Four Electronic Health Record Plays and Strategies

 |  Includes: CSC, ECLP, PER, STRM, WMT
by: Dan Grundig

While debates will continue as to the motives for and future effects of the healthcare IT initiatives in the American Recovery and Reinvestment Act of 2009 stimulus bill signed by President Obama in February, the essential cannot be denied: the widespread transition to Electronic Health Records (EHRs) is imminent.

Wal-Mart’s (NYSE:WMT) Sam’s Club and eClinicalWorks’ recently announced partnership to provide EHR systems to independent physician practices is a sign that the EHR revolution is quickly gaining momentum. Perhaps just as important as the financial incentives the government is offering to providers who make the switch prior to 2015 are the penalties that will begin to accrue for physicians who have not made the full transition by 2015. GroupOne healthsource sums it up well in its recent post The Stimulus Bill, the EHR, and the Physician - Frequently Asked Questions:

Beginning in 2015, physicians not demonstrating meaningful use of an EHR will face penalties in the form of reductions to their Medicare fees schedule reimbursement rates. The penalty will equal 1% in 2015, 2% in 2016, and 3% in 2017 and each subsequent year. Under the bill, the Secretary can increase the penalty to 5% if fewer than 75% of eligible physicians are not utilizing an EHR by 2018.

Recent Seeking Alpha posts and the 3/24/2009 Wall Street Journal article Stimulus Funds for E-Records Augur Big Windfall for Small Health Firms have discussed a number of publicly-traded firm in the EHR business, including: ATHN, CERN, CPSI, GE, MCK, MDRX, and QSII. Most of these firms either already have or are likely to gain strong footholds in the EHR market, but there are several additional players in the game that have yet to be mentioned:

EHR Software Providers

Eclipsys Corporation (ECLP)

Eclipsys Corporation is a provider of advanced integrated clinical, revenue cycle and performance management software, and professional services that help healthcare organizations improve clinical, financial, and operational outcomes. It has developed and licensed software and content that is designed for use in connection with many of the key clinical, financial and operational functions that healthcare organizations require. It also provides professional services related to its software. These services include software implementation and maintenance, outsourcing, remote hosting of its software, as well as third-party healthcare information technology applications, technical and user training and consulting. It markets its software to healthcare providers of many different sizes and specialties, including community hospitals, large multi-entity healthcare systems, academic medical centers and physician practices. In January 2009, the Company acquired Premise Corporation. [Source: ECLP’s business description.]

Note: CERN names ECLP as a ‘Key EHR Competitor’.

Streamline Health Solutions Inc. (NASDAQ:STRM)

Streamline Health Solutions, Inc. (Streamline Health) is a healthcare information technology company focused on developing and licensing software solutions that improve document-centric information flows and complement and enhance existing transaction-centric hospital healthcare information systems. The Company's workflow and document management solutions bridge the gap between paper-based processes and transaction-based healthcare information systems by electronically capturing document-centric information from disparate sources, electronically directing that information through vital business processes, and providing access to the information to authenticated users (such as physicians, nurses, administrative and financial personnel and payers) across the continuum of care. [Source: STRM’s business description.]

IT Consulting Companies

Investors looking to take another EHR angle should consider not only EHR software providers, but also IT consulting companies with significant healthcare IT offerings.

One company which stands out is Perot Systems Corporation (NYSE:PER). Perot counted 47% of its 2008 revenues from its Heathcare IT division, which offers EHR deployment services for physicians, and a wide range of other healthcare IT services.

Computer Sciences Corporation (NYSE:CSC) has integrated the operations of First Consulting Group, a healthcare/life science IT consulting firm which CSC acquired in 2008. CSC’s Health Services division deploys EHR systems from major vendors, and offers an array of healthcare and life science IT services to health plans, government, and other clients.

Investment Considerations

Now that investors are confident good times are ahead for EHR designers and consultants, how can they decide which companies have the greatest chance of winning contracts? Just a couple of the factors that are worth considering before placing any bets:

In which target market(s) does a firm compete: Independent physician practice, small-midsize hospital, or large hospital/health system? Once this has been determined, what type and size EHR provider has this customer segment historically favored? Also, it may be smart to try to understand which providers are likely to make the transition earliest, on average.

Since the transition to electronic systems is a major undertaking, and many healthcare providers will make the switch reluctantly, it follows that they will choose suppliers who offer superior consulting, training, and ongoing support services.

Disclosure: No Positions