Merge eFilm plans to acquire developer of info systems products

July 23, 2003

Deal would provide RIS technology and access to installed baseIn keeping with its goal to support the needs of its PACS customers, Merge eFilm has signed a definitive agreement to acquire RIS Logic, a privately held company based

Deal would provide RIS technology and access to installed base

In keeping with its goal to support the needs of its PACS customers, Merge eFilm has signed a definitive agreement to acquire RIS Logic, a privately held company based in Cleveland that develops and supports software for radiology information systems. Milwaukee-based Merge has offered to pay $2.725 million in cash and 772,000 shares of its common stock, as well as to issue replacement employee stock options. The deal is expected to close in July, contingent upon certain conditions and due diligence.

The acquisition is seen as a strategic step in Merge's evolution toward providing a comprehensive RIS/PACS solution, according to Rich Linden, Merge eFilm president and CEO.

"The combination of Merge eFilm and RIS Logic creates a unique company that offers our customers a single-source integrated solution combined with professional services that specifically target what we often refer to as the underserved market within healthcare: imaging centers and small to medium-size hospitals," he said.

In this market segment, Merge eFilm has focused heavily on image management. The company introduced its Fusion Server 1.0 as an all-in-one PACS, teleradiology, and Web access solution at the 2002 annual RSNA meeting (SCAN 12/25/02). This software-based alternative to traditional PACS offers image and information management tools that can be scaled to meet healthcare organizations of any size. The modular system allows the addition of software applications that provide such functionality as archiving, image serving, and Web distribution; visualization, including the e-Film workstation; and a comprehensive work environment that supports workflow.

RIS Logic has focused on developing radiology information systems for outpatient imaging centers. The goal behind the technology, as with any RIS, is to automate and integrate radiology workflow. Its CS Version 2.0 software, released in early June, covers virtually all aspects of RIS.

The combined software will deliver patient registration and order entry; DICOM and IHE connectivity; image archiving and distribution; radiology workflow management; embedded dictation, transcription, and voice-to-text recognition; image and radiologist report distribution; integrated billing and financial management; and clinical business and financial reporting, according to Linden.

The two products already talk to each other on a basic level, he said. Their compatibility has been demonstrated in a handful of imaging centers where the two products have been installed under separate contracts. Efforts will soon be under way to develop a road map of how the complementary technologies might grow together technologically.

The deal joining the two companies will provide Merge eFilm not only with complementary RIS technology but also with access to the installed base managed by Ohio-based RIS Logic, comprising some 64 imaging-center customers operating more than 200 imaging centers. Imaging centers typically buy RIS before PACS. This makes the RIS Logic customer base a potentially rich environment for the sale of Fusion PACS. A look back at the last nine months of PACS sales underscores this opportunity, as the number of sites purchasing Fusion has been split about evenly between imaging centers and hospitals, according to Linden.

"Clearly we are finding success and traction in this common space," he said. "With that said, the unshared customers represent a target market for cross selling. We have already outlined some sales strategy plans that will begin to approach those opportunities so that the number of shared customers can steadily grow as part of our integration plan."

Merge eFilm plans to run RIS Logic as a wholly owned subsidiary. Very little is expected to change in terms of the acquired company's structure. The management team will remain largely intact, with Dan Quigg continuing as president and CEO of RIS Logic. The newly acquired subsidiary would continue operating from its Cleveland facilities.

"They will execute their business plan as is," Linden said. "And we will integrate operationally where appropriate."

If the deal goes through as expected, much of this integration will focus on the sales side, as the two companies conduct joint presentations of a combined RIS and PACS to prospective customers. RIS Logic, which now sells entirely through a direct sales force, might also take advantage of value-added resellers that market Merge PACS products, although whether and how this might be done still needs to be determined, Linden said.

"The timing has yet to be determined, but clearly our initial focus will be from a direct sales perspective," he said.