NextGen Healthcare Information Systems, a full subsidiary of
) recently revealed an agreement with Puerto Rico Hospital Supply,
Inc. to jointly sell high end technology offerings to medical
providers in the Caribbean and Florida.
The agreement includes the possibility to expand into South and
Central American nations. According to NextGen, Puerto Rico
Hospital Supply's hold in the Latin American and Caribbean markets,
in conjunction with Dell's worldwide presence, will allow it to
penetrate these markets.
As per their understanding, Puerto Rico Hospital Supply will
bring to market several NextGen solutions as parts of Dell's
Electronic Health Record (EHR/EMR) offerings for outpatient and
inpatient settings. Dell will use up-to-date cloud-based know-how
to reduce complications with data management for Puerto Rico
Quality Systems runs a pure-play business model, in an
attractive industry, with a large number of catalysts, which
provoke frequent speculation about mergers and acquisition. On the
positive side, we observe the high proportion of recurring revenues
and steady growth in its NextGen pipeline.
Of late, however, growth of its pipeline metric has been on a
falling trend along with progressively lower number of signed deals
on a quarterly basis.
The company has made multiple acquisitions to bolster organic
growth. Its acquisitions are expected to facilitate its entry in
the small hospital segment. We are concerned about execution risk
emanating from Quality Systems' entry into the rural inpatient
Moreover, competition is intense from well regarded players such
Allscripts Healthcare Solutions
) and others. Price discounting is frequent, particularly on the
lower end, and Software as a Service (SaaS) based model appears to
have exacerbated pricing pressure.
Quality Systems has traditionally focused on providing solutions
for physician practices. However, core ambulatory EHR providers,
such as Quality Systems, will see opportunities shrinking for
selling their products as physician groups are increasingly getting
absorbed into hospitals.
Our Underperform recommendation is supported by a short-term
Zacks #5 Rank (Strong Sell).
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