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Imaging and interoperability solutions provider, Merge Healthcare (MRGE - Analyst Report) recently announced the launch of its latest clinical trial operating solution Merge eClinical OS. This innovation is claimed to be the first end-to-end study support for trials of all sizes through a single interface and one platform, thus minimizing the technical and administrative hazards associated with trial management. Merge plans to unveil this solution at the upcoming DIA Annual Meeting in Philadelphia.

As a single web-based solution, Merge eClinical OS is fit for both large and small studies and is apt for large pharma, biotechs, small and large medical device companies, contract research organizations (CROs) and academic medical institutes. This solution also has the flexibility to grow if there is an increase in size, number or complexity of the trial.

According to the CMS, as of December 2011, more than 175,000 professionals and hospitals have registered for "meaningful use" incentive programs, and $2.5 billion was paid out to eligible hospitals and professionals. The incentives will be offered for a period of 4-5 years, after which physicians will be penalized for not adopting proper measures.

The company remains optimistic that with this new clinical trials software, the specialty physicians will come up to meet the Meaningful Use criteria, thereby driving the demand for its offerings.

Favorable demographic trends, reinforced by a supportive regulatory environment are expected to sustain strong growth in demand for EHR-related software in the foreseeable future. We believe that Merge is well placed to grab a meaningful share of the multi-billion dollar ARRA-related healthcare information technology investment opportunity.

However, we remain concerned about the declining Medicare reimbursement for advanced medical imaging that could negatively affect hospital and imaging clinic revenues, thereby reducing the demand for imaging-related software and services offered by Merge. Furthermore, the presence of many big players like General Electric (GE - Analyst Report) and McKesson Corporation (MCK - Analyst Report) has made the healthcare solutions and services market highly competitive.

Presently, Merge retains a short-term Zacks #4 Rank (Sell). Over the long term, we have a Neutral recommendation on the stock.

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