Health Care IT Software Replacement Cycle Accelerates as Complexity and Consolidation Create New Sector Winners: Exclusive Interview with Industry Analyst Leo Carpio

Wall Street Transcript

67 WALL STREET, New York - October 29, 2013 - 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: HIT Consolidation Activity - Electronic Health Records Implementation - Affordable Care Act - Healthcare IT Consolidation Trends

Companies include: Cerner Corp. (CERN), Allscripts-Misys Healthcare So (MDRX), Quality Systems Inc. (QSII), MedAssets, Inc. (MDAS), Tenet Healthcare Corp. (THC), Community Health Systems, Inc. (CYH), Health Management Associates I (HMA), Omnicell Inc. (OMCL) and many others.

In the following excerpt from the Health Care IT Report, a leading analyst discusses the coming consolidation and new developments in the sector for investors:

TWST: Could you define the health care IT space for us in your mind?

Mr. Carpio: I define it as any company that uses technology in the health care arena in order to either improve costs, improve outcomes, or improve the efficiency of health care delivery or outcomes. There are the pure-play companies that solely do electronic medical records and billing management, but there are also other health care companies that are in the space. For example, the HMOs have health care IT assets in the space that I also track. The hospitals have health care IT assets internally that they use in the space. And then there are other, more edgy companies that offer analytics data on the Web, as well as those who offer mobile apps and other products and services that are more geared toward the consumer.

TWST: How would you characterize the industry over the last 12 months or so?

Mr. Carpio: The industry was very active in the last 12 months, and I think we're in a sustainable period of activity going forward. We're seeing some big changes in the space. We're seeing a very big replacement cycle coming along. A lot of the health care providers have realized that the software they use to meet prior government regulations, such as the HITECH stage 1 regs, are inadequate for stages 2 and 3, and also inadequate for meeting ICD-10 and other future requirements. So there is going to be significant replacement cycle. On the physician side, from a third to half of the installed base could be looking for a new system, and on the hospital side, we're looking at a third or even more hospitals looking for replacement systems.

The second major trend is consolidation within the space. We're going to see a lot of the vendors who can't meet the capital expenditure requirements for creating bigger and better systems falling away. On the physician side, we've got 300-plus vendors right now. I could envision that easily going down to 50 to 100 vendors, and ultimately 50 vendors of critical mass, over a 12- to 18-month period. So you've got a land-grab opportunity coming for the surviving vendors.

The third big trend is a growing focus on data analytics, population health and the use of mobile apps going forward...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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