How to profit from health care and Big Data

Obamacare isn't the only reform hitting the US health industry. One company is emerging as a stronger player after recent struggles.

By StreetAuthority Dec 13, 2013 10:14AM
Man working in data center © Erik Isakson, Tetra images, Getty ImagesBy Marshall Hargrave                                                    

Data sets are getting larger and larger, and there's a lot of useful information just waiting to be made sense of. Nowhere is this truer than in the health care industry.
 
Different hospitals have different platforms for managing data, which makes it exceedingly difficult to exchange information. Although it has been a slow process, the U.S. is moving toward a health care market that provides care more efficiently. Part of this includes implementing electronic health records and managing hospital costs.

The American Recovery and Reinvestment Act allocated about $20 billion for electronic health records. This portion of the act offers financial incentives to hospitals and physicians to adopt and use health care information technology. The other positive is that many organizations face penalties for non-compliance, starting in 2015.

With all this "reform" coming to the health care industry, one of the best ways to invest in the coming health care data boom is Allscripts Healthcare Solutions (MDRX).

Yet the stock hasn't been all that great to investors over the past couple of years. Thanks to a botched acquisition, MDRX is still down nearly 50% from its 2007 highs. The multi-year pressure was a result of the 2010 acquisition of Eclipsys that proved to be more trouble than it was worth.



On the bright side, Allscripts has made a number of key steps to better position itself for long-term growth. The company has been revamping its product image and boosting customer satisfaction, and is still one of the best plays in the acute and ambulatory care space.

This has been a year of transition for Allscripts. The CEO who orchestrated the Eclipsys acquisition is gone, and the company, which had been up for sale, says it has "unequivocally removed the 'for sale' sign from the front yard." This undoubtedly will help the company focus on sales and a turnaround.

It appears Allscripts has learned its lesson on the acquisition front with its two most recent purchases, dbMotion and Jardogs. DbMotion is a software company that allows info sharing between health care providers; Jardogs provides patient kiosks and mobile tech for tablets and smartphones. Unlike the Eclipsys acquisition, these new deals are poised go a long way in ensuring Allscripts maintains positioning in its core products.

Earnings per share (EPS) this year is expected to come in at $0.27, down nearly 60% from 2012. However, Allscripts is expanding beyond the electronic health records market and tapping the population health market, which should help boost 2014 numbers. Allscripts' population health solution helps provide analytics for high-cost diseases, such as heart disease and diabetes. Its data analysis helps physicians identify target populations and manage risk. This is a move to be more proactive (instead of reactive) with health care.

Consider this: There are some 130 million people in America who live with at least one chronic disease. The average medical cost per person is over $8,000 per year, while only $250 is spent on preventing medical conditions. So the market potential is there for Allscripts.

Risks to consider: One of the biggest overhangs for Allscripts is related to customer adoption, especially considering that some might question the company's financial viability. Yet Allscripts has strengthened its balance sheet: During its second quarter, Allscripts completed a $1 billion debt financing to help lower borrowing costs. This puts Allscripts' liquidity at all-time highs.

Action to take: Buy Allscripts for upside to $20. If investors look at the long term, earnings could easily hit $1 per share, possibly as soon as fiscal 2015. At $1 per share, Allscripts deserves a price-to-earnings (P/E) multiple of 20, which is still a steep discount to the industry average of 28.

More from StreetAuthority

2Comments
Dec 13, 2013 10:56AM
avatar

healthcare data is a farce. 

 

every doctor i've ever had runs on manualy entered information.  there is no data sharing WITHIN the medical plan, so how do they data share to any extent?!!??!?

Dec 13, 2013 2:37PM
avatar
if only the computer charts were what they had in mind when they say "increase efficiency".  No people, what it means is that you are booked to the hilt, our treatment times have been cut in half so that we can see even more patients, your already non existent 15 minute break is booked over, and your 30 minute lunch is out the window too.  That's what efficiency is, cramming in more patients per provider. Supposedly the computer charting is supposed to make paperwork easier, which it would if I wasn't doing twice as much now in the same amount of time.  It would also help if I wasn't required to ask you and document if you are depressed or suicidal? do you want to see a psychiatrist for any reason? do you own a gun? are in pain? Do I need to call your doctor because you aren't happy with your pain control? Do you have any special gender, cultural, and religious needs I need to be sensitive about and provide? And on and on for every visit. Be patient, I will eventual get to your sprained wrist. Answer fast, it's cutting into your already shortened treatment time.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

116
116 rated 1
265
265 rated 2
429
429 rated 3
612
612 rated 4
499
499 rated 5
525
525 rated 6
701
701 rated 7
533
533 rated 8
337
337 rated 9
131
131 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
COPCONOCOPHILLIPS9
TAT&T Inc9
DVNDEVON ENERGY CORPORATION9
EOGEOG RESOURCES Inc9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.