Expect to see some slowdown in growth in the health information technology market as the industry matures, but hospitals remain committed to their IT projects, which will help vendors that might be worried about downturns in spending, according to industry analysts.
The slowdown isnt unexpectedit follows two years of strong earnings growth in the market, said Corey Tobin, equity research analyst with William Blair & Co. who tracks Allscripts Healthcare Solutions and Eclipsys Corp. Financial reports are rolling out for some of the big players in the IT market, with Eclipsys, HLTH Corp. and Mediware Information Systems set to release earnings statements Tuesday. In the past two months, Cerner Corp., McKesson Corp. and Streamline Health Solutions have posted their reports, and MedAssets released its expected earnings. Cerner, HLTH and Eclipsys were leading in intraday price performance, according to financial charts tracking Nasdaq rates Monday morning.
Some vendors missed their mark with earnings for the early part of 2008 in a market that has been bifurcated, said James Kumpel, managing director of healthcare services equity research with Friedman, Billings, Ramsey Group. But other IT companies beat expectations, Kumpel said, pointing to Cerner, a company FBR tracks.
Cerner last month reported $36.8 million net earnings on total revenue of $384.7 million for the first three months of 2008, up 33% from first-quarter 2007 net earnings of $27.7 million. MedAssets, which will host a conference call May 14 to discuss results, expects to post total net revenue between $58 million and $59 million, higher than expected. The company also recently announced the acquisition of Accuro Healthcare Solutions.
Demand for electronic health records and clinical systems continues to drive demand, based on respondents to Modern Healthcares annual IT survey. Those types of long-term, strategic clinical projects will keep vendors busy this year. IT remains a strategic priority for many hospitals, Tobin said.
Mergers, a popular trend in the past few months, will continue to play a role throughout the year, Tobin added. Consolidation is natural as companies seek broader distribution paths for products that are becoming more narrowly focused, he said. Hospitals also are becoming more tech-savvy while scrutinizing ways in which to streamline internal operationsworking with fewer vendors who can provide a wider range of services is one way to accomplish that, he said.
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