Shares of IDX Systems Corp. are down 13% early Thursday afternoon in the wake of a stock analyst's downgrade related to a decision by Salt Lake City-based Intermountain Health Care to cancel an informatics contract with the electronic medical records developer.
IDX stock was trading at $14.35 at 1 p.m. EDT, down from its Wednesday close of $16.50, after WR Hambrecht & Co. issued a "sell" recommendation Thursday morning. The issue has fallen by nearly 18% on the Nasdaq since closing at 17.45 on Monday.
"A number of recent events within the Carecast division have caused us to re-evaluate our estimates," writes Hambrecht analyst Sean Wieland.
Carecast is the Seattle-based division of IDX that produces integrated clinical and financial software for healthcare organizations. It represents about one-third of sales for the entire company, which is headquartered in Burlington, Vt.
Specifically, Intermountain decided to cancel a long-term Carecast contract it signed in 2001, opting instead to bring its electronic medical records development back in-house. Wieland estimates that this contract was worth more than $10 million and that the loss will reduce IDX revenue by $2.5 million and earnings by 2 cents per share in 2003.
However, IDX spokesperson Margo Happer says that the long-term collaborative partnership had been in its early stages when Intermountain pulled the plug. "We were anticipating no revenue from this project this year," Happer says.
Happer also says--as Wieland notes in his report--that IDX will remain the technology vendor for a comprehensive nonclinical patient care management system under development at the Utah health system. Additionally, Intermountain still is working with IDX on the Standards-Based Active Guideline Environment, or SAGE, a federally funded project intended to bring computerized clinical decision support to the point of care.
"Intermountain Healthcare will continue as an important partner in the SAGE project," Happer says.
SAGE is the subject of a lawsuit filed by whistleblower Mauricio Leon, M.D., against IDX, in which Leon, the onetime lead scientist on SAGE, alleges the company falsified documents submitted to the U.S. Department of Commerce.
Also shaking investor confidence in IDX is this week's news that the company suspended Carecast President Larry Krassner.
However, IDX denies any link between the Krassner suspension and the Leon suit, and analyst Wieland says those two events do little more than add to "uncertainty" about the company.
"My downgrade has nothing to do with the lawsuit and it has nothing to do with Larry Krassner," Wieland says.