Officials say the economic pressures faced by hospitals will plague healthcare information technology companies in coming months following a third quarter filled with completed mergers and acquisitions, and optimism for growth.
Hospitals are not quite as optimistic. Facilities have begun implementing hiring freezes, reducing capital and cutting back on operational spending, according to John Halamka, chief information officer of Boston-based CareGroup Healthcare System. Harvard Medical School, of which Halamka also is CIO, recently released a letter to employees explaining the financial pressures faced by the institution and what steps are being taken. We are going to be quite conservative about capital spending, Halamka said.
This will affect the companies trying to sell electronic health records, IT infrastructure and systems that require significant implementation and costs, but theres still room for vendors with more flexible, cheaper products, he said. With the federal government continuing to focus on pay-for-performance, hospitals must invest in technologies that help them with those programs, such as EHRs and electronic prescribing, Halamka said. The economy may be bad, but you may have no choice, he said. Its almost a compliance requirement.
Companies that can provide solutions such as Web-based applications and EHRs without costly overhead will still do well, Halamka predicted.
A look at IT companies for the three months ended Sept. 30 shows they posted higher earnings on the completion of acquisitions while continuing to struggle with profits. SXC Health Solutions Corp., which completed the purchase of National Medical Health Card Systems in April, reported $318.1 million in revenue compared with $22.2 million for the third quarter of 2007. Net income was $3.5 million, a 29.6% increase over a profit of $2.7 million for the same quarter last year. The Lisle, Ill.-based developer of information services for the health benefits management industry said in a news release that its strong results have led to higher projections for the rest of the year, despite the current financial climate.
Allscripts Healthcare Solutions, Chicago, and Misys Healthcare Systems completed their merger in the third quarter. Allscripts posted revenue of $85.7 million and net income of $4 million compared with $73.4 million in revenue and net income of $4.1 million for the third quarter of 2007. The results are the last that Allscripts will post as a stand alone company, according to a news release.
Starting next quarter, results will come from the company, Allscripts-Misys Healthcare Solutions.
InfoLogix, Hatboro, Penn., wrapped up its purchase of three companiesDelta Health Systems, Aware Interweave and Healthcare Informatics Associatesand saw earnings of $23.8 million compared with $20.5 million for the same period last year. The company had a net loss of $2.5 million for the third quarter compared with a net loss of $466,000 for the same period last year. The company, which makes wireless tracking products, attributed the loss in part to clients that delayed projects into the fourth quarter and early part of 2009.
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