With just about everyone, from entertainers to U.S.
Congressmen, crossing that invisible line between crassness
and civility, why shouldn't the president be allowed to slip
a few gratuitous stock picks into one of his health-care
speeches? Then again, he doesn't really have to. President
Obama has already signaled to investors where he'd put his
health-care investing dollars.
Don't go there
I'm sure many executives and investors in
major health-care providers such as
UnitedHealth Group (NYSE: UNH) and
WellPoint (NYSE: WLP) are burning the
midnight oil as they ponder the potential pros and cons of a
complex plan. Most of the diversified health-care
players, such as
Pfizer (NYSE: PFE) and
Johnson & Johnson (NYSE: JNJ), will
likely see both benefits and drawbacks once a final plan
takes effect. Whatever shape the eventual law takes, however,
some health-care companies have better odds of
coming out ahead when the dust settleson reform.
Companies that bring new efficiencies into the health-care
system have drawn attention from politicians on both sides of
the aisle. Many of these companies are small, innovative
firms with a huge market opportunity. According to a recent
report by PricewaterhouseCoopers' Health Research Institute,
the U.S. wastes more than $1.2 trillion of the total $2.2
trillion spent on health care each year. Excessive testing
and time spent processing claims top the list of money pits.
Depending upon whom you ask, annual savings in these areas
could range from mere billions into the hundreds of billions
of dollars.
The reform that everyone likes
In particular, the implementation of electronic health
records seems almost inevitable. Obama's health
ITÂ coordinator, Dr. David Blumenthal, says they
could become as integral to medicine as the stethoscope. The
government has already set aside more than $20 billion to
fund the adoption of electronic records, and the president
wants them up and running in five years. To jump-start the
process, the government recently announced $1.2 billion in
initial grants.
There are undoubtedly huge hurdles to overcome here. A
health-care panel I recently attended emphasized the
overwhelming cost and scale of converting legacy IT systems.
That may be bad for the administration's goals (and
taxpayers' wallets), but it's good news for the companies
helping hospitals go digital.
Tech companies such as
Cisco (Nasdaq: CSCO),
Google (Nasdaq: GOOG), and
IBM (NYSE: IBM) are all moving quickly to
provide hardware and software solutions for electronic health
records. But investors who want the best bang for their buck
should also consider companies more directly related to
electronic records, which have more room for growth. Here are
some health-care IT small caps that may
reap the greatest benefits:
Company
Market Cap
P/E Ratio
Athenahealth
$1.3 billion
45.0
Eclipsys
$1.1 billion
12.4 Continued... |