction. Consequently, healthcare companies are seeking new and better ways to develop a line of communication with their patients, users and customers. JEGI believes that this will require delivering true value to the patient, rather than simply using them as a targeted ad base. Patient portals,

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health and wellness tools and prescription compliance tools are all examples of patient engagement solutions that are becoming more widespread. In addition, employers are also trying to engage their employees on health & wellness issues. In a recent study conducted by Buck Consultants and WorldatWork, 73% of employers have a health engagement strategy in place. Over 60% of the companies surveyed have implemented a “gamification” for employee health including games, contests, and lotteries, and over 50% have a social media platform for this purpose.(6) JEGI continues to believe that the healthcare industry has just scratched the surface of communication among the various healthcare constituents. Individuals are taking a more active role in their health and are seeking value in the marketplace, while patient engagement has become a vital element for healthcare companies. Forward‐looking healthcare companies are already developing an integrated and comprehensive communication strategy that includes a variety of channels, similar to those being developed by marketing services companies in the retail and B2C marketplace.

While numerous companies compete in this market, there is not a single dominant player that has developed an end‐to‐end solution with patient communication, patient portals, consumer health information and social media monitoring analytics across multiple healthcare markets. While insurance companies have spent millions of dollars to develop patient engagement expertise, healthcare providers and other participants have not. In September 2011, OptumHealth (UnitedHealth Group) acquired Connextions to enhance its patient engagement and analytics capabilities. Meanwhile, IMS has continued to expand its capabilities in the pharmaceutical market wither several acquisitions in the past few months. The company’s recent acquisition of social media analytics platform Semantelli represents a good example of healthcare companies realizing the value of social media. Based in Bridgewater, NJ, Semantelli offers a set of cloud‐based tools that automate the collection of insights into consumer and physician behavior and sentiments. In the healthcare provider market, a few companies such as PatientPoint have used M&A to expand its patient communication capabilities. JEGI believes that given the large incentive to develop a successful patient engagement strategy, healthcare media and technology vendors will continue to add to their capabilities through acquisitions. The table below highlights some of the recent transactions in this area.

Exhibit 13: Patient Engagement & Communication Precedent Transactions


4/30/2013 IMS Health, Inc. Semantelli , Inc. Semantelli Corporation operates as a social media analytics company that develops a Web based l istening platform to healthcare organizations worldwide.

3/12/2013 IMS Health, Inc. Appature, Inc. Appature Inc. creates enterprise marketing solutions to the healthcare industry. Appature's software helps companies analyze multiple proprietary streams inside a company, providing some of the most valuable healthcare information pharma companies can get.

3/5/2013 Allscripts Healthcare Solutions, Inc.

Jardogs, LLC The Jardogs FollowMyHealth™ patient engagement platform enables patients to actively participate in their care, critical for at‐risk populations, and empowers consumers with the solution they need to monitor and optimize health status.

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Market Catalyst #4: Transformation of the Healthcare Insurance Market Despite recent delays in some of the government’s mandates, the healthcare insurance market is also undergoing dramatic change as a result of the ACA. Corporations and individuals are seeking cost effective health insurance coverage to meet the requirements set forth under the ACA. Seventeen states are setting up their own insurance exchanges for individuals and employers in order to meet this requirement. As a result, JEGI believes that the healthcare

insurance market will begin to function more like other retail‐oriented insurance markets, such automobile and casualty insurance. In order to achieve this transformation, healthcare insurance companies will need to develop several new capabilities, including insurance exchange technology and marketing services capabilities.

Information technology will play a key role in the creation of healthcare insurance exchanges and the delivery of insurance information to the consumer. While this market is still in its early

Exhibit 13: Patient Engagement & Communication Precedent Transactions ‐ continued


2/25/2013 Cerner Corporation PureWellness, Inc. PureWellness, Inc. provides an online wellness platform to individuals and corporations for the administration and management of corporate wellness programs and health plan member engagement strategies.

1/3/2013 Welsh, Carson, Anderson & Stowe GetWellNetwork GetWellNetwork, Inc. provides interactive patient care solutions for hospitals in the United States. The company entertains, educates, and empowers patients using the bedside television in the hospital, mobile devices, Web, or cable television at home.

11/30/2012 M/C Ventures, North Cove Partners Patient education wallboard business of Euro RSCG (Havas)

The Patient Education Wallboard Business of Euro RSCG Impact was acquired by AccentHealth, LLC. The business provides point‐of‐care patient education services through wallboard.

11/30/2012 Physicians Interactive, Inc. InfoMedics InfoMedics, Inc. provides patient feedback solutions for pharmaceutical companies and the healthcare community. The company offers various solutions to close the communication gap between patients and their prescribing physicians.

11/29/2012 HealthTap, Inc. Avvo, Inc., Health Business Health Business of Avvo, Inc. comprises healthcare technology including expert network and patient communities offering answers to health questions by U.S. doctors and dentists.

11/12/2012 Healthiest You Corporation Health Now MD, LLC Health Now Md LLC provides a network of doctors for healthcare services by linking patients and physicians via phone, email, or Webcam video in the United States. The company’s physicians review medical records, diagnose common conditions, recommend treatment plans, provide second opinions, and prescribe non‐controlled medications when appropriate.

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stages, several companies have recognized the opportunity and have developed insurance exchange technology. Optum Health (UnitedHealth Group) acquired Quality Software Systems (QSSI) in November 2012. QSSI recently signed a $145 million contract from the Department of Health and Human Services to build a data hub for the national health insurance exchange.

IT vendors are also developing technology for private insurance exchanges. Alegeus Technologies, a Lightyear Capital backed benefits and payment solutions provider, acquired Workable Solutions, a provider of health insurance exchange technology solutions, in April 2013 to establish a presence in this market. The company will launch its WealthCare Marktplace, an integrated private exchange and defined contribution platform. Similarly, Liazon Corporation has created its Bright Choices Benefits Exchange to enable employees and their families to purchase customized healthcare benefits. The company recently raised $18.2 million to expand nationwide and develop new products with Bessemer Venture Partners and Fidelity Bioscience participating in the round alongside existing investors, Bain Capital Partners and Rand Capital. Second, JEGI believes that healthcare insurance providers will have to utilize marketing technology to better understand their audience. Because healthcare insurance companies have traditionally sold their products through the employer channel and have not had to engage in marketing and customer acquisition, they will need to acquire the skills and marketing technology to address the changes in the market, just as

automobile and property & casualty insurance companies have implemented technology solutions to drive customer acquisition. As discussed in JEGI’s Enterprise Marketing Management report in February 2013, a new class of software applications has emerged to help automate and integrate digital marketing activities, from customer acquisition through retention and loyalty programs (http://www.jegi.com/sites/default/files/industry_report/Enterprise_Marketing_Management.pdf). Exhibit 14 shows the JEGI Enterprise Marketing Management Stack, a system that helps businesses effectively manage and measure ongoing interactions with their customer. Since most healthcare insurance providers do not have all of the necessary technology and capabilities necessary to move to a B2C model and drive retail customer demand through an integrated marketing strategy, we believe there is need that must be filled.

Exhibit 14: JEGI Enterprise Marketing Management Stack

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The dramatic changes in the healthcare insurance market are forcing insurance providers to acquire a new set of capabilities and develop, either through internal development or acquisitions, technology solutions that address these changes. JEGI believes that providers who cannot adjust to this new business environment will become obsolete and, like other areas of healthcare, information technology is a critical piece of this transition.

Some insurance providers may develop their technology internally, but others will look to acquire the technology and capability set in order to accelerate the process. M&A activity in this area has begun and we expect other transactions to occur in the near‐term. We have included a table below that highlights some of the recent transactions.


4/24/2013 Alegeus Technologies, Inc. Workable Solutions LLC Workable Solutions is a leading provider of private health insurance exchange technology.

2/6/2013 Genpact Ltd. JAWOOD Business Process Solutions, LLC

JAWOOD Business Process Solutions, LLC provides information technology (IT) consulting services to the healthcare payer industry.

1/22/2013 Connecture, Inc. DRX, Inc. DRX (formerly known as DestinationRx) provides of Web‐based shopping and enrollment systems for consumers of Medicare health plans, The company's technology powers the Medicare.gov PlanFinder and Online Enrollment Center and serves many of the nation’s largest health plans, pharmacy benefit managers, brokers and senior advocacy groups.

11/5/2012 Optum (UnitedHealth) Quality Software Systems, Inc. QSSI has a broad set of IT solution offerings, including health IT, enterprise software development, security and privacy services, and critical IT infrastructure solutions. QSSI has successfully performed over 200 private and public sector contracts and task orders and manages over 400 IT professionals.

8/31/2012 ABS Capital ConnectYourCare LLC ConnectYourCare, LLC operates consumer‐directed healthcare (CDH) administrative platform that provides healthcare account administration services.

5/13/2012 Towers Watson & Co. Extend Health, Inc. Extend Health provides online health insurance exchanges for supplemental Medicare coverage.

Exhibit 15: Insurance Technology Precedent Transactions

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Conclusion Through the ACA, healthcare reform is having a profound impact on the current healthcare market, and these changes are in turn creating opportunities for emerging healthcare IT and informatics businesses. While the healthcare industry has traditionally been slow to adopt innovative technology solutions, healthcare companies are realizing the need to quickly adapt to the new environment or struggle for survival. Adding to this, the federal government has put financial incentives (and penalties) in place to accelerate the adoption of new HCIT solutions such as EHRs and healthcare information exchanges. Evidence‐based medicine and value‐based purchasing will require

companies across the industry spectrum to not only collect data, but use it in their decision making process. We believe that M&A will continue to be a key strategy in the healthcare IT and informatics market and the pace of activity will accelerate, particularly in selected markets. Healthcare customers are seeking innovation, and this is more likely to come from emerging companies that the incumbent vendors. These are exciting times for nimble healthcare IT companies that can meet the needs of the changing market.

Market Catalyst Near‐Term Impact HCIT Solutions

Increasing Patient Volumes at Lower ▪ Emphasis on operating efficiency ▪ Business intelligenceReimbursement Rates ▪ Need for improved work flow and patient ▪ Clinical work flow

throughput ▪ Logistics and patient throughput ▪ Demand for physicians and medical ▪ Telemedicine

professionals ▪ Healthcare human capital management▪ Solutions that reduce medical errors and

readmission rates

Growing Demand for Informatics and Data‐ ▪ Integrated informatics platform ▪ Data Warehousedriven Decision Making ▪ Business intell igence and clinical decision ▪ Clinical decision support

support ▪ Outcomes analytics▪ Social media as a business tool ▪ Natural language processing

▪ Unstructured data analytics

Emergence of the Consumer Patient ▪ Cost and quality transparency ▪ Pricing and quality tools▪ Patient engagement is critical ▪ Consumer health information▪ Increased value of social media ▪ Patient portals

▪ Prescription compliance▪ Social media analytics

Transformation of Healthcare Insurance ▪ Consumer focused delivery model ▪ Exchange technology▪ Infrastructure ▪ Insurance information and analytics ▪ Valued‐added services

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Endnotes: (1) HIN Blog. http://hin.com/blog/2012/11/27/infographic‐how‐technology‐impacts‐healthcares‐future/ (2) Carmen DeNavas‐Walt, Bernadette D. Proctor, Jessica C. Smith, Income, Poverty, and Health Insurance Coverage in the United States: 2011 Current Population Reports. September 2012 (3) Henry J. Kaiser Family Foundation Medicare‐to‐Medicaid Fee Index (4) Modern Healthcare, May 20, 2013. “Riding the Wave.” (5) “Extracting Value from Chaos,” IDC IView, EMC Corporation (June 2011) (6) Buck Consultants/Xerox Corporation press release, March 26, 2013. Buck Consultants, “Emerging Technology in Health Engagement.”

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