Friday, March 12, 2010

Trolling for EMR Plays

Last year the Center for Health IT at the American Academy of Family Practice rated various electronic medical records solutions. The ratings were the result of a survey among physicians who had already adopted EMR in their offices. The participating physicians were asked to rate their system on quality, value, usability, productivity and support.

The survey results are available only to AFP members. However, that is alright because we are not certain a survey of physicians is valued since only 3% of doctors in the U.S. have actually adopted EMR in the first place. This dismal figure on EMR penetration is from the AFP itself.

The AFP suggests that doctors will only adopt EMR when such systems become usable and the add value. Even the $44,000 subsidy the federal government is offering physicians who make a purchase is apparently not enough to encourage doctors, who claim most EMR packages available today cost most than they save. Furthermore, there are so many applications on the market, doctors do not have enough time to evaluate which is best. On this we will agree. KLAS Research displays a list of over four hundred vendors.

I question the “poor value” excuse. More likely it is that physicians are too embarrassed to admit that cloud versus local server or web hosted versus client server are foreign terms to them. This is, however, another story.

The suggestion that many products might be less than viable should send a warning signal to investors that stock picking in the health care information segment could be tricky. Industry rankings were our tip in finding Eclipsys Corp. (ECLP: Nasdaq), which we featured in our Small Cap SEARCH Newsletter some months back. At htat time the stock was just under $10.00 per share. We closed out our coverage just four months later after the stock had surged past our price target, with the admonishment that the stock could move further as sales began building with economic recovery. ECLP is near the $20.00 price level today.

Computer Programs and Systems, Inc. (CPSI: Nasdaq) is also highly ranked and its notoriety has helped move the stock. However, the CPSI price has pulled back from highs achieved in late 2009. The stock is trading at 19.1 times forward earnings. If that PE ratio does not seem justified given recent earnings growth near 17% in the last year, consider the 3.7% dividend yield. CPSI claims over 650 customers across the U.S. The company ended 2009 with a backlog valued t $109 million, of which $85 million is from recurring payments from existing customers.


Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

2 comments:

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