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Stimulus Plan Should Give a Shot in the Arm to Health IT



February 06, 2009 – Comments (0)

Stimulus Plan Should Give a Shot in the Arm to Health IT

by: Mike Havrilla January 25, 2009

about stocks: BEAT / CERN / MDRX / MRGE / QSII / SXCI

By: Mike Havrilla

The accompanying table below presents statistics and the top five rated companies in the ETF Innovators Global Health Information Technology (Health IT) Index, which is structured to include companies with market caps between $50M - $10B. The rating system is based on a formula which considers each company's market cap weighting, net income weighting, and historical stock price returns and the index is equally-weighted among all 52 companies, which is dominated by small-caps with an average market cap of $558M.

As a new ETF idea, the Top 30 Rated stocks would be chosen as active components and rebalanced each quarter on a semi-active basis. Over the past year, the Health IT Index has outpaced its benchmark ETFs, including Vanguard IT (VGT), Healthcare Sector SPDR (XLV), and Technology Sector SPDR (XLK).

The top five rated companies include Swiss telemedicine firm Card Guard (CDGUF.PK) – a provider of remote patient monitoring systems, Merge Healthcare (MRGE) – a clinical and medical imaging information software developer, Quality Systems (QSII), maker of NextGen electronic medical records system, SXC Health Solutions (SXCI), a provider of pharmacy benefit management and transaction systems, and CardiNet (BEAT), a provider real-time, outpatient heart rhythm monitoring.

Cerner (CERN) and Allscripts-Misys (MDRX) are two more companies included in the top 30 rated stocks as integrated Health IT plays on electronic prescribing (e-prescribing), medical records, and health information systems. The entire Health IT space is poised to benefit from an expected multi-billion dollar investment (likely around $20B) as part of an overall $800B stimulus plan.

However, the expected benefit for Health IT companies may not materialize until 2010 as it will take some time for the expected government grants to encourage purchases of new technology by hospitals and clinics. Also, prescribers are encouraged to adopt e-prescribing in the form of longer term financial incentives through Medicare reimbursement and will be penalized if they do not adopt the technology by 2012.

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