NZ’s Orion buys Microsoft e-health unit

Orion Health chief executive Ian McCrae

When Microsoft’s in the news, it’s usually because it’s gobbling up a smaller competitor.

Today, it’s New Zealand’s Orion Health doing the buying.

As first flagged by NBR on October 13, Orion has signed an agreement to purchase Microsoft’s Hospital Information System (HIS) software assets, and the related PACs (Picture Archiving and Communication Systems) and RIS (Radiology Information System) products previously marketed under the Microsoft Amalga brand. The New Zealand company will sell them as Orion Health HPM (Health Process Management) suite.

50 new staff
The deal will see Auckland-headquartered Orion take on around 50 developers based in Asia NBR understands (as of last week, Orion had 480 staff - making it easily New Zealand's largest software company. Microsoft has an Amalga team in Thailand). Ultimately, the new acquisition could lead to up to 200 new hires.

The acquisition was pitched to media this morning as an "Asia Pacific" deal. Orion chief executive Ian McCrae told NBR this was a reference to the fact his company would initially target the Asia Pacific market with Orion Health HPM.

"There is one version of the HIS/RIS/PACS assets and Orion owns this and the global rights," Mr McCrae said. "There is no regional qualification to the deal."

The Orion boss would not put a value on the deal, but said it would more than triple his company's software assets, and make it a "full line" health vendor.

Orion-Microsoft marketing alliance
The two companies have also signed to agreements to co-market their health information exchange (HIE) and data aggregation and analysis products: Orion Health HIE and Microsoft Amalga Unified Intelligence System (UIS).

The deal represents something of a victory for Orion. In 2009, shortly after launching Amalga (based on its purchase of the 40-person health software company Azyxxi), Microsoft trotted out an analyst from Ovum who said "Amalga will be worrying news for its closest competitors, which include dbMotion and Orion Health.”

The creation of regional heath information exchanges has become a huge business in the US - thanks to e-health initiatives being targeted as a major recipient of government stimulus spending. 

Under the Hi-tech (Health Information Technology for Economic and Clinical Health) Act, passed by Congress under the broader ARRA (American Recovery and Reinvesment Act), $US22 billion was ear-marked for “advance the use of health information technology” as part of President Barack Obama’s push to move the US hospitals, doctors and other medical providers to e-records by 2014.

Orion has won contracts in Maine, Louisiana and Alaska. The company is in the running for other states. As baby boomers age, and governments and private healthcare providers worldwide seek more efficient information systems to help deal with rising costs, Orion sees strong revenue growth ahead.

Towards $1 billion, and beyond
Privately held Orion, which does not publicly post its accounts, had revenue of $90 million for its 2011 fiscal year.

On top of its growing HIE business in the US, the company has recently landed major contracts  with the Singapore and Australian governments (as part of consortia).

Last week, Mr McCrae told NBR he anticipated revenue of $120 million to $140 million for 2012, plus a further $10 million through affiliated company Heathlink. 
 
Mr McCrae saw the healthcare software sector consolidating to six or seven players worldwide over the next five years, each with revenues between $2 billion to $8 billion.
 
Orion would be one of those six or seven remaining players, he said - meaning it would have to surge past its existing $1 billion annual revenue growth target.
 
Mr McCrae said while health information exchanges were being developed in many countries, New Zealand risked falling behind.
 
From next year, Australians would be able to access their own health records online, thanks to the single e-record system being developed by an Accenture-led consortium (or which Orion is a part). In New Zealand, records remained fragmented on a mix of digital and paper systems.
 
Mr McCrae is the largest holder in Orion, with a 63.49% stake.

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7 Comments & Questions

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Well done Ian.

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Yes, WELL DONE!

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Nice to see Orion buying Microsoft product, as the author mentioned it usually the other way! Well done Orion!

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Chris,

Many Kiwis involved in New Zealand’s health sector would argue with Mr McCrae’s position that New Zealand risks falling behind due to a fragmentation of digital and paper systems. In fact, the leader of the National IT Health Board has been actively promoting the current and ongoing evolutionary process driving towards a shared patient record.

As one of the participating vendors in the NZ shared patient evolution, that also includes the company highlighted in your article, has been effectively driving from a regional clinical repository for healthcare information towards a federated model across all of New Zealand.

Recent articles that refer to this initiative can be found at:

http://ehealthspace.org/casestudy/new-zealand-embraces-healthcare-records

http://www.pulsemagazine.com.au/index.php?option=com_content&view=articl...

Another reference for how far along is the state of the NZ health sector is the Commonwealth Fund 2009 survey ranking New Zealand first for advanced electronic health information capacity among primary care physicians and second for use of electronic medical records.(1) And, a 2010 Commonwealth Fund study ranks New Zealand first in overall quality of care, coordinated care and patient-centred care.(2) This is despite the fact that the average spend on health per head of population in New Zealand is about 16% less than the UK (source: www.ehealthnews.eu).

Regards,

Noel Paggao
Sysmex New Zealand Ltd

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