) continues to expand rapidly through new client wins. Following
last week's agreement with Worldwide Clinical Trials, Inc.,
a global contract research organization ("CRO"), the company
has won another deal with St. Vincent's Hospital, a member of the
Hospital Sisters Health System and the largest hospital in
Per the deal, St. Vincent's Hospital will deploy Merge's
complete cardiology solution suite to provide end-to-end support
for managing cardiac images, hemodynamics and ECG data. Merge
expects this to help improve workflow and patient care. However,
financial terms of the contract were not disclosed.
The entire suite of cardiology solutions includes Merge Cardio,
an enterprise-level image and information system and Merge Hemo,
which is a catheterization laboratory knowledge tool for data
The list also includes iConnect Access, (a zero-download DICOM
image and XDS viewer) and iConnect Share, (Internet-based gateway
for image sharing). The company noted that in 2011 Merge Hemo was
awarded rank 1 by KLAS, an organization that measures product
perceptions of customers.
With the entire suite of Merge Cardio, cardiologists can access
integrated patient information through a centralized web-based
system, thereby ensuring fast and better treatment even if they are
not present on location. This is likely the reason that Advocate
Health Care, one of the top 10 health care systems in the U.S.
implemented Merge's Cardio suite across its 250+ care sites,
including 10 acute-care hospitals and two integrated children's
Healthcare-IT Industry - Current Scenario
Currently, imaging in laboratories accounts for over 90% of data
storage in healthcare. As per the estimates of the global market
research and information analysis company RNCO, the U.S. 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.
According to Frost and Sullivan and Merge's 2011 internal
research report, the global market for imaging software and
services, healthcare IT interoperability solutions and electronic
health records (EHR) solutions for radiology, cardiology,
ophthalmology and orthopedics is worth $7.5 billion annually.
With greater adoption of EHRs in doctor's offices, hospitals and
imaging centers, the need for data exchange is on the rise. In this
backdrop, a reliable imaging interoperability platform becomes
significant as a vendor-neutral archive (VNA).
During the second quarter of fiscal 2012, Merge was acknowledged
by InMedica, a division of IMS Research as the global market leader
in VNA Solutions. Data from InMedica's study revealed that in 2011,
Merge's iConnect VNA customers accounted for 37% of all studies
archived in VNAs worldwide.
The overall U.S. 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, which was
included as part of the American Recovery and Reinvestment Act
(ARRA), an economic stimulus bill.
The ARRA, along with the accompanying HITECH provisions included
more than $35 billion in incentives, which rewarded providers who
use certified EHRs in a meaningful way.
In August 2012, the final regulations for the second stage of
the 'Meaningful Use' incentive program for EHRs were released,
along with the final rule on the certification of EHR technology.
As per this final mandate, the 2009 ARRA, which authorized the $27
billion program, requires providers to use certified EHRs in order
to earn bonus payments from Medicare, Medicaid or both for
'Meaningful Use'. Implementation of the final stage 2 ruling will
begin in 2014.
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, including Merge, are
witnessing improved and positive investors' 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.
This will benefit Merge in the long run. It is believed that
Merge is well placed to capture 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 the imaging-related software and services offered by
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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