PACS firms unite as Merge buys DR Systems

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One of the oldest names in imaging informatics is going by the wayside as PACS firm DR Systems has been acquired by Merge Healthcare. While the DR Systems name will be retired as part of the deal, founder and CEO Dr. Murray Reicher has been named chief medical officer (CMO) of Merge.

The deal unites two midlevel PACS providers and gives Merge additional scale to compete with larger multinational firms in the imaging informatics space. It also expands Merge's geographic footprint to DR Systems' core market in the Western U.S., while broadening the combined company's portfolio of intellectual property.

The deal was finalized on February 25, according to Michael Klozotsky, vice president of marketing at Merge.

Founded in 1992

DR Systems was founded in 1992 by neuroradiologist Reicher along with another brain imaging specialist, Dr. Evan Fram. Reicher and Fram said they founded the company out of dissatisfaction with existing PACS software available at the time.

The closely held company charted its own course over the years, remaining fiercely independent even as the rest of the radiology industry consolidated. The company gained a reputation for high levels of customer satisfaction, as evidenced by a string of top rankings in KLAS reports, as well as for its aggressive defense of its patents for PACS software.

Through the years, Reicher maintained his active role with the San Diego firm, serving as a frequent speaker at industry events and publishing peer-reviewed articles on imaging informatics. He assumed the position of CEO again earlier this year after the retirement of longtime chief executive Rick Porritt.

In announcing the acquisition, Merge cited the broad array of healthcare information technology software that will be offered by the combined firm, including DR Systems' eMix image-sharing service, RIS software, and cardiology and pathology offerings. Both companies also offer traditional PACS and RIS/PACS software and, indeed, have long been competitors in the acute care and ambulatory markets, Klozotsky said.

Merge cited the high customer satisfaction ratings of the combined entity, with No. 1 ratings according to KLAS surveys for cardiovascular information systems, hemodynamic monitoring software, and RIS software. Merge also plans to offer its iConnect Network services, including exam preauthorization, through DR Systems' installed base.

In addition to adding Reicher as CMO, Merge said it plans to keep DR Systems' San Diego headquarters open as its West Coast regional office. DR Systems employs some 180 people, according to Wikipedia. Merge will also maintain support for DR Systems' core software platform, continue with current implementations, and support and advance all product lines, the company said.

Merge expects the deal to be accretive to earnings per share under nongenerally accepted accounting principles (GAAP) in 2015 and future years. Merge financed the deal through a combination of $20 million in cash on hand and $50 million in cash raised from the sale of shares of recently issued preferred stock.

The deal is the latest in a long string of acquisitions that Merge has made over the years as it grew from a niche firm offering data connectivity software to perhaps the largest independent PACS firm. Other acquisitions have included Amicas, Cedara Software, Confirma, RIS Logic, and eFilm Medical.

Merge's most recent acquisition is designed to give the combined entity the heft to move forward in a healthcare industry where size increasingly matters.

"As healthcare continues to consolidate, scale is very, very important," Klozotsky said. "This allows Merge to really operate on an entirely different level of scale."

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