This article discusses the top public and private medical software companies, what they do, their business models, and investment opportunities in this specialized sector.

What are medical software companies and how they do business?

Medical software companies are involved in building and delivering products, systems, services, or solutions within a medical space, serving the following needs:

  • Medical record (or electronic health record) keeping: These are software and services for use by any size organization from an individual doctor’s clinic to large hospitals or even government organizations keeping a nation's biometrics.
  • Medical practice management: Used to enhance and streamline the medical practice process from booking an appointment to printing prescriptions to billing and payment, these applications can be used at individual doctor's offices and large hospitals.
  • Networking and content management solutions: These software applications are used for multiple purposes, such as connecting various medical entities (e.g., patients to hospitals or drug companies to medical representatives, pharmacies, labs, etc.)
  • Medical services through web-based portals: These portals range from a simple business listing on a website for a clinic to appointment booking to promotional and advertising solutions. These ready-made products can be purchased as a customized theme for new website or can be a recurring service to provide promotion, advertising, and appointment booking.
  • Hospital management: These are software and services that support various operations in the running and management of large hospitals. An individual doctor’s clinic may find medical record keeping software sufficient, but a large hospital will additionally need other modules to maintain schedules of multiple doctors, inventory management of various devices in the hospital, its billing and payment system, as well as modules to be used by hospital security staff.
  • Software or middleware to operate a medical instrument or device: An electrocardiogram instrument may be built by company A, but the software that facilitates its working may be built by company B.
  • Software for medical research and analysis: This stream focuses on providing software, applications, and systems to medical research companies, aimed at facilitating and automating their research work.

Top publicly traded medical software companies

  • McKesson Corp. (MCK): NYSE-listed McKesson, through its technology solutions segment, provides “software, services, and consulting to hospitals, physician offices, imaging centers, home health care agencies, and payers” and offers connectivity services to streamline communication between patients, providers, payers, pharmacies, and financial institutions. It has a market cap of $47.93 billion and its institutional holdings are 86%.
  • Cerner Corp. (CERN): NASDAQ-listed Cerner Corp has a market cap of $21 billion and institutional ownership of 83%. It is a reputable provider of healthcare IT solutions, services, devices, and hardware. Additionally, it provides solutions for health care process optimizations.
  • Allscripts Healthcare Solutions, Inc. (MDRX): Allscripts is listed on NASDAQ and has a market cap of $21.1 billion. Allscripts provides clinical, financial, connectivity, and information solutions and related services to hospitals, physicians, and post-acute organizations.
  • Quality Systems, Inc. (QSII):  NASDAQ-listed Quality Systems has a market cap of around $870 million. Its services, applications, and systems allow users to refine and enhance patient medical care, workflows, processes, and productivity. It also integrates and provides systems for administrative operations.
  • Athenahealth, Inc. (ATHN): Athenahealth has a market cap of $4.6 billion and is listed on NASDAQ. It offers Internet and cloud-based services for billing, business, and clinic-related practice management solutions.
  • GE Healthcare (GE): Although GE remains a large conglomerate across various sectors, its healthcare division, GE Healthcare, is a known name in medical imaging, medical research, and analysis systems.
  • Merge Healthcare, Inc. (MRGE): With a market cap of $334 million, NASDAQ-listed Merge Healthcare is involved in health information exchanges, such as the electronic sharing of medical images, diagnostics, and similar solutions.
  • Computer Programs & Systems, Inc. (CPSI): NASDAQ-listed CPSI has a market cap of $660 million and 87% institutional ownership. CPSI's target market is mid-size hospitals, for which it develops, designs, and supports healthcare systems. It also offers the automation and management of clinical and financial information for hospitals and medical enterprises.

Top privately held medical software companies

  • Epic Systems Corp. operates in the health care management software arena, offering integration solutions across various medical entities.
  • eClinicalWorks provides medical software to assist in administrative tasks such as record keeping, and serves small- and medium-sized health care establishments.
  • Greenway Health LLC provides administrative and clinical solutions for the health care sector.
  • Practice Fusion, Inc. claims to be the largest cloud-based electronic health record company in the US, providing solutions to connect patients, doctors, and data.

The Bottom Line:

Investors looking for short-term trading or long-term investments can buy shares of public medical software companies. Care should be taken to clearly understand the business and operations of a particular company, as many firms have other businesses and operations, some in diverse, unrelated sectors. As of now, there are no dedicated medical software sector funds, but there are funds to explore in the larger medical sector or software sector, as well as exchange-traded funds (ETFs).