Wall Street Transcript Interview with Michael Cherny, Managing Director and Analyst for the ISI Group LLC: EHR Expansion Continues to Drive Growth in Health IT Space

Wall Street Transcript

67 WALL STREET, New York - October 29, 2012 - 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 Record Adoption - HIT Consolidation Activity - Platform Interoperability and Data Analytics - Analytics for Evidence-Based Care Protocols - Electronic Health Records Implementation - HITECH Act Incentives - Affordable Care Act

Companies include: Cerner Corp. (CERN), Athenahealth, Inc. (ATHN), Allscripts-Misys Healthcare So (MDRX), Quality Systems Inc. (QSII), MedAssets, Inc. (MDAS) and many others.

In the following excerpt from the Health Care IT Report, veteran analyst Michael Cherny discusses the outlook for the sector for investors:

TWST: Last time we spoke about a year ago, you were still with Deutsche Bank Securities. Would you tell us briefly about ISI and your role there?

Mr. Cherny: ISI has a macro-focused research staff that has been building out its fundamental practice over the last few years. A few months ago, I came over here, along with the rest of the team from Deutsche Bank, and we launched coverage of the health care services and technology sector back in July. In that coverage universe, I cover the health IT space, the specialty distribution space, which includes dental, veterinary and medical distributors, as well as Catamaran (CTRX), the pharmacy benefits manager.

TWST: Where are you focusing your attention within the IT space these days?

Mr. Cherny: The five names that I cover in the HIT space have varying degrees of investor attention. The key focus is on the trajectory of market growth as well as adoption rates related to the HITECH Act and what that means for driving electronic health record adoption within the space. We're being asked which companies are best positioned to capitalize on this adoption trend, who has the best products, who has the most robust offerings, and who has best service and support to maintain those products.

TWST: How would you characterize the industry during the past 12 months or so with the HITECH Act in the forefront?

Mr. Cherny: It's been an interesting divergence within the industry, both from a growth perspective and a performance perspective, for the stocks of companies that sell electronic health records. The major divergence has been between the companies that have been taking share in certain solutions and the companies that have either had product issues and/or have hit some sort of growth wall in their space.

On the positive side, Cerner (CERN) has obviously been a major beneficiary of their broad product solutions and product architecture. They've been able to win new customers and continue to see strong revenue and bookings growth. athenahealth's (ATHN) growth has also remained at elevated levels from the rest of the group, driven in large part by the focus on driving cash flow enhancements for physicians while also selling electronic health record solutions.

But on the opposite side, Allscripts (MDRX) and Quality Systems (QSII) have run into some issues. Allscripts' problems stemmed primarily from an unsuccessful rollout of their integrated product solution after the Eclipsys merger. On the other hand, Quality Systems ran into a saturation level in the core area of their market, which is the larger physician practice group segment.

TWST: What are some of the key headwinds and tailwinds you're focusing on within that space?

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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