In a concerted effort to tap the growing market for electronic
health record ("EHR"), imaging and interoperability solutions
) recently struck another deal with a national radiology group
Lakeland Healthcare. As per the deal, Lakeland Healthcare group
will deploy Merge's entire suite of cloud-hosted radiology
solutions to meet the "Meaningful Use" need as well as to improve
The Lakeland Healthcare group is a multi-site practice with two
regional hospitals and a number of affiliated and free standing
clinics in Illinois. Each year this group performs 300,000 studies
for hospitals in the US.
Thus, Merge strongly expects this newly formed alliance between
them to increase the number of hospitals served along with an
increase in the company's number of studies to over one million in
a couple of years.
Merge's radiology solutions comprise Merge RIS, a web-based
radiology information system used for streamlining of workflow as
well as helps to meet the Meaningful Use criteria. The other
meaningful use solutions of Merge are Merge PACS (a real-time
picture archiving communication system), Merge Financials (a
web-based billing system), Merge Documents (a paperless office
solution), Merge Referral Portal and Merge Dashboards.
Earlier this month, Merge also added 12 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
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
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
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.
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
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
) has made the healthcare solutions and services market highly
Presently, Merge retains a short-term Zacks #4 Rank (Sell). Over
the long term, we have a Neutral recommendation on the stock.
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