McKesson Corporation (MCK), Cerner Corporation (CERN), athenahealth, Inc (ATHN): These High-Flying Stocks Could Be Riskier Than You Think

Page 1 of 2

Health care technology has been hot over the past few years. Billions of taxpayer dollars were spent to encourage hospitals and physicians to use electronic health record, or EHR, systems. These incentives translated to higher sales and profits for the vendors of those systems.

Boatloads of federal money injected into health care continues to bolster the stocks of EHR companies. Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) shares have soared by 68% year-to-date. athenahealth, Inc (NASDAQ:ATHN) is up 54%. Quality Systems, Inc. (NASDAQ:QSII)‘ stock has gained more than 30% this year. Large players Cerner Corporation (NASDAQ:CERN) and McKesson Corporation (NYSE:MCK) are both up around 27%.

But could these high-flying stocks actually be riskier than they might appear at first glance? A couple of recent reports suggest the answer might be “yes.”

Not so hot
A study published in the Annals of Internal Medicine found that use of EHR systems didn’t lower inpatient costs. Savings were seen in ambulatory settings — but costs decreased by only 3.4% per year after using EHR technology for 18 months. At that rate, according to the study, it would take seven years for health care providers to recover their investment.

Physicians don’t think EHR systems are saving them any money. Actually, they think the opposite is true. The 2013 Physician Outlook survey recently conducted by market research firm Ipsos for Wolters Kluwer Health found that 68% of physicians said that their costs are going up. The top reasons cited for higher costs were implementation of health information technology, Obamacare and other government regulation, and uninsured patients.

Another study published in the March issue of Health Affairs appears to confirm the survey findings. Researchers found that only 27% of physicians have a positive return-on-investment within five years from implementing EHR systems. Even with federal incentives thrown in, only 41% would make their investment back in five years.

If health care providers face losing investments even with Uncle Sam’s help, why would they spend money to buy EHR systems? The risk for vendors like the high-flyers mentioned earlier is that many providers will decide that EHR technology isn’t as hot as it has been cracked up to be.

Still warming up
On the other hand, a major reason why health care providers aren’t seeing better returns should be easily addressed. Researchers found that a large number of physician practices, for example, experienced negative financial returns because they didn’t make operational challenges such as discontinuing use of paper medical records.

And many of the physicians surveyed by Ipsos see benefits in using EHR systems. 55% of respondents think that health information technology can help improve patient safety. 51% said that EHR systems can help improve evidence-based care.

Even if health care providers that haven’t jumped on the EHR bandwagon opt out, solid market potential exists for capturing market share from dissatisfied customers that already use EHR technology. Around 23% of physicians have said they planned to switch to a new system this year.

McKesson Corporation (NYSE:MCK)Credit: McKesson Corporation (NYSE:MCK)

Several of our high-flying EHR companies have impressed customers enough to attract other customers who weren’t so happy with their previous systems. A new Black Book Rankings report found that physicians who switched to a new EHR system are moving to a handful of vendors, including athenahealth, Inc (NASDAQ:ATHN) and Cerner Corporation (NASDAQ:CERN). Allscripts, McKesson Corporation (NYSE:MCK), and Quality Systems, Inc. (NASDAQ:QSII)’s NextGen also received top rankings in client experience surveys conducted by Black Book.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!