Merge Expands with Meaningful Use - Analyst Blog


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In a concerted effort to tap the growing market for electronic health record (EHR), imaging and interoperability solutions provider Merge Healthcare ( MRGE ) recently added twelve new practices to its ever-growing list of users who selected its complete EHR solution to achieve Meaningful Use need. Presently, Merge Meaningful Use solutions are deployed by over 89 clients, representing more than 850 physicians.

The company encouragingly noted that the Centers for Medicare & Medicaid Services (CMS) proposed a second set (Stage 2) of the Medicare/Medicaid Meaningful Use EHR program (released in March 2012) that included specialties like radiology and orthopaedics in meaningful use. The company remains optimistic that with this Stage 2 requirement, the specialty physicians will come up to meet the Meaningful Use criteria, thereby driving the demandfor its offerings.

Merge's meaningful use needs solutions include Merge RIS v7.0 that provides a radiology-specific EHR with complete certification. The product enables healthcare providers to efficiently record patient details. With the complete EHR Ambulatory certification, RIS v7.0 has emerged as the industry's leading radiology information system (RIS). With RIS v7.0, users can now utilize a single product for radiology-specific workflow to qualify for up to $44,000 in funding under the Health Information Technology for Economic and Clinical Health (HITECH) Act and also avoid future penalties.

Merge OrthoEMR, a product for the orthopaedic physicians, received the complete EHR Ambulatory certification. While qualifying for incentive funds, this product enables orthopaedic physicians to efficiently record patient details and eliminates the need for carrying images.

Healthcare IT Industry- Current Scenario

As per the estimates of the global market research and information analysis company RNCO, the US healthcare IT market is anticipated to grow at a compound annual growth rate (CAGR) of over 24% during 2012-2014. This market will gradually adopt electronic health records (EHRs) to meet HITECH funding requirements. Merge is expected to target this market given its imaging interoperability platform.

The overall US health IT (HIT) market witnessed a dramatic change in February 2009 with the passing of the Health Information Technology for Economic and Clinical Health (HITECH) Act, as part of the American Recovery and Reinvestment Act (ARRA), an economic stimulus bill. The ARRA and accompanying HITECH provisions allotted more than $35 billion in incentives, which reward providers who use certified EHRs in a meaningful way.

According to the CMS, through December 2011, more than 175,000 professionals and hospitals registered for meaningful use incentive programs and $2.5 billion was paid out in 2011 to eligible hospitals and professionals.The incentives will be offered for a period of 4-5 years after which physicians will be penalized for not adopting proper measures.

The Stimulus aims to increase the use of EHR by medical practitioners, in both ambulatory and hospital-based settings. As a result, selected companies in this space are witnessing heightened investor interest. Favorable demographic trends, reinforced by a supportive regulatory environment, are expected to sustain strong growth in demand for EHR-related software in the foreseeable future. We believe Merge is well placed to bag a meaningful share of the multi-billion dollar ARRA-related healthcare information technology investment opportunity.

However, we remain concerned about the declining Medicare reimbursement for advanced medical imaging that could negatively affect hospital and imaging clinic revenues, thereby reducing the demand for imaging-related software and services offered by Merge. Furthermore, the presence of many big players like General Electric (GE) and McKesson Corporation (MCK) has made the healthcare solutions and services market highly competitive.

Presently, Merge retains a short-term Zacks #4 Rank (Sell). Over the long term, we have a 'Neutral' recommendation on the stock.

GENL ELECTRIC (GE): Free Stock Analysis Report
MCKESSON CORP (MCK): Free Stock Analysis Report
MERGE HEALTHCAR (MRGE): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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