Medfusion seeks millions in damages from former partner Allscripts

dranii@newsobserver.comMay 15, 2014 

Medfusion, which late last month terminated its partnership with medical software company Allscripts over a payment dispute, has followed up with a lawsuit seeking millions of dollars in damages.

Cary-based Medfusion filed the complaint Thursday in Wake County Superior Court. It accuses Allscripts of violating its contractual obligation to provide its customers with Medfusion’s patient portal technology after it acquired competing software.

“We were contracted as their only preferred portal vendor to be included by default in every sale. Virtually every customer should have been ours,” Medfusion CEO Steve Malik said in an interview. “Instead, they were marketing a competing product.”

The complaint, which seeks actual and punitive damages, also contends that Allscripts owes it $4.5 million in payments and was responsible for an order backlog that cost Medfusion more than $10 million.

An Allscripts spokeswoman said via email that the company doesn’t comment on pending litigation.

Medfusion, a privately held company with about 120 employees, is tackling a company that’s much bigger. Allscripts, a publicly traded company based in Chicago, has 7,000 employees worldwide, including more than 1,600 in Raleigh.

At issue is a contract the two companies signed in 2009 that made Medfusion’s patient portal technology available to about 30,000 physicians who use Allscripts’ medical softtware.

Medfusion’s technology enables patients to make appointments, pay bills, request prescription refills and perform a host of other tasks over the Internet. It also enables physicians to share medical charts with patients, a requirement of the federal government’s “meaningful use” program that provides financial incentives to doctors who use electronic health records.

Although it terminated its partnership with Allscripts last month, Medfusion is providing those 30,000 Allscripts physicians with free portal service through the end of this month while hoping to sign them up as customers. It’s offering more services plus lower fees for those willing to make a commitment that’s longer than month to month.

Malik said Medfusion has received “a tremendous response” from those physicians but declined to provide any details.

“We want to cross the goal line before we really make those numbers fully transparent,” he said.

Those 30,000 Allscripts physicians represent a huge chunk of Medfusion’s customer roster of more than 65,000 physicians. So the stakes are high for Medfusion.

On the other hand, in recent years – stemming from an August 2011 amendment of their contract – Allscripts has been receiving 55 percent, and Medfusion has been receiving 45 percent of the net revenue generated by their partnership, after certain costs were deducted.

Given that Medfusion won’t have to share revenue from the Allscripts customers it signs up, Malik contends that Medfusion will end up with more revenue when the dust settles.

However, according to the lawsuit, Allscripts has been making “false and misleading statements” to its customers in hopes of inducing them to sign up with its competing portal offering, FollowMyHealth.

“We have had to set the record straight a number of times with prospective clients,” Malik said.

Allscripts acquired the company that created FollowMyHealth in February 2013 and, according to the lawsuit, then started to promote its proprietary service rather than Medfusion’s portal in violation of the contract.

That produced “an immediate and significant drop” in customer adoption of Medfusion’s portal, the lawsuit claims.

Ranii: 919-829-4877

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