The History of Merge Healthcare: What to Know

In the 1980s, imaging devices like CT scanners and MRIs were becoming standard pieces of medical equipment. However, hospitals and other medical centers faced a problem. Machines by different manufacturers did not communicate well. This lack of compatibility made it difficult to pass scanned images to printers and offsite workstations.

Merge Healthcare opened in Milwaukee, WI offering a solution to this issue. The company developed software and connective hardware that assisted communication across devices, an innovative solution that streamlined the workflow between imaging and diagnosis.

Quick Facts

Year Founded
1987
Founders
William C. Mortimore
Industry
Medical Imaging Software
Headquarter
Milwaukee, WI
Key People
William C. Mortimore, Richard A. Linden
Notable Products
MergeNet, FUSION Server
Website
https://www.ibm.com/watson-health/about/merge-healthcare

The company was private until its IPO in 1997. Merge continued to grow, acquiring several medical imaging and information companies along the way.

At the same time, its products became more advanced, expanding from imaging resources to medical information software. In 2002, the company introduced its FUSION Server, a comprehensive image management system.

An accounting scandal damaged the reputation of Merge Healthcare in 2006. This shakeup led to the resignation of the CEO and several board members and a deep drop in stock price. The company survived and recovered over the next few years. In 2015, IBM purchased Merge for $1 billion. Its resources are now part of the Watson Health Division of IBM.

The Founding of Merge Healthcare: How It Happened

Merge founder William C. Mortimore started his company to solve the problem of limited communication between medical devices from different manufacturers. For example, to print an image, technicians might have to record the data onto a magnetic tape and then load that tape into a printing device. The lack of clean communication delayed the diagnostic process.

Mortimore developed a physical converter along with software that would enable direct communication between incompatible devices. In 1987, the Bernard Mitchell Hospital in Chicago was the first medical facility to try out the new solution. 16 other hospitals had adopted the system by 1991.

medical imaging
Merge Healthcare played an integral part in the modern-day medical imaging used today.

Merge Healthcare Through the Years

1987-1997

In 1987, the company started with a system to make medical imaging workflow more efficient. Over the next 10 years, the operation expanded from a basement startup to a full-grown company with 55 employees. In 1997, the IPO raised over $10 million in stock sales.

1998-2006

In the early 2000s, improved networking solved many of the incompatibility issues that the Merge System addressed. The company moved from a sole focus on imaging machines to creating medical information software products.

These years also represent significant growth for Merge. A series of acquisitions improved their position as a top software provider in the medical industry. They also opened international branches in Japan and China. However, a 2006 accounting scandal led to the resignation of the CEO and other board members and made the future of the company uncertain.

2007-2015

In 2008, an influx of cash from an investment group and a change in leadership improved the health of the company. Finally, in 2015, IBM purchased Merge in a $1 billion acquisition deal.

What is the Most Important Invention from Merge Healthcare?

The Merge System

The original Merge System invented by William C. Mortimore in 1987 is the device that launched the company. This first product was a combination of software and a piece of connective hardware that allowed machines from different manufacturers to communicate. The device streamlined the medical imaging process, but improved networking technology made it unnecessary within a few years.

How did Merge Healthcare Make Money?

Merge Healthcare made money by providing solutions for the data-rich medical imaging sector. In the 1980s and 90s, the company created medical information software intended to streamline the process of getting medical images to workstations and patient files.

As more medical facilities moved to digital patient files in the 2000s, the company provided software to aid the process. Tools like MergeNet and FUSION Server improved image management as more facilities embraced filmless imaging.

Merge Healthcare Acquisitions

Interpra Medical Imaging Network – $600,000 – 1999

The acquisition of Interpra Medical Imaging Network by Merge took place in 1999 for $600,000 in stock. This small company focused on workflow and medical information software solutions.

eFilm Medical Inc. – $8 million – 2002

Merge acquired this Toronto-based company for $8 million in 2002. eFilm specialized in medical imaging workstations and viewers.

Aurora Technology Inc – $869,000 – 2002

Also, in 2002, Merge used stock and cash in the acquisition of Aurora Technology of Lake Bluff, IL. The cost of purchasing this smaller imaging company was $869,000. The purchase expanded the customer base for Merge.

RIS Logic Incorporated – $2.72 million – 2003

In 2003, Merge purchased RIS Logic Incorporated for $2.72 million. This company was known for producing software for radiology information systems.

AccuImage Diagnostics Corp .- $6 million – 2005

AccuImage Diagnostics developed software for visualization and imaging. Purchasing this company for $6 million supported Merge’s efforts in the digital imaging space.

Cedara Software Corp. – $393.4 million – 2005

The acquisition of Cedara Software in Toronto was an important step for Merge. The stock-swap deal was unique because Cedara was a larger company with a higher market value. This transaction doubled the size of Merge Healthcare.

IBM – $1 billion – 2015

The IBM corporation acquired Merge Healthcare in 2015. This acquisition gave the technology company access to databases with millions of medical images to improve IBM’s medical AI resources. Merge is now part of the Watson Health Division.

Merge Healthcare Notable Controversies

2006 Accounting Scandal

In January of 2006, the board of directors at Merge received an anonymous letter that pointed to accounting irregularities around the merger with Cedara Software. Investors filed several class-action lawsuits that claimed the company deceived them about the revenue generated from the deal. After an investigation, the company had to resubmit its financial reports from 2002 to 2005. In the wake of this scandal, several executives resigned including the CEO, Richard A. Linden, and the company’s founder, William C. Mortimore.

It took a couple of years to recover from this scandal and return to growth. Eventually, IBM would acquire the company for $1 billion in 2015 and bundle it into its Watson Health Division.

Merge Healthcare: Complete Guide – History, Products, Founding, and More FAQs (Frequently Asked Questions) 

What is Merge Healthcare?

Merge Healthcare is a development company focused on medical imaging and information management. Currently, IBM owns the resources of this company.

When was Merge Healthcare founded?

Merge Healthcare started in 1987. At this time, its only product was the Merge System, a software tool that allowed imaging devices from different manufacturers to share information.

Who founded Merge Healthcare?

William C. Mortimore founded Merge in his basement in Milwaukee, Wisconsin.

When did Merge Healthcare go public?

Merge Healthcare went public in 1997. Its IPO raised around $10 million for the growing company.

What is Merge Healthcare known for?

Merge Healthcare produced software focused on medical imaging management. Its first products improved communication between imaging scanners, printers, and other devices. As technology changed, they developed solutions for digital imaging management.

Who bought Merge Healthcare?

IBM purchased Merge Healthcare for $1 billion. The company is now part of the Watson Health Division.

When did IBM acquire Merge Healthcare?

IBM acquired Merge in 2015 in part to gain access to the extensive collection of medical images owned by the company.

  • Available here: https://www.encyclopedia.com/reference/dictionaries-thesauruses-pictures-and-press-releases/merge-healthcare
  • Available here: https://www.ibm.com/watson-health/about/merge-healthcare
  • Available here: https://techcrunch.com/2015/08/06/ibm-buying-merge-healthcare-for-1b-to-bring-medical-image-analysis-to-watson-health/
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