The tumbling of Allscripts Healthcare Solutions' stock price (it declined 30% on Nov. 2 after a disappointing earnings report) raises the question of whether healthcare information technology stocks are overvalued. Cerner Corp., for example, fell 15% in the past three weeks. A lot of the valuation in these companies is based on very optimistic projections of both government and consumer spending.
The Allscripts plunge should remind us of one key factor that is often overlooked in healthcare IT: the physician. Like many healthcare IT companies, Allscripts has wonderful technology but it is relatively expensive for smaller medical groups. Many physicians are reluctant to pay for these new systems when they see most of the economic benefits being reaped by employers and health plans.
The physician factor needs to be included in any computation of the future value of the major healthcare IT vendors.
David KauppiManaging directorMidMarket CapitalChicago To submit a letter to YOUR VIEWS, click here. Please include your name, title and hometown.