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Hewlett-Packard Company (HPQ - Analyst Report) has renewed its deal with the Florida Agency for Health Care Administration (AHCA) for a period of 3 years. The extended contract, which cost the company $172.0 million, will be operational till June 2016. The deal entitles H-P to extend its Enterprise services for better management of AHCA’s Medicaid operations and in due course, health care reform for the State of Florida.
The H-P-AHCA alliance dates back to 2008 when the former offered its interChange Medicaid Management Information System fiscal agent and outsourcing services. The task of a fiscal agent is to review and process all medical claims. Till date, H-P has helped AHCA provide prompt and hassle-free Medicaid benefits to more than 3.1 million Floridians.
The Medicaid program focuses on the health care of the low-income population. The aged and disabled are also covered under the program through nursing and medical expense benefits. This fifty-fifty state-federal partnership is run by a state plan that federal centers for Medicare and Medicaid Services approve of.
H-P is already serving as a fiscal agent to 21 other state Medicaid programs. The need for an efficient Medicaid program arises from the enactment of the U.S. Healthcare Reforms Bill. The goal of the reform is to make health care more affordable to Americans. The basic objectives of the reform were presented in the Patient Protection and Affordable Care Act passed on March 23, 2009. As per the Act, beneficiaries are expected to join Medicaid through a registration process requiring exchange of information regarding health. Medicaid is a joint endeavor of the states and Federal governments, designed to provide medical care to the poor, children and expectant mothers under the federal poverty level.
In March, Hewlett-Packard Company signed a five-year deal with the health care division of Nevada Department of Health and Human Services. Per the terms of the deal, H-P will receive a sum of $176.0 million.
The U.S. government's endeavor to expand the information technology industry and make it a major component of health reform will help drive IT spending in the health care segment over the coming years. We believe that HP, with its strong position, would be able to capitalize on government initiatives.
Apart from health care, H-P has been continually securing service deals from various industrial sectors.
Despite, H-P’s positive deal momentum, market position and compelling product line, we remain cautious about its future growth, particularly as competition from other big technology players, such as Cisco Systems Inc. (CSCO - Analyst Report), Apple Inc. (AAPL - Analyst Report), Acer and Dell Inc. heats up. Moreover, the recent volatility that has pumped up over Apothekar’ dismissal, the appointment of Meg Whitman, the former EBay Inc. (EBAY - Analyst Report) chief and the decision to spin off the PC business are contributing to investor confusion over the stock.
As a result, H-P now has a short-term Strong Sell recommendation (Zacks #5 Rank).