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August 4, 2008

EnovateIT supplies custom computer wall stations, point-of-care carts, and articulating arms. Our mission is to create better patient care. We bring patients and caregivers closer by designing and facilitating effective solutions. Our integrated healthcare mobility solutions merge innovation, experience and technology to solve healthcare information needs from a single source. EnovateIT.

1. Eclipsys Announces Good Numbers, Not Just Improved Excuses

Facts and Background

HIT vendor Eclipsys announced second-quarter earnings Wednesday, reporting an 11% increase in revenue and earnings per share of $0.16 vs. $0.11 a year ago. Excluding one-time charges, profits were $0.24, beating Wall Street's expectations by a penny.

Opinion

Finally Eclipsys has something to talk about other than subscription plans that never seemed to result in earnings. New management is making ECLP look and work like a real company that understands what Wall Street likes to see.

Musings

ECLP shares have mounted a furious rally in the past couple of weeks, though still short of February's high of the year.
New managament seems to be quieter, more consistent, and less desperate than those they replaced.
The EPSi acquisition and the development of Sunrise Pharmacy give ECLP good ongoing prospects and recurring revenue.
On the negative side, ECLP sells mostly clinical systems and doesn't win many deals against Epic or Cerner. Somehow the company makes good revenue without earning much new business.
ECLP has had a lot of management turnover, nearly all of it overdue judging from recent performance improvement.

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2. ACS Gets a UMass-ive Outsourcing Deal

Facts and Background

Dallas-based Affiliated Computer Services announced Thursday that five-hospital UMass Memorial Healthcare Care had signed a $100 million, five-year IT infrastructure outsourcing contract.

Opinion

This seems like a lot given the size of the organization (12,000 employees), but no details were provided. It covers nearly everything except application support, it appears.

Musings

The deal includes technical services, data center hosting, desktop management, telecommunications, and business continuity services.
ACS has been a UMass vendor for six years.
According to UMass tax records for the most recent year, it paid ACS $11.5 million, plus another $2.7 million to the former First Consulting Group and $1.2 million to new FCG parent CSC. That's a lot of consulting and outsourcing expense.
UMass signed a 2005 deal with ACS for what looks like the same list of services announced in the new deal.
The original 2002 agreement was for $102 million over seven years, o this is a 40% increase in value.
Is this a lot to pay? It sounds like it, but at least the hospital has experience with the same vendor and hasn't kicked them out so far.

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3. Where's the Strangest Place athenahealth Made Whoopie? That Would Be H.E. Butt, Bob

Facts and Background

Athenahealth announced Wednesday that its billing software will be used in up to 200 retail clinics operated by RediClinic LLC located in Wal-Mart and H.E.B. (H.E. Butt Grocery) stores.

Opinion

The deal was nearly entirely for athena's billing products and retail clinics aren't thriving like everyone expected, but it's a nice addition to athena's footprint and recurring revenue prospects.

Musings

Future prospects aside, RediClinic has only 35 clinics.
A competitor's EMR offering will continue to be used in most cases (that of eClinicalWorks, one must assume, since a February announced from Wal-Mart requires all in-store clinics to use eCW).
Given low-cost insurance billing and minimal doctor services offered, it doesn't seem likely that the deal will be all that lucrative if athenahealth is taking its usual small percentage.
Despite the sexiness of the Wal-Mart name, investors apparently saw a limited upside, with ATHN's shares are down since the announcement.
In the past three months, ATHN insiders bought 55,000 shares and sold 3.5 million. Some of that may have been cashing in vested shares from the IPO, but it's not encouraging to shareholders to see those in charge unloading.
All that aside, ATHN still has no significant competition on the billing side, its nearly perfect renewal rate doesn't seem to be slipping, and there's a lot of runway still under the company to grow going forward. The company is still tiny ($109 million in revenue) and high expectations are built into the trailing PE of 570, but it's early in the game.

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