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QSII Unit Selected by Mowery Clinic

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NextGen Healthcare Information Systems, a full subsidiary of Quality Systems (QSII - Free Report) , recently revealed that it inked a deal with Mowery Clinic of Salina, Kansas to install NextGen offerings, such as NexGen Ambulatory EHR.   

Mowery Clinic is the biggest multi-specialty practice in Salina. It has 33 physicians and other staff providing general surgery, internal medicine, critical care, cardiology and other healthcare. For its part, Mowery Clinic believes that it is gaining an integrated platform from NextGen that will satisfy its specialty specific needs.

NextGen products will enable Mowery Clinic to meet meaningful use criteria. As per the agreement, Mowery Clinic will house a composite platform centered on a unified database, which will meet its multifaceted requirements. For example, usage of NextGen know-how will provide Mowery Clinic with streamlined workflow and better access to patient data. It will also contribute to outcome based care.

Quality Systems runs a pure-play business model, in an attractive industry, with a large number of catalysts, which provoke frequent speculation about mergers and acquisition. On the positive side, we observe the high proportion of recurring revenues. Of late, however, growth of its pipeline metric has seen a falling trend along with progressively lower number of signed deals on a quarterly basis.

The company has made multiple acquisitions to bolster organic growth. Its acquisitions are expected to facilitate its entry in the small hospital segment. We are concerned about execution risk emanating from Quality Systems’ entry into the rural inpatient market.

Moreover, competition is intense from well regarded players such as Athenahealth (ATHN - Free Report) , Allscripts Healthcare Solutions (MDRX - Free Report) , Cerner Corporation (CERN - Free Report) and others. Price discounting is frequent, particularly on the lower end, and Software as a Service (SaaS) based model appears to have exacerbated pricing pressure.

Quality Systems has traditionally focused on providing solutions for physician practices. However, core ambulatory EHR providers, such as Quality Systems, will see opportunities shrinking for selling their products as physician groups are increasingly getting absorbed into hospitals.

Our Underperform recommendation is supported by a short-term Zacks #5 Rank (Strong Sell).

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