Hanger Adopts NextGen Solutions

Leading orthotic and prosthetic (O&P) company Hanger Orthopedic (HGR - Analyst Report) has partnered with NextGen Healthcare, the wholly-owned subsidiary of Quality Systems’ (QSII - Analyst Report).

Under the collaboration, Hanger will implement NextGen’s Ambulatory electronic health record (“EHR”) and Practice Management solutions to automate clinical and operational workflows (such as medical records, billing and scheduling) across hundreds of patient care centers.

NextGen’s integrated Ambulatory Practice Management and EHR products enable coordination of patient care with formalized clinical and administrative workflows in any health care facility. Moreover, the company’s in-patient products such as NextGen Financials and NextGen Clinicals have extended its services to community and rural hospitals.

Hanger leads in the O&P patient care services market, operating through more than 675 patient care centers across the U.S. The company is enjoying healthy demand for its services. Hanger’s economies of scale are unmatched by its competitors which include notable players in the O&P space such as Orthofix International (OFIX - Snapshot Report), Conmed Corp. (CNMD - Analyst Report), Exactech Inc. (EXAC - Snapshot Report) and Owens & Minor Inc. (OMI - Snapshot Report).

To expand its geographic presence, Hanger is pursuing small tuck-in acquisitions. The company’s $155 million acquisition of rehabilitation technologies provider Accelerated Care Plus in December 2010 has added a fresh avenue of growth. Hanger anticipates the transaction to be accretive in 2011.

Hanger has substantially completed the relocation of its headquarters from Bethesda, Maryland, to Austin, Texas. The company is poised to achieve meaningful cost synergies from its corporate relocation. Another significant opportunity represents broader reimbursement coverage for its electrical stimulation device WalkAide.

However, Hanger’s back-to-back acquisitions could lead to substantial integration risk. Our Neutral recommendation on the stock is in tandem with the Zacks #3 Rank, which translates into a short-term Hold recommendation.

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