The Stalwart: The Case for Healthcare IT

Information Technology in its various flavors has lead to efficiency gains and reduced costs across many industries. But have you been to the Doctor's office lately. Paper's are everywhere, you have to fill out the same form multiple times and the only information they really have on the computer is your name, phone number, and address. Not surprisingly, IT spending in the healthcare industry remains at a surprisingly small level. Some studies suggest it's just 2%-3%. Again not surprisingly the cost of health care continues to spiral upward. Regulation and privacy fears have to be a cause of the slow pace of investment, but it's clear that when investment does happen, it can have major effects:

Infection-tracking technology has saved four Alabama hospitals that have participated in the Alabama Hospital Quality Initiative for two years a total of $4.96 million in addition to "an incalculable amount of needless patient suffering," HealthLeaders reports.

The technology, which was created by MedMined, analyzes patient data to spot unusual activity and identify areas for improvement. Since the program's inception at the four Alabama hospitals, 33 additional Alabama hospitals, as well as BlueCross and BlueShield of Alabama and an Alabama-based health care technology company, have started using the technology.

Clearly the benefits are there, and with the costs of health care expected to rise, the pressure to find cost-reducing technologies will certainly spur more of these projects. It has to happen. This space seems like a compelling way to play a demographically induced long-term expansion of the health care industry.

Let's take a brief look at IMS Health (NYSE: RX). Providing a broad range of software and services, it's the IBM of the Healthcare IT sector, but with a very un-IBM $5.8 Billion market cap. Seems small for the premier IT company of the $1.7 trillion dollar industry. The PE of 19 is not bad for a company that could grow at double-digits for years. Furthermore, it's a cost-cutting play in a defensive industry, something that should also support it's PE. Finally, further government regulations are likely to demand more IT spending not less.

Other companies in this space include eResearch, IDX Systems, and NMS health.

Verify your Comment

Previewing your Comment

Posted by: |

This is only a preview. Your comment has not yet been posted.

Your comment could not be posted. Error type:

Your comment has been posted. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

The Stalwart

The Case for Healthcare IT

TrackBack

Comments

Verify your Comment

Previewing your Comment

Post a comment

What is This?

About

Stats

Advertisements

Subscribe

Archives

Categories