Allscripts tapping into Microsoft's cloud technology to focus on innovation

Allscripts' focus on innovation and its cloud partnership with Microsoft will enable the company to meet providers' needs, CEO Paul Black said. (seb_ra/Getty Images)

Allscripts is leveraging its partnership with Microsoft to invest in innovation and get a leg up on competitors as healthcare providers look to shift to the cloud.

Back in July, the health IT company announced an extension of its partnership with Microsoft to use the tech giant's cloud technology to enhance its electronic health record (EHR) software.

The new five-year strategic partnership will support Allscripts’ cloud-based Sunrise EHR, making Microsoft its cloud provider and opening up co-innovation opportunities with a focus on developing smarter, more scalable technology, Allscripts said.

As the company looks for opportunities in the community hospital market, Allscripts' cloud-based EHR delivers a single patient record, including clinical and financial workflows for both inpatient and ambulatory settings of care, Allscripts CEO Paul Black said during the company's third-quarter earnings call Thursday.

RELATED: Allscripts sells care coordination business to WellSky for $1.3B

"Because the EHR is hosted, we can offer improved cost of ownership and shorter implementation times compared to the implementation of traditional on-premise solutions. This is a big step forward for Allscripts and an example of the benefits from our Microsoft partnership," he said.

Healthcare providers are increasingly focused on reducing the total cost of ownership, increasing physician satisfaction and advancing innovation and digital solutions for consumers, Black said.

"Clients are looking to create or enhance their consumer experience creating a digital front door. Many clients were on a three-year journey to accomplish this. In some cases, due to COVID, this was accomplished in three weeks," he said, noting that providers are focused on adding telehealth, self-scheduling and self-pay capabilities for patients.

Allscripts' focus on innovation and its cloud partnership with Microsoft will enable the company to meet providers' needs, according to Black.

"The innovations we are delivering here, technology innovation from on-premise to cloud, take advantage of the Azure product features for artificial intelligence, cybersecurity and scale. These innovations will make the human experience for physicians easier," he said.

The Chicago-based company reported third-quarter 2020 revenue was $402 million, down 9% from revenue of $444 million in the third quarter of 2019.

RELATED: Allscripts sells EPSi business to Strata Decision Technology for $365M

Allscripts' third quarter missed Wall Street estimates as analysts forecast revenue of $420 million for the quarter.

Bookings were $187 million in the third quarter of 2020, compared with $236 million in the third quarter of 2019. Contract revenue backlog totaled $4.4 billion as of Sept. 30.

Income from operations was $9 million and included $13 million of severance and other restructuring charges primarily related to the company’s cost reduction actions executed during the quarter.

Allscripts reported a third-quarter profit of $1 million compared to a loss of $6 million in the third quarter of 2019.

On a per-share basis, the company said it had zero earnings per share in the third quarter of 2020 compared with earnings loss per share of 3 cents in the same period a year ago.

Earnings, adjusted for non-recurring costs and stock option expense, came to 20 cents per share compared to 17 cents in the third quarter of 2019. That topped Street estimates of 18 cents per share for the quarter.

"I am pleased with our execution even as the typically seasonally weaker third quarter was impacted by challenges related to the ongoing pandemic," Black said. "Our successful margin improvement initiatives delivered increased earnings and cash flow in this uncertain environment."

RELATED: Allscripts, Microsoft strike 5-year cloud partnership to enhance EHR software

During the third quarter, the company generated $53 million of operating cash flow and $27 million of free cash flow. These cash flow numbers include the headwind from both $16 million of payment Allscripts made to the Department of Justice (DOJ) during the quarter as well as cash restructuring charges, said Rick Poulton, Allscripts' president and chief financial officer.

The payment to the DOJ is part of a $145 million settlement involving an investigation into Practice Fusion's compliance with the Anti-Kickback Statute and HIPAA. Allscripts acquired Practice Fusion for $100 million in January 2018,

Allscripts is selling its care coordination business to WellSky for $1.3 billion. Boston-based CarePort Health, which Allscripts acquired in 2016, develops software that connects acute and post-acute providers and payers.

The company also closed the sale of its EPSi business to Strata Decision Technology for $365 million. EPSi is a provider of financial decision support and planning tools for hospitals and health systems.

The sale of EPSi and the upcoming sale of CarePort will create a heightened focus on Allscripts' core business while providing significant capital to reduce leverage and return cash to shareholders, Black said during the earnings call.

The two transactions will generate approximately $1.25 billion in after-tax proceeds, Poulton said.

Allscripts will use the sale proceeds to reduce debt, invest in growth for its solutions and support significant share repurchases.