McGuessin’: The McKesson Strategy Guessing Game

It’s been two and a half years since McKesson executed a major shuffle of the executive suite in its Technology Solutions business, and we’ve now seen what I’d consider to be the first major announcement since that change: The company is halting development on its Horizon inpatient clinical and revenue cycle products and doubling down on Paragon to the tune of $1B in new R&D investment over the next two years.

In the discussion that followed this announcement, several themes have emerged:

  • This change is part of a broader initiative.
  • ICD-10 and Meaningful Use precipitated a decision to rationalize the portfolio.
  • The migration from Horizon’s Oracle platform to Paragon’s Microsoft platform will reduce customers’ TCO.

All of these reasons for the change make sense at first glance. But here’s what’s not being said:

  • Epic is mopping the floor with these guys.
  • Epic is winning on inpatient/ambulatory integration, not clinical/financial integration.
  • Epic doesn’t seem to be bothered by its TCO problem.

My conjecture is that the MPT executive team is making a tactical retreat from the bloodbath it’s been enduring in Epic’s target market and is attempting to rally around Paragon, which is thriving in the sub-300-bed segment. These customers appear to be a bit more price sensitive, a bit less interested in following the herd, and a bit less dismissive of loose inpatient/ambulatory integration. If true, this approach by McKesson seems like it would have a higher likelihood of success than would standing toe-to-toe and trading punches with the champ.

A final data point that may add weight to this argument: At last week’s ASHP show in New Orleans, McKesson commanded a gargantuan booth on the main aisle in the exhibit hall. Immediately under the company name and logo on the front of the booth was a mock-up of a hospital outpatient pharmacy. The prominent signage advertising the solution? “COMMUNITY HOSPITALS”

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