The idea is that the quality of health care will get a big boost, and costs, over the long run, will decline. But this will come at a cost of around $75 billion to $100 billion over ten years according to studies from Harvard, RAND and the Commonwealth Fund.
Can we profit from this?
Some Health Care Information Stocks
- Athena Health (ATHN): Athena Health provides Internet based business services for physician practices in the United States. "Its service offerings are based on proprietary Internet-based software, database of payer reimbursement process rules and back-office service operations." The company is a $1 Billion company, with a Forward PE of 40, a 5 year estimated growth rate of 32% for a Price Earnings to Growth Rate (PEG) of 1.25 (more than 2 is expensive, less than 1 is a great value).
- Quality Systems (QSII) : Quality Systems engages in the development and marketing of health care information systems in the United States. Its system automates various aspects of medical and dental practices, and networks of practices. The company also offers proprietary electronic medical records software and practice management systems. QSII is a $1 Billion company with a Forward PE of 19, 5 year estimated growth of 19% for a reasonable PEG of 1. It even has a forward Yield of 3%
- Allscripts (MDRX): Allscripts-Misys Healthcare Solutions, Inc. offers software, services, information, and connectivity solutions that enable physicians and other health care providers to deliver patient safety and clinical outcomes primarily in the United States. It operates in four segments: Professional Solutions, Enterprise Solutions, Health Systems Group, and Medication Services. MDRX is a $1.2 Billion company, with a forward PE of 13.4, a 5 year estimated growth rate of 17% for a bargain PEG of 0.78.
- Cerner (CERN): Cerner Corporation provides health care information technology solutions, health care devices, and related services in the Americas, Europe, the Middle East, and the Asia Pacific region. CERN is a $3.1 Billion company, with a forward PE of 15, an estimated 5 year estimated growth rate of 20% for a good PEG of 0.75.
Future of Digital Records and Health Care Information Systems
The Future of Digital Records and Health Care Information Systems is bright, even without President Elect Obama's Digital Record initiative.
However, from a short term point of view, there could be challenges. Earlier this month, firm Leerink Swan downgraded ATHN from Outperform to Market Perform. The Analyst Bret Jones said that "Our best guess as to the time line for federal money to work through state grant and loan programs in any material way is at least 12-18 months." Bret Jones also mentioned that the climate for health care IT companies is still very difficult, and investors may be disappointed as they wait for the stimulus package to take effect.
But if we look at the longer term, there is great promise in this area.