EHR: A Promising Proposition

Of late, the Electronic Health Record (EHR) market has been witnessing a number of activities. The latest being Quest Diagnostics’ ( DGX - Analyst Report ) decision to offer Care360, its EHR at a subsidized rate. The company, as a part of its sales effort, adopted “Quest Diagnostics Grant program” under which it expects to provide a discount of 85% on its Care360 compared to its retail price to the eligible physician practice. This offer will be valid from January 23 till 2012 end.

Under the grant program, Quest will offer physicians a fully certified EHR solution including 24/7 support and training for less than $100 per month. As per Quest’s recent estimates, presently, around 3,800 people use Care360 EHR.

Amidst a challenging scenario where economic uncertainty has resulted in higher expenses for physicians, Quest’s Grant program is expected to provide relief as well as push the physicians to adopt its package. Moreover, this discount option will also help Quest to expand its EHR business in an extremely competitive and price sensitive healthcare information technology market flocked with competitors like Allscripts ( MDRX - Analyst Report ) , Cerner ( CERN - Analyst Report ) , Merge ( MRGE - Analyst Report ) and many others.

Other Players in this market

Currently, Merge is working hard to expand in this market based on its imaging interoperability platform. Recently, the company received several complete EHR Ambulatory certifications, including certification for its OrthoEMR v4.0 that enables healthcare providers to efficiently record patient details. Also it obtained the ‘Meaningful Use’ stamp from the federal government for its Merge RIS v7.0.

AllScript too continues to benefit from the financial incentive program targeted toward medical providers. The company is well placed to bag a meaningful share of the multi-billion dollar ARRA-related healthcare information technology investment. Earlier in December, the company announced that both its Sunrise Emergency Care, Version 5.5 as well as Sunrise Acute Care, Version 5.5 are in compliance with 2011/2012 Certification Commission for Health Information Technology (CCHIT).

In January this year, Cerner decided to expand its relationship with Adventist Health that began using Cerner’s EHR in-patient settings way back in 2001. With this new development, over 130 outpatient centers will be benefited by the digitization of health care processes at Adventist Health.

Conclusion

The overall US health IT (HIT) market witnessed a drastic change in February 2009 with the passing of the HITECH Act, as a part of the American Recovery and Reinvestment Act (ARRA). The ARRA provision includes $20 billion in incentives. Within that, radiologists using certified EHRs are eligible for receiving rewards of approximately $1.5 billion. As per estimates, the US HIT market, valued at $7.6 billion in 2010, is expected to grow to $9.6 billion by 2014. The US HIT market is gradually adopting EHRs to meet HITECH funding requirements.

Despite the significant opportunity in the market, penetration remains low. As a result, we believe that these companies are well positioned to take advantage of the opportunity over the long term.

However, the general slowdown in hospital spending, low demand for imaging equipment and related technology due to global credit crisis could result in lower product sales.

In the short run, we have Zacks #3 Rank for both Quest and Merge, which translate into a Hold rating. We currently retain our long-term Neutral rating for both the companies.