Apologies in advance for the long post:Since December 2021 the...

Apologies in advance for the long post:


Since December 2021 the SP has generally headed in one direction and the sentiment on here naturally reflects that trajectory. Whilst there’s more this an 1 reason for the decline, many have flagged the Silverlink (SL or PAS) acquisition as the stand-out mistake.

Thinking through some posters’ concerns, I couldn’t help but share a few. We’re now 2.5 years on from the acquisition and I was asking myself things like:

1. Why has ALC has been unable to sell SL to a single new customer? (Though I do note that extension options exist to sell it to UHS and South Tees.)

2. Wasn’t the purpose of acquiring a PAS to enable us to compete in EPR opportunities? So, to date, we’ve spent $61m to ‘buy’ a $21.6m contract expansion with South Tees…and they haven’t even committed to using our PAS!

With that in mind, I’ve spent the past while thinking back on the SL purchase and wondering how to evaluate it so far?




The Purpose of Acquiring SL:

To be fair to ALC, they went to some lengths to communicate their rationale in a special webcast on 7 December 2021(https://www.alcidion.com/asx-announcements/investor-webcast-recordingacquisition-of-silverlink-software-and-capital-raise/). The webcast went for 33 minutes and revealed there were several reasons for acquiring the company.


The short version:
see slide 12 (pictured below, https://www.alcidion.com/asx-announcements/investor-presentation-acquisition-and-capital-raising/).





The medium version:
ALC wanted to remove a headwind (their lack of a PAS) thus enabling them to bid into more opportunities by offering a modular EPR. It also reassured their 2 key customers (South Tees and Dartford), whilst providing cross-selling opportunities to SL’s 12 customers. This move aligned with NHS market dynamics such as new NHSX funding for digital health, a shift toward integrated EPR solutions, 63 trusts looking to replace legacy EPR’s and the growing importance of ICSs in decision making.


Just to clarify what many will already know: an integrated EPR is an all-in-one solution. A best of breed solution is where ‘the best’ of each function is purchased and stitched together. Integrated solutions are slowly dominating the market. ALC’s modular EPR (which was enabled by the PAS acquisition) means it can be sold as both.



The long, clunky, referenced version:
1. SL gives ALC a “cloud-native modern and modular EPR to rival global incumbents." Simply put, their offering is more competitive. See 2min 20sec, 24:30.

2. They can use this to bid into more EPR opportunities, see 30:30 (some trusts require a PAS to even be considered) and so ALC’s total addressable market grows. Their existing market share also grows (12 new customers) along with cross-selling opportunities. See 3:30, 5:25, 18:00, 24:30 and slide 19.

3. There were 63 trusts that have legacy EPRs that ALC was particularly aware of. See 15:10, slide 14. In addition, the Digital Aspirant Plus Program was of particular interest. See 24:50.

4. “We ultimately believe in the next few years we will start to see some real increasing demand for modern patient systems in Australia and New Zealand.” See 16:00. And a follow-up question on this at 26:50; essentially ALC will work toward being able to offer SL in ANZ. The next 12-18 months was given as a timeframe.

5. The existing users of SL have not gone down the monolithic EPR path and were therefore an ideal target for ALC’s modular EPR. See 25:20

6. The acquisitions removes a headwind; in the prior 12-18 months there were opportunities ALC had to forego because they lacked a PAS. Also, their key customers (South Tees and Dartford) were asking what future offering ALC might have re. a PAS. See 29:15

7. See 21:10-22:00 for a summary.)



How has ALC gone in pursuing these goals?

Having established (from the webcast) what ALC wanted from the acquisition, I infer the following 7 criteria questions and answers:



Q1: In purchasing a PAS, has ALC been able to sure-up itskey customers (South Tees and Dartford)?

Yes.

South Tees is ALC’s first EPR win and its 10+ year commitment speaks for itself.

Post the acquisition, Dartford and Gravesham has signed an extension in April 2022 and then again in March 2024. Reading the 2024 renewal notice (https://bidstats.uk/tenders/2024/W07/816775588), I would also be very surprised if we aren’t appointed their EPR supplier in future.

Interestingly:
1. The original 2019 contract was worth $2.1m over 5 years = $0.42m p/a
2. The 2022 extension was worth $3.0m over 5 years = $0.6m p/a
3. The 2024 renewal was worth 3.4 over 3 years = $1.13m p/a.


Q2: Of the 63 trusts mentioned, how many are still an opportunity for ALC?

The 63 figure comes from slide 14 of the acquisition webcast. Incorrectly, I always took it to mean that in 2021 there were 63 opportunities for ALC. As a result, I was worried when reading that the NHS had hit its 90% EPR rate; how have so many opportunities slipped by without a single PAS sale? My mistake – that’s not what ALC said (and I can now appreciate why the 90% figure is actually not very indicative).

Having reviewed the presentation, the 63 figure is clearly explained.






It’s meant to show that the market is trending toward integrated EPR solutions (as opposed to bespoke and best-of-breed ones). There were 63 trusts using legacy solutions as of December 2021 (not to mention the additional 10% of trusts with no EPR). So the acquisition enables us to offer an integrated solution (or a best-of-breed one, as the customer chooses) and thus our modular strategy keeps pace with the market. See the following: HTN Trends Series: EPR Trends in the UK - htnIn short, the acquisition has modernised ALC’s offering and the sales opportunity is bigger than the few trusts still lacking an EPR.






So where are we in 2024 regarding customers seeking an EPR?

1. There are currently around 10-15 trusts without any EPR in place.

2. There are around 10 running a bespoke EPR (noting some of these may have no intention of replacing such).https://www.linkedin.com/posts/paulbrown579_which-are-the-most-widely-used-eprs-in-nhs-activity-7201234964695130112-F1g_?utm_source=share&utm_medium=member_android

3. There are many more trusts running legacy EPRs that will replace these sooner or later. (George Eliot NHS, Central and North West London NHS, Coventry and Warwickshire NHS and some of the trusts within the Dorset ICS to name but a few.)

Obviously I don’t know precisely how many opportunities remain for ALC but over the next few years I believe there’s a lot more than the 20 or so trusts often cited (e.g. see jcmleng’sMarch/April S#rawman post ‘#Quantifying the ALC NHS Opport’ – a really excellent post but I believe ALC has more opportunities).


Q3: Which NHS trusts were awarded funds under the Digital AspirantPlus program? What EPR providers did they select?

7 trusts were selected for NHSX's Digital Aspirant Plus program (digitalhealth.net).

I don’t want to place too much weight on this program. KQ simply noted that trusts that qualified for it were likely be suited to ALC’s offering (which has possibly arrived on the market too late to capitalise.) Pleasingly, there are many more programs out there (e.g. see the hyperlinks in the above website’s final paragraph).

The short answer:

Of the 7 trusts, only 2 have used the program’s funding to select a new supplier. The remainder are either going through procurement or plan to in future.

The long version:

1. Liverpool University Hospitals NHS: no EPR in place and they were not at the procurement stage as of September 2023. (https://www.liverpoolft.nhs.uk/application/files/2117/0014/0373/FOI_9352_-_Patient_Administration_System__Electronic_Patient_Record.pdf.) They did advertise the following in April 2024 (https://beta.jobs.nhs.uk/candidate/jobadvert/C9287-24-0843)

2. Doncaster Bassetlaw Teaching Hospitals: legacy SystmOne, contract from 2017 to March 2024. (NHS: https://www.whatdotheyknow.com/request/epr_and_mdi_information_request_117/response/2518179/attach/2/FOI%203997%20Response%20Letter.pdf?cookie_passthrough=1). Procurement timeframe unclear though they did advertise for an EPR program director in April 2024 (https://beta.jobs.nhs.uk/candidate/jobadvert/C9272-24-0270).

3. East Sussex NHS: no EPR, currently seeking an EPR with no timeframe for procurement (https://www.esht.nhs.uk/wp-content/uploads/2023/11/Disclosure-Log-23-743.pdf)

4.East Suffolk and North Essex: selected Epic in November 2023 (https://www.digitalhealth.net/2023/10/east-suffolk-and-north-essex-pick-epic-as-preferred-epr-supplier/ - note the poster's comment at the bottom on too).

5. Humber Teaching NHS: announced a 10 year deal with SystmOne in November 2023 with a 5 year extension option. (https://htn.co.uk/2023/11/28/humber-teaching-reveals-epr-provider-following-a-dedicated-period-of-procurement/)

6. Surrey and Borders Partnership NHS: legacy SystmOne 2015 to 2023, contract renewed annually. Planning to commence a tender process as of March 2023. (https://www.sabp.nhs.uk/application/files/2216/7767/3877/12511_Electronic_Patient_Record_System_Contract.pdf.) I note they don't plan to replace their current system so the tender process may be a foregone conclusion?

7. Sussex Community NHS: legacy SystmOne contract worth $1.0m p/a. Contract from 2014 to July 2022, extended for 2 years to July 2024. Currently in the procurement process. (https://www.whatdotheyknow.com/request/epr_system_query_161 and https://www.whatdotheyknow.com/request/clinical_systems_information_req_313#incoming-2424922)



Q4: Has ALC made any progress in selling SL into the ANZ market?

Unknown but they did qualify that this was a ‘one day, down the track’ option.



Q5: What additional ALC products (if any) have been sold to the 12 NHS trusts that use SL?

I suspect none. I’ve seen no evidence of cross-selling and I would expect them to share such.



Q6: Of the 12 SL users, have any acquired EPRs? Do they plan to replace SLasa result?





The short version:
8 of the 12 trusts have acquired an EPR. 4 of these predate the 2021 acquisition. 2 of the 8 EPRs are bespoke. 1 trust is confirmed to be removing SL. 4 of the 12 are planning to procure an EPR.


The long version:
1. North Cumbria Integrated Care NHS: no EPR, out to tender as of November 2023 (https://www.whatdotheyknow.com/request/epr_and_mdi_information_request_97/response/2524569/attach/html/4/FOI%202324%200668%20Final%20Response.docx.html)

2. Liverpool Heart and Chest NHS: selected Altera in 2022. As of 2021 they stated they had no plans to replace the SL PAS. The contract was to expire in June 2023 but was renewed for 3 years in April 2022

3. Royal Wolverhampton NHS: selected System C EPR in 2023, no plans to replace SL as of 2021 (renewed for 2 years in 2023, expiring early 2025). I suspect this will be replaced with System C’s Careflow PAS.

4. The Walton Centre NHS: bespoke EPR, extended in 2020, expires March 2025, evidence of them wanting to double-down on their existing solution. (See pg. 7 https://www.thewaltoncentre.nhs.uk/Downloads/strategy/Digital%20substrategy.pdf. They also believe their current digital infrastructure – which includes SL – is fit for purpose, see under ‘Where we want to be’ on pg.6 of the above link.)

5. Northumbria NHS: no EPR and their 2023-2028 strategy does not mention acquiring one. (Strategic Plans for the Future :: Northumbria Healthcare NHS Foundation Trust). Rather, pg.13 vaguely lists “making progress digitally” as a goal. SL PAS expires in November 2024 although their CEO voiced support for best of breed solutions in 2021. Given I couldn’t find any information on them planning to procure a solution, I suspect they may be building a bespoke solution over time (just a guess).

6.Moorfields Eye Hospital NHS: no EPR, renewed for 3 years in April 2022 to 2025, advertised for an EPR deputy director in April 2024 (https://www.moorfields.nhs.uk/about-us/join-our-team/vacancies/support-services/support-services-role-d). Procurement business case approved in June 2024 (Ideal Health on LinkedIn: #moorfieldseyehospital#digitaltransformation #healthcareinnovation…). They are a perfect customer for ALC as they want an EPR that allows them to retain their current Noting software. See under ‘Complication’, Moorfields | Outline Business Case for EPR Procurement. (ideal-health.co.uk).

7. Royal National Orthopaedic NHS: selected EPIC EPR in June 2024 (https://uk.linkedin.com/jobs/view/epr-business-change-analyst-epic-at-royal-national-orthopaedic-hospital-rnoh-nhs-trust-3945535041), unclear if SL will be replaced.

8. Hillingdon NHS: selected Cerner EPR November 2023 and will replace SL (https://thh.nhs.uk/news-events/countdown-continues-for-new-cerner-rollout-956/).

9. Mid Cheshire NHS: selected MediTech in mid-2022 (Trusts unveil innovative electronic patient record plan :: Mid Cheshire Hospitals NHS Foundation Trust (mcht.nhs.uk), unclear if SL will be replaced.

10. Dorset County NHS: legacy EPR, renewed the PAS for 3 years in late 2022. Are part of the Dorset ICS made up of 4 NHS trusts. The ICS is seeking to procure an ICS-wide solution. (https://www.uhd.nhs.uk/uploads/about/docs/bod/2022/9._future_pas_epr_for_dorset_briefing_note.pdf. Note: this link includes an estimation of what the value of an EPR contract could be over 15 years, see the ‘Funding and Costs’ section). The other trusts in the ICS currently use different systems (SystmOne, MobiMed (Ortivus) and legacy System C).

11.Central North West London NHS: has run SystmOne’slegacy EPR from January 2015 - 2025 (https://www.whatdotheyknow.com/request/epr_and_mdi_information_request_21/response/2525370/attach/html/4/24%20FOI%20002%20RESPONSES.pdf.html), updated the system around 2022 (https://tpp-uk.com/news/central-north-west-london-nhs-foundation-trust-goes-live-with-systmone-epma/), unclear whether SL is still used.

12. Harrogate and District NHS: ran a bespoke EPR from 2016-2023 and renewed to 2025 (https://www.whatdotheyknow.com/request/epr_and_mdi_information_request_59#incoming-2518527). They conducted EPR pre-engagement information sessions in Sept-Oct 2022, and hired an EPR project manager in February 2023 (https://uk.linkedin.com/in/neilcrossley). More pleasingly they advertised this in April 2024: https://beta.jobs.nhs.uk/candidate/jobadvert/C9421-24-0365.



Q7: Have the market dynamics shifted again? Has ALC’s modular EPR strategy missed the boat?

No.

The government purse and public healthcare don’t move that quickly for a start. (The budgetary process usually meansthat plans announced several years back are only now getting funded.) These observations align with both lived experience and the HY and Q3 webcast commentary from KQ that NHS funding and tender activity had finally arrived.

Ultimately, the market dynamics were shifting (slowly over the 2010s) whereby best-of-breed EPRs were steadily being replaced by integrated solutions. The SL acquisition is actually ALC adapting to this change. This was clearly spelled out in the 7/12/2021 webcast, (e.g. see slide 14 and under ‘Miya Precision + PCS (EPR Strategy)’ on slide 27, both pictured below, respectively).








So has ALC had enough time to prove their EPR offering?

No. (Just because 2.5 years have passed doesn’t mean a lot of opportunities have been lost or even presented themselves.)

If I made that complaint I’d be misunderstanding the business and market I’d bought into. (If you’re sitting on the sidelines, not sure whether to buy into ALC, consider the slow, plodding nature of selling IT into public healthcare. This opportunity cost will always be a problem for ALC investors; even more so with bulky EPR contracts.)


The slowness stems from:

1. The budgetary process meaning several years delay between funding announcements and funding delivery;

2.Funding for Digital Health is often prioritised below other areas of healthcare and can be creatively reallocated when needed (e.g. ‘pushed back in the estimates’);

3. The tendering process (once it’s finally commenced is lengthy. A sense of Dartford’s procurement timeline is available in the following, under ‘Other Information’. Insight Direct UK LTD (Alcidion UK Limited) – EPR Services [VEAT] (bidstats.uk));

4. Once a preferred supplier is announced, contract negotiations take around 6 months on average whilst extension options can be left in limbo for years;- The market is incredibly competitive and ALC is the ‘new kid on the block’ looking to disrupt the status quo. We’re at a ‘second-mover’ disadvantage;

5. Because ALC arrived late, many potential customers are ‘out of the game’ for long periods of time until their legacy EPR contracts expire. (Norfolk Community Health and Care NHS SystmOne contract from 2007 to 2026https://www.whatdotheyknow.com/request/clinical_systems_information_req_296/response/2410074/attach/html/4/Response%20FOI%2023%200174.xlsx.html, and Essex Partnership University NHS, SystmOne contract from 2009 to 2026, https://www.whatdotheyknow.com/request/epr_and_mdi_information_request_49/response/2531194/attach/html/5/EPUT.FOI.24.3296.pdf.html.);

6. Because so many customers are ‘on the side line’, thereare limited opportunities to bid on at any one time. It’s senseless to use the 2.5 years since acquisition as a measuring stick if there have only been negligible selling opportunities.


If there’s any criticism to be made of ALC in the EPR space, it’s that they didn’t move fast enough (though this is somewhat ignorant of the difficulty of public acquisitions.) There were waves of Digital Aspirant funding announced from February 2020 onwards (see Digital Aspirants - Key tools and information - NHS Transformation Directorate (england.nhs.uk). We bought a PAS in December 2021 (it seems we had had this goal in mind for a while, see the webcast at 11:00). Once we did acquire SL, at least 6 months were needed to deploy it to the cloud (see 23:15 and 28:20). So it’s not really until FY23 that we started competing in the modular EPR market.

(If you look back at various 2022 and 2023 webcasts, KQ made comments trying to explain away the lack of EPR traction. In hindsight, she’d have been better off just being honest and saying it’s stalled. I appreciate it’s hard to get people outside the industry to appreciate why you’ve done an acquisition at a big discount and 2 years later you’re saying ‘Yeah, not much has happened since, but it’s coming.”)

I’m also reminded that the EPR market is incredibly competitive and the best system (which I believe is ALC’s edge alongside its modular nature) doesn’t always win. (Assuming we bid for it, I suspect we lost the $91m AUD joint Derby and Chesterfield EPR to Nervecentre as they could better facilitate staff rotations to deal with rostering shortages (New Electronic Patient Record system one step closer as preferred supplier identified | Latest news | University Hospitals of Derby and Burton NHS (uhdb.nhs.uk), see paragraph 6). This is despite the fact that Nervecentre is not an integrated solution, it lacks a PAS function and can only support a lower HIMSS (Healthcare Information and Management System Society) rating. (See: google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwiE65aXzOSGAxXk1zgGHUaCGOQQFnoECAcQAQ&url=https%3A%2F%2Fnervecentresoftware.com%2Fwp-content%2Fuploads%2F2023%2F01%2FNervecentre-EPR-Platform-Brochure-09-22.pdf&usg=AOvVaw3jMDF-7Xq7Q5Bx7jwQ7Uoa&opi=89978449)



So what now?

I’m waiting for the preferred supplier announcements forecast in the Q3 update (whilst bearing the opportunity cost). FY25 will give us our first meaningful sample of tender results by which to evaluate ALC’s modular EPR and thereby the SL acquisition.

In the meantime, we can and should ask hard questions of management. In the upcoming July quarterly webcast, there’s a range of questions I’d like to ask. (They’re neither hard nor profound, I’m just curious.) Obviously the webcast moderator won’t take 7 questions from one person. So, I’ll end with a list of questions that I will not be asking at the quarterly. I invite anyone else to steal these and ask them if you so wish.

I’d love to hear any questions others may be asking at the quarterly too?


Potential Webcast Questions:

1. Long-term, does Alcidion plan to add scheduling and medications capabilities to its modular EPR offering?

2. Of the 12 NHS trusts that used Silverlink when acquired in 2021, how many remain our customers and has Alcidion had any success in cross-selling to them?

3. In the coming months, do you expect the PAS contracts for The Walton Centre NHS and Northumbria Healthcare NHS to be renewed?

4. Is Alcidion now in a position to offer Silverlink in the ANZ market? If yes, what progress has been made?

(Apologies again for the long post.)