$30 Billion In Funds Earmarked For Electronic Health Record Adoption; May Benefit Emdeon (EM) And Athenahealth (ATHN) According To Industry Expert

Wall Street Transcript

67 WALL STREET, New York - June 28, 2011 - The Wall Street Transcript has just published its Health Care IT Report offering a timely review of the sector to serious investors and industry executives. This Special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online. Topics covered: Electronic Health Records Adoption - HITECH Act Incentives - Meaningful Use Implementation Delays - Healthcare IT Consolidation Trends Companies include: ASPYRA (APYI); Accretive Health (AH); Aetna (AET); Allscripts (MDRX); Amerigroup (AGP); Bio-Reference (BRLI); and many more. In the following brief excerpt from the Health Care IT Report, expert analysts discuss the outlook for the sector and for investors. Stephen Shankman joined UBS Investment Bank in 2010 as an Analyst on the health care distribution and technology team. Previously, Mr. Shankman worked at Natixis Bleichroeder LLC as a sell-side Research Analyst covering the health care services sector, and prior to that he worked as part of the large pharma and biotech team, also at Natixis. Before joining Natixis, he worked on the buy side at Sanford C. Bernstein & Co., and at a small investment manager in a research capacity. He holds a B.A. from the University of Michigan and an MBA in finance from the New York University Leonard N. Stern School of Business. TWST: Please begin with a brief overview of your coverage areas, including some of the specific names you follow. Mr. Shankman: I am an Analyst on the UBS health care distribution and IT equity research team. My coverage currently is focused on companies that provide EHR, or electronic health record, and RCM, or revenue cycle management solutions, to both hospitals and physicians. And names I cover leveraged to these markets include Allscripts (MDRX), Cerner (CERN), Quality Systems (QSII), athenahealth (ATHN), MedAssets (MDAS) and Emdeon (EM). I am also involved in covering the clinical lab space and I have lead coverage on Bio-Reference (BRLI). TWST: Which of those segments or subsegments offers the best opportunity for near-term and long-term growth? Which of the companies under your coverage stands to benefit? Mr. Shankman: Due to the HITECH Act, which was part of the American Recovery and Reinvestment Act, ARRA, there is over $30 billion earmarked to facilitate and incentivize electronic health record adoption. The large majority of the incentive payments related to HITECH are expected to be paid out over the next five years and in order to spur EHR adoption, which should benefit companies such as Allscripts, Cerner, Quality Systems and athenahealth. Longer term - given the pressures facing hospitals and providers that's mainly in the form of declining reimbursement, greater complexity in billing and payment collections, not to mention 30 million more Americans with insurance entering the system due to health care reform - we think all of those factors are going to require providers to become more efficient in their payment processes, which may benefit RCM players such as MedAssets, Emdeon and athenahealth. That said, we do think EHR or clinical applications are more of the focus over the near term, as both hospitals and physicians try to align themselves to receive these incentive payments. TWST: Broadly speaking, which of the companies has the best set of product offerings right now and what makes that company's products unique? Mr. Shankman: In our view, unfortunately there is not a lot of differentiation among the HIT offerings. In terms of the hospital market, we do think Cerner and Allscripts - legacy Eclipsys business - offer robust solutions with strong CPOE capabilities, which seem to be key for that segment. CPOE is computerized physician order entry. For physicians, Allscripts and Quality Systems appear to have some of the strongest ambulatory offerings. And that's due to their ability to scale down with streamlined solutions and offer a wide array of customization features, respectively. TWST: What will be the next big thing from a product or technology perspective in this sector? Is any of these companies at the leading edge of product development? If not, which direction should these companies take? Mr. Shankman: As you can imagine, given the trends that you see out there with smartphones and tablet computers, I think mobile electronic health record offerings are really starting to build some momentum. So lot of the companies that we cover are working on mobile apps, but a true mobile EHR offering we think is still a bit away. And it's probably too early for me to call out the leaders and laggards in the mobile space, but ultimately I do think mobile EHR offerings will be a big part of the future story for my sector. TWST: What is your top-rated stock pick today? Mr. Shankman: Our topic here is Allscripts. We have a "buy" rating and a $25 target, which represents about 25% upside from current levels. I'll give you three main reasons why we like Allscripts. One, we think the market is underappreciating Allscripts' market-leading, hospital-to-physician product offering. And that's really only matched by a few other players, one of which is private. So that gives them high-quality exposure to the EHR adoption story on both the hospital and physician side. Number two, Allscripts has an experienced management team which has successfully generated above-market shareholder returns after the Misys deal a few years ago. And so far they appear to be following a similar playbook post the Eclipsys deal, which closed near the end of 2010. Number three, Allscripts trades at a discount valuations to group at 19 times 2012 EPS versus the group at 24 times, and we think there may be possible upside to Allscripts' numbers in out years. In fact, we actually just had the Allscripts management team on the road, and we came away with further support to our "buy" thesis. The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This Special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online . The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations. For Information on subscribing to The Wall Street Transcript, please call 800/246-7673

View Comments (0)