This afternoon, Surescripts announced that its subsidiary, Kryptiq, will be taken private via a management buy-out led by Kryptiq founder and CEO, Luis Machuca. Surescripts will maintain a minority stake in Kryptiq going forward and the two companies will continue to collaborate through a shared services agreement.
We see this as a very positive move for both companies.
Surescripts and Kryptiq have a long history together going back to 2010 when Surescripts took a minority interest in Kryptiq. At that time, Surescripts was strictly an eRx facilitating service. The company, however, saw an opportunity to leverage its growing network to potentially become the de facto National Health Information Network (NHIN) exchanging not only eRx requests but also clinical data, thereby becoming the messaging backbone for physicians.
Kryptiq has been profiled in our HIE Market Trends Reports as a company that took a novel approach to HIE, with a bottom-up strategy, focusing on physicians’ messaging needs (threaded messaging was one of their hallmarks). Surescripts turned to Kryptiq to help with its overarching NHIN strategy, beginning with that equity stake in 2010 followed by acquiring Kryptiq outright in 2012.
Over the last three years, Kryptiq has been able to maintain a high level of independence within Surescripts and the management team in place prior to the acquisition, by and large still remains. Surescripts has done a nice job of integrating some of Kryptiq’s core technology into its network. Likewise, under Surescripts, Kryptiq has continued to build out high value applications, chief among them an EHR-agnostic care management platform: CareManager.
Good Reasons for a Split
Despite the value that Surescripts and Kryptiq were both able to gain in being under one corporate structure, the market is simply moving too fast for each entity to meet their specific objectives.
Surescripts, as of late, has had some senior management changes and with such changes there is often a reassessment of strategy. Surescripts, first and foremost, wants to be a high volume transaction engine for the industry. Their eRx transaction order flow is likely greater than all HIEs (public and private combined) in the U.S., with some six billion plus annual transactions. The company also has created probably the most complete physician/prescribers directory at over 800,00 and can connect to over 700 different EHRs. Some pretty impressive numbers that Surescripts will leverage in the future with its record locator service (RLS). We’ve said it before, we’ll say it again, Surescripts has become the de facto, lightweight HIE in the U.S.
But numbers at these scales require a completely different type of operational structure then that for a company building high-value applications, which is Kryptiq’s core competency. Rather than scale, Kryptiq’s model is to build solutions that continue to expand in functionality to meet specific customer requirements. It’s not about broad scale, one size fits all, but bordering more on a bespoke solution that requires deep customer engagement, collaboration and often co-development.
In order for both companies to be successful with their respective strategies, it no longer made sense to have both under the same operational umbrella. By parting amicably, the two organizations will be able to accelerate the execution of their core programs and initiatives rather than be bogged down in what at times was likely very conflicting priorities.
In my call with Kryptiq CEO Luis Machuca yesterday, I made it a point to both congratulate him and his team on the fine work they’ve done to date on CareManager and their future independence but also gave caution.
The care management market remains mostly greenfield today, but there are countless developments by solution vendors of all sizes that are ongoing to address this opportunity. (Don’t say I didn’t warn you that you’ll hear a lot about care management from vendors at HIMSS’15!)
Luis’s team must continue to move fast to thrive. Now, back under private ownership, they have that independence to move quickly to address this growing market opportunity.