Medicare Fraud, Healthcare Waste and the Companies Helping to Solve It

Includes: ATHN, KAD, MDRX
by: Investment U

By Marc Lichtenfeld

It was one year ago that television show 60 Minutes broadcast an in-depth report into Medicare fraud. The incredible conclusion was just how easy it is for criminals to rip off taxpayers. (I don’t recommend watching it unless you have your blood pressure medicine handy.)

In fact, Medicare fraud alone costs roughly $68 billion per year – more than the federal government’s entire education budget.

Here in Florida, you can imagine that Medicare is always a hot topic, regardless of politics. But it’s especially fiery now considering that one of the leading candidates for governor orchestrated the largest fraud in Medicare history when he ran a hospital chain (and then did it again with a second company).

So what’s is being done to tackle this massive problem?

Stemming the Tsunami-Like Tide of Medicare Fraud

On the face of it, the U.S. government is taking steps to stem the tsunami-like tide of Medicare fraud. The Feds have hired more agents and are employing tougher screening methods for medical suppliers. And the 2009 stimulus package calls for all medical records to be electronic by 2014, which will cut down on errors.

But the reality is that the new healthcare reform bill does little to address fraud or other unnecessary costs.

So forget the outcome of November’s mid-term elections and whether or not healthcare reform is implemented as written or gets repealed. The high cost of healthcare will persist. And not only will that continue to squeeze consumers, it will also cost the government even more in waste and fraud.

But help is at hand…

This Successful Business Model Ain’t Rocket Science

Despite the strain on the healthcare sector, some companies are working hard to appease the situation and remove some of the bloated costs from the system.

And the opportunity is particularly strong for those companies that can do so without negatively impacting patient care. In fact, the level of care actually increases in some cases.

Hmm… better patient care, coupled with lower costs. You don’t need an MBA to figure out that there are few ways to make your customers happier than by giving them good service and helping them save money.

In turn, that likely results in successful businesses. And here are three of them…

The Healthcare Holy Grail: Better Care… Lower Cost

In the coming years, it’s clear that the healthcare companies who can help improve patient care while cutting costs are going to be big winners – for both consumers and investors alike. Get a headstart on your research with these ones…

  • Allscripts Health Solutions (Nasdaq: MDRX)

Allscripts’ mission is to “improve clinical and financial outcomes” for physician practices and health clinics. It does this by managing electronic health records, providing clinical and office management software, as well as computer systems for large healthcare networks.

There’s $20 billion worth of stimulus money earmarked for digitizing America’s medical records – and companies like Allscripts that are involved in electronic health records should benefit.

  • Arcadia Resources (AMEX: KAD)

Arcadia is a prescription management company that helps patients on multiple medications manage their prescriptions and ensures that they take their medicine at the appropriate time.

This is important because insurance companies and Medicare pay millions per year for patients who are admitted to hospitals because of prescription errors and non-compliance (i.e. they don’t take their medicine as prescribed).

But with Arcadia’s DailyMed program, patients stay healthier and insurers lower their costs. A word of warning, though: Arcadia has a very small market cap (just $68.6 million) and its shares can be quite volatile.

  • AthenaHealth (Nasdaq: ATHN)

Earlier this year, an accounting scandal stung Athena. But the company (and its stock) has since rebounded - and for one simple reason.

The provider of Internet-based services for physicians, Athena offers athenaCollector - a web-based system that aids the payment process for doctors' offices. The service manages revenue, claims and reimbursement, which helps eliminate billing errors and ensures that doctors are paid faster.

The beauty of its business model means that doctors don’t pay anything upfront or have any software to install and upgrade. Everything is web-based and doctors simply pay a percentage of collections. Athena also offers athenaClinicals, which manages patients' medical records digitally. No wonder doctors and their office managers love Athena’s services.

In an area where efficient healthcare can be patchy – and costs, fraud and errors are high – there are plenty of companies whose products aim to boost patients’ health, save money and eliminate mistakes.

And you can bet that a lot of money will find its way to those who can provide these kinds of services. I’ll continue to look for the best ones and will be writing about them here, as well as making specific recommendations in The Oxford Communiqué.

Hoping your longs go up and your shorts go down.

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