Inovalon Gains on 5-Year Deal with Wellcare Health Plans

Healthcare analytics provider Inovalon Holdings Inc INOV recently entered into a five-year partnership with managed care service provider Wellcare Health Plans WCG to help the latter improve its services. Inovalon's share price gained almost 2.4% to close at $21.69 following the news.

Inovalon's cloud-based data analytics platform will help Wellcare identify loopholes in its services. The platform is capable of processing huge amount of data in almost real-time, which will help Wellcare provide better quality service to its members.

Clinical and quality outcomes have gained significant importance in Medicare Advantage, managed Medicaid, Commercial, accountable care organizations (ACOs) and other value-based programs. The Inovalon-Wellspace collaboration reflects growing number of cloud-based data analysis providers in the healthcare space.

Of late, Inovalon's solutions are also being picked by IT giants like Hewlett Packard HPQ apart from health plan providers like the Independent Health Association and FamilyCare Health.

Meanwhile, Independent Health Association (IHA), one of the highest ranking health plans in the U.S., extended its relationship with Inovalon to develop solutions focused on disease and comorbidity data. These solutions will help IHA gain clarity on disease conditions and comorbidity progression.

Inovalon also recently extended its business ties with FamilyCare Health. Under the extended arrangement, Inovalon's solutions will help in providing patient disease insight, risk score accuracy, financial performance and regulatory data compliance for FamilyCare Health's Medicare Advantage members.

In July this year, Inovalon and H-P joined forces to offer analytics solution to State of Georgia Department of Community Health's (DCH) Medicaid and PeachCare for Kids programs.

We believe that these partnerships with existing as well as new clients will continue to drive Inovalon's revenues. In the second quarter of 2015 (ended Jun 30), the company's revenues increased $16.6 million or 17% year over year. Of this, 57% came from new clients while extended contracts contributed the remaining.

Management at Inovalon noted that the average time frame for existing clients to request additional services has trimmed down to 7.4 months in the first half of 2015 from 16 months in the year-ago period. This clearly hints at the growing popularity of Inovalon's solutions among its existing customer base.

In a separate development, Inovalon completed the acquisition of advisory services and business intelligence (BI) solutions provider Avalere Health. The buyout has helped Inovalon add approximately 200 pharma/life sciences clients in the broader healthcare space. Inovalon expects the acquisition to be mildly accretive to 2015 earnings, assuming that the deal closes within the stipulated period.

Zacks Rank and Key Pick

Inovalon carries a Zacks Rank #3 (Hold).

A better-ranked stock in the same sector is CDW Corp CDW with a Zacks Rank #1 (Strong Buy).

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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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