Healthcare IT and electronic medical records have been the focus of the current and previous president's agenda. In his first year as president, Barack Obama called healthcare IT the "low hanging fruit," and an area in which Republicans and Democrats agree. Despite that push, the companies that deliver these solutions to hospitals, and the hospitals themselves, are still trying to marry the idea and the reality of implementing the solutions. Many hospitals continue to feel pressures in the face of a weak economy and growing uninsured population as the jobless rate remains high. Implementing an IT system hospital-wide is both expensive and time consuming and the payback period is too out of range for most hospitals to consider. Yet, the government continues to reinforce the notion and even with the pressures facing hospitals, the adoption rates, while slow, are improving. There are several companies at the forefront of the technology.
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Delivering Healthcare IT
The most well known and largest stand alone healthcare IT provider is Cerner Corp (Nasdaq:CERN). CERN, a $10.07 billion market cap company, has been delivering healthcare solutions since its founding in 1979 and this long history has helped the company become one of the largest global servicer, with operations in Europe, Mid East, Asia, and North and South America. As a result the stock remains strong and able to weather the roller coaster that comes with the investment activity that is closely tied to and reliant on the "backing" of the U.S. government. CERN is trading at 27-times forward P/E and 1.79-times forward PEG. The stock usually trades more expensive than many healthcare stocks, but compared to many IT companies, it often trades cheaper. With a strong balance sheet and 19.75% operating margins, the company continues to deliver a healthy performance.
General Electric Company's (NYSE:GE) healthcare business has a division that competes with Cerner in the electronic medical record space. A strong competitor to CERN, GE also has a cross-selling advantage since it has a relationship with hospitals and doctors via its medical device division. However, unlike Cerner, GE's foray into this space is relatively recent; similar to CERN, its solution seems to have many followers and is well received. (Learn more in Investing In The Healthcare Sector.)
Similar to GE, another competitor is McKesson Corporation (NYSE:MCK). MCK is more widely known for its drug-distributor business, but the healthcare IT business is growing and showing good profits. For both GE and MCK, with the backing of such large corporations, both of these are able to withstand the ebbs and flows related to investment by hospitals and investors. However, different from CERN, investors have difficulty putting money to work in this space because the parent company has other larger businesses.
Other healthcare companies, health insurers such as United Health Group (NYSE:UNH) and Aetna (NYSE:AET), are using the data they collect on claims to gather healthcare data and put that data to use in a platform that communicates to electronic medical records. This data can be used by both the providers (hospitals or doctors) and the customers (patients) to make better informed decisions.
The use of electronic medical records for both the providers and the patients has been a slow process. However, the data suggest that patients want it and the system, when implemented should help providers deliver more informed care and take costs out of the healthcare system. While the payback is a big hurdle for many hospitals and physicians, the backing of the U.S. government may help to alleviate some of the burden. (Find out how healthcare investments can become the strongest asset in your portfolio. Read Healthcare Funds: Give Your Portfolio A Booster Shot.)
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