In a concerted effort to tap the growing market for electronic
health record ("EHR"), imaging and interoperability solutions
provider
Merge Healthcare
(
MRGE
) recently announced the launch of a picture archiving and
communication system (PACS) solution for orthopedics called Merge
OrthoPACS.
Prima facie, a subscription model of OrthoPACS, has been
marketed by Merge to achieve proper client review and requirements
in order to set its long-term operating plans.
This new complete set of image management and digital templating
solutions will capture, store and manipulate digital
orthopedic-specific images from multiple locations in a single
viewer, providing orthopedic surgeons with efficient and faster
query resolution.
The company also claims that the new device will perfectly into
the current workflow of the surgeons. Georgia's largest orthopedic
practice Resurgens Orthopaedics has opted to upgrade to Merge
OrthoPACS immediately after the release of the product.
Currently, imaging in laboratories accounts for over 90% of data
storage in healthcare. Merge 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 orthopedics and radiology 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 demand for its
offerings.
According to Frost and Sullivan and Merge's research reports in
2012, the global market for imaging software and services,
healthcare IT interoperability solutions and electronic health
records (EHR) solutions for orthopedics, radiology, cardiology and
ophthalmology is currently worth $7.5 billion a year. With greater
adoption of EHRs in doctor's offices, hospitals and imaging
centers, there is a corresponding increase in the need for data
exchange.
In December last year, CMS declared that 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.
Thus, favorable demographic trends, reinforced by a supportive
regulatory environment, are expected to sustain the strong growth
in demand for EHR-related software in the foreseeable future. We
believe that Merge is well placed to gain a meaningful share of the
multi-billion dollar American Recovery and Reinvestment Act
(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.
Currently, Merge retains a short-term Zacks #3 Rank (Hold). 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
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