Electronic medical and health records promise to make health care more efficient, and help physicians identify and treat potential problems earlier. For patients, they could also eliminate the time-consuming and tedious practice of filling out those medical history forms every time we visit a new health provider. And for investors who own a share of medical records stocks, this shift could make shareholders a pretty penny.
The list of companies in the electronic medical records field is crowded and no single firm holds a dominant share. Among the publicly traded players are some small firms as well as some big names. They include Allscripts Healthcare Solutions (NASDAQ: MDRX), Cerner Corporation (NASDAQ: CERN), Computer Programs and Systems (NASDAQ: CPSI), General Electric (NYSE: GE), McKesson Corporation (NYSE: MCK), Quality Systems, Inc. (NASDAQ: QSII) and Siemens AG (NYSE: SI ).
One huge player is giving signals it plans to join the fray,, and it’s a name that could shake things up dramatically: Microsoft (NASDAQ: MSFT).
One look at the size of the market explains Microsoft’s interest. The U.S. healthcare IT market is expected to reach $35 billion in 20111, and electronic medical and health records have emerged as the “bread and butter” of the industry. Key drivers of their growth are government initiatives and the push for greater efficiencies in the system.
Most experts think it would be challenging for Microsoft to build an electronics health records business from the ground up and bring it to the market. The company’s best bet appears to acquire a current player.
Microsoft is already in the medical market with HealthVault is a patient-managed, centralized health records solution. It is essentially designed to be a reference point for consumers, not a substitute for medical records. Many believe the company would be sitting pretty if it had a health records business, enabling its users to make records accessible to patients, labs, specialists and pharmacies via HealthVault.
So who is Microsoft eyeing? GE Healthcare’s Centricity and McKesson’s Practice Partner would be nice fits, but the parent companies are not acquirable.
One potential target is Allscripts. The Chicago-based firm says approximately 160,000 physicians, 800 hospitals and 10,000 post-acute facilities nationwide utilize its solutions to automate and connect their clinical and business operations. The company’s shares are trading a dollar and some change below its 52-week high of $22.55, giving Allscripts a market cap approaching $4 billion. It’s been speculated that Microsoft hasn’t moved on the company because it’s been waiting for Allscripts to digest some of its own acquisitions.
Cerner might also be of interest to Microsoft. Its big cash generator is a product designed primarily for hospitals. However, the company’s outpatient electronic medical records system is older with a smaller market share. Cerner would probably have to improve the latter dramatically before it became attractive to Microsoft.
Cerner would also be a lot costlier to than Allscripts, given its market cap of $8.7 billion. Moreover, shareholders might want a bigger premium since the company is one a huge upswing. Its share price has climbed from the mid-70s in to $104.29 in just the past six months and is right near its 52-week high.
As of this writing, Barry Cohen did not own a position in any of the stocks named here.
