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H-P Extends Medicaid Deal with AHCA

Zacks Equity Research

Hewlett-Packard’s (HPQ) Enterprise Services arm signed a 2-year service renewal deal related to the Medicaid program with Florida Agency for Health Care Administration (:AHCA). Per the $109 million contract H-P will manage Florida’s Medicaid Management Information System (:MMIS) through Jun 2018.

H-P already serves 114k healthcare providers of the state and processes in excess of 150 million claims per year valued at approximately $24 billion. Moreover, as a fiscal agent, H-P reviews and processes all medical claims, and also manages finances, provides call center support and upgrades call center technology.

H-P’s services help the state to improve Medicaid programs, deliver more critical health information to a larger number of healthcare providers and keep pace with nationwide healthcare reforms in a cost effective manner.

H-P acts as the fiscal agent or the IT provider to 19 other states’ Medicaid programs. The need for an efficient Medicaid program arises from the enactment of the U.S. Healthcare Reforms Bill which aims to make healthcare more affordable for Americans. We believe that H-P, with its strong position, would be able to capitalize on these government initiatives

Per the Act, beneficiaries are expected to join Medicaid through a registration process, which requires exchange of information regarding health. Medicaid is a joint endeavor of state authorities and the Federal government, designed to provide medical care to those under the federal poverty level, including expectant mothers and children.

However, H-P has to compete with Computer Sciences Corp. (CSC) in the Medicaid service space. H-P’s growing focus on new business segments, such as electronic medical records, cloud computing and the recently-added analytics segment will help the company grow in the ensuing quarters.

Nonetheless, H-P is still reeling under pressure from the declining PC business and sluggish macroeconomic environment. The company has also hinted at muted revenue growth in 2014. Moreover, competition from other technology bellwethers such as IBM (IBM) and Salesforce.com (CRM) makes it even more difficult for the company to gain market share in the cloud and security space.

Currently, H-P has a Zacks Rank #3 (Hold).

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