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TMFHelical (99.06)

Electronic Medical Records - Special Opportunity?

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January 22, 2011 – Comments (0) | RELATED TICKERS: CVS , MCK , CERN

There is little doubt in my mind that there is a 'special opportunity' embedded in healthcare reform.  This is in the provisions that initially provide financial incentive, but then later turn to penalties, for the adoption of electronic medical records.  The 'records' aren't specified but what is required is adoption and 'meaningful use'.  The kicker is, meaningful use is phased with time, and only the initial phase is anywhere near defined.

 

It would have me pulling my hair out  if I was a physician or a hospital administrator tasked with EMR adoption.  But the incentives are large.  As discussed in a round table at the JPMorgan Healthcare conference (flash -  free listen with registration - I've listened a couple of times now), individual physicians could see incentives amounting to 50-75K between now and 2015.  Total incentives are in the $20B range (yup, billion).  The first tranche of payments will be provided in 2011 [aside, don't you just hate the word 'tranche' now].  Since this is part of the reimbursement 'determination', it may not be easily subject to republican efforts to repeal reform.

 

How this plays out will be transforming of healthcare, and it is important for a healthcare investor to get this right (least wrong?).  As noted, almost as an aside in the talk, the opportunity to 'make money' is likely in software providers to larger organizations, like hospitals and physician networks, as they re-form as accountable care organizations and offer a full service as a bundled payment, instead of a procedure for a fee.  Yeah, hard to really envision it all isn't it.  Where will this software come from.  Is it going to just be used by insurers or originate from them?  Are pharmacy benefit managers going to be part of the framework, or roadkill as broader scoped service frameworks come to the forefront.  Is my investment in CVS-caremark a likely beneficiary or at risk? I don't fully appreciate it yet. How 'accessible and liquid' can health information really be, and still be HIPAA compliant and reassuring to individual patients?

 

Losers may well be companies whose revenues depend in part on a system that provides incentive for volume of service.  Does that mean medical devices?  I do own Medtronic and JNJ.  And yet pharmaceuticals I expect will benefit, as patient compliance becomes a bigger factor in providing 'care' over 'billing an apointment'.

 

As a kick, I looked to MedCompare: A buyers guide to medical professionals. A quick search (took some effort) of electronic medical records had to be done from within an indication space (odd, why?).  Here is the list of offerings for cardiovascular electronic medical records.  Open in another tab, its an extensive list.  Heard of any of these providers?  I Googled each and every one with the idea of just glancing at the company homepages to get a quick idea of service (and noting if there was an ‘investors’ link).  I note lots of M&A in this space, as several of the companies have been acquiring or acquired.  This is an amazingly fractured space, with everything from full to partial services, which shouldn’t be a surprise when a large incentive (pot of gold) is there to be obtained.  More than a few websites have headline information offering direction on how to obtain ‘meaningful use’ EMR adoption funds.  Makes the individual investors job a bit tough. Public companies?  There is Cerner, and one of the listings, BDM Information Systems, has been acquired by GE Healthcare.  athenahealth lists a product offering with athenaClinicals “developed expressly to help you manage the complete patient encounter. By applying the right combination of EMR software, clinical rules knowledge, and services, you can be confident your practice is operating at peak performance.”  I note that front and center on the Microwize website are relationships with AllScripts and McKesson.

 

Data aggregator Fierce, has an entire segment dedicated to the news of EMR.  FierceEMR.  Reading the news here over the past couple of weeks has given me the impression (but not solid confidence) that Cerner is the leader in signing large institutions to adoption of EMR / EHR.  This older story notes along with Cerner, McKesson and private Meditech and Epic could be leaders in this space.  It also implies that smaller niche companies could struggle, particularly as the later stages of meaningful use of EMR get defined and required.  Cerner does not look value priced to me, but I liked what I heard from their JPMorgan presentation.  I’m not opposed to an occasional careful ‘greater fool’ investment if I think the bandwagon is just getting recognized (but it has been rolling here awhile).  Owning McKesson increasingly seems to be something I should do, as I can’t ignore how often this sleepy distribution company seems to have its hand in industry disruption.  I also don’t think GoogleHealth can be ignored in this space, but Google won’t likely be an addition to the Helical port (never say never, Apple and telecom will factor heavily into the future health landscape as well).

 

Enough musing for now.  I’ll have more in February after another Xconomy forum I registered for.

 

TMFHelical

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