Editors' Note: This article covers one or more micro-cap stocks. Please be aware of the risks associated with these stocks.
Many of you may have read about the ICD-10 challenge that is coming to the healthcare industry along with Obamacare. By October 1, 2014, all healthcare providers and payers will be required to "code" utilizing an international ICD-10 system of coding that will replace the old ICD-9, which is used in the United States presently. ICD-10 will expand the number of codes from about 14,000 to 76,000. Proper coding will require the knowledge of biology, anatomy, chemistry and other subjects that will lead to about 900 hours of training for new coders and 250 hours of training for existing coders as well as 10 hours of training for clinicians. This is going to be a huge undertaking.
This transition offers a company like CodeSmart Holdings, Inc. (OTCQB:ITEN) a great opportunity at market share as it positions itself to become the lead trainer for the medical community in the United States.
CodeSmart Holdings is considered a "microcap healthcare stock," which recently came on the trading scene in May 2013. The company is almost entirely focused on ICD-10 training and certification because of the change taking place. The company has put together a series of programs that caters to each individual within the healthcare sector that needs training. It has also positioned itself as the "go to provider" of ICD-10 certification, compliance and consulting.
Using a combination of web-based classes as well as partnerships with universities across the nation; "CodeSmart University" will be able to reach numerous market segments. "CodeSmart University" is the company's online training program that teaches existing and new medical coding professionals the new ICD-10 coding systems.
- Existing healthcare professionals will be looking to update their skills.
- New students will be looking to enter the field.
There is an incredible ease of accessibility to the University that has such comprehensive training and more and more healthcare professionals will be turning to CodeSmart for the transition.
As would seem appropriate in a market like this, the company is forming partnerships with major healthcare networks and educational institutions.
CodeSmart will also be the exclusive strategic partner for ICD-10 education and consulting services to the University of Central Florida's Regional Extension Center. UCF-REC serves more than 3,000 physicians. This is an example of the type of alliances the company has set up to provide services. To give you an idea of how important this company will be to the transition that is going to be taking place for the new coding, here is a list of recent alliances the company has put together since the 20th of August:
- Provider of ICD-10 Coding Education for Freedom Medical Doing
- It will partner with Millennium Healthcare Inc. to market its ICD-10 Education and Consulting services for medical practices and hospitals
- Provide ICD-10 consulting services to Communicare Health Centers
- Assist ICD-10 training and materials for Find-A-Code
- Partner with IOS Health Systems for ICD-10 consulting services
As recently as the first week of September, CodeSmart is working with My Data Guru and The College Network in a direct marketing campaign which they believe will develop 1500 to 2000 "student leads" per month. Through the system, students will be able to register and The College Network will provide the opportunity for students to finance their tuition. Both of these companies that CodeSmart is working with have a very successful track record in generating new students for other online universities.
The revenue projections stated above are based on conservative numbers. This is a huge market with a unique quality. Not only is the market potential very large, since it is a "required change" the medical community will be seeking CodeSmart to provide training.
Everyone has to buy but only a handful can deliver the proper training.
CodeSmart is the only publicly traded company that I know of that is focusing on and leading ICD-10 training. Based upon projections, one should refer back to a recent article written by Equity Options Guru on Seeking Alpha. The author does a good job putting a valuation on the company with a conservative twist for the short term.
ICD-10 Training is a Long-Term Revenue Stream
The transitional problems that are going to be created with the move from ICD-9 to ICD-10 will create huge revenue opportunities for decades to come. Presently with "only" 17,000 codes, doctors themselves have problems keeping up with the 95% accuracy standards. Imagine the challenge with educating the present core with 141,000 new designations! The need for additional programs such as consulting, outsource coding, servicing and overseeing clinical documentation will create more jobs and opportunities than is imaginable. The need to stay compliant with such a huge change will create a whole industry in itself that CodeSmart Holdings will be the leader in.
Recent Revenue Developments
Like all new companies bringing a "new product" to market, CodeSmart has yet to show a positive cash flow. The recent financials can be seen on Yahoo Finance. In this unique market, I would expect revenue to increase drastically as we inch closer to October 2014. We may be a year away, but healthcare providers are realizing they need to begin the transition to ICD-10, and this must be addressed now.
In a recent letter to shareholders, Chairman & CEO Ira Shapiro cited a statistic from Forbes Magazine and Ernst & Young. Only 5% of physicians have started their ICD-10 training. Not only doctors, but other healthcare facilities and hospitals are going to have to address this transition quickly. As I have given examples of earlier in this article, new contracts for CodeSmart are developing regularly and I would expect revenue will begin to accelerate soon.
Two of the largest medical partnerships, Amerinet and Ciranet, are aggressively promoting CodeSmart on a national basis. According to Mr. Shapiro, Amerinet has produced more than 30 letters of commitment from members in its healthcare facilities group to utilize CodeSmart's training services.
The New Opportunity
This is a very simple concept to understand and the new "industry opportunity" is being created in part by the implementation of Obamacare. CodeSmart Holdings stands at the front and will be the industry leader for ICD-10 training which will blossom into an industry worth hundreds of millions of dollars in revenue.
Concerns and Risks
The Value of the Stock
The stock is presently trading at $3.35 and has a 52-week trading range of $2.16-$7.02. In mid-June, when the stock was trading over $6, the company did go through a 2 for 1 stock split which was a smart move at the time because the stock rose so quickly.
Because of the quick rise in the value of the stock, there had been a lot of "shorting" which has caused the stock to drop in value. Yesterday was a good example of the volatility the stock faces as it backed off its recent highs. As an investor you should know the company will continue to deal with volatility until it finds its legs and the ICD-10 training starts to become more reality the medical marketplace.
The company is working with another firm to address this issue and bring in long-term monies to alleviate the shorting. This has brought the price of the stock down to an attractive level for long-term investors that understand the revenue potential that will hopefully be flowing into the company soon.