The Unnoticed Opportunity of Healthcare Reform

Though the jury is still out on how – or even if – insurance companies like Humana (NYSE:HUM) will be able to thrive in the post-healthcare reform era, experts mostly agree that President Obama’s final healthcare package is good for pharmaceutical companies, and great for hospitals.

Why’s that? Despite $80 billion in fees and rebates the bill requires Merck (NYSE:MRK), Pfizer (NYSE:PFE), and their peers to cough up over the next ten years, with annual global sales approaching $1 trillion, these companies can absorb the cost… offset by a small flood of new customers. As for hospitals, considering Tenet Healthcare (NYSE:THC) loses about $1 million per day to care for the uninsured [about 4% of total revenue], the benefit of more paying patients is clear.

Right idea, wrong stocks: Yet, investors and the media are still missing the boat when it comes to the healthcare act’s biggest winners…… who’s going to help the hospitals and insurance companies manage an even-bigger pile of paperwork and filing requirements that’s bound to result from a 2400-page bill?

The answer is, healthcare information technology companies.

Obscure no longer: Though the industry was going strong prior to the Marc 22^nd inking of the healthcare overhaul, insurance companies and hospitals (hospitals in particular) could afford a ‘take it or leave it’ opinion regarding the outsourcing of things like billing, claims management, records management, collections, and the like. Now, with margin-eating red tape and a strong influx of new patients to deal with, these companies simply can’t afford to outsource those jobs to the experts.

Enter Cerner (NASDAQ:CERN), Qualilty Systsem Inc. (NASDAQ:QSII), and Allscripts-Misys Healthcare Solutions (NASDAQ:MDRX), just to name a few. These publicly-traded organizations specialize in helping hospitals and insurers not get bogged down – and lose money – by logistics.

From good to better: All these companies offer a great deal to investors, but each one also seems to have their clear area of dominance. Cerner, for instance, offers an entire suite of software that integrates seamlessly. There is one thing almost all of them have in common though… serous revenue and earnings growth.

Of the three stocks sited above – Cerner, Quality Systems, and Allscripts – increase in year-over-year comparisons of revenues as well as profits has become the norm; the recession had no tangible impact on results.

Now, with the recession easing and the increasing complexity of healthcare laws (not to mention the fiscal incentives for the computerization of medical record-keeping and billing the ARRA bill offers), many of the names found in the healthcare IT group stand to gain significantly.