I think there’s only one way to drive down the cost of health care: technology.
Of course, that’s not a new idea. These days I see signs of technology – and its cost-lowering efficiencies in all areas of life.
Just yesterday, I got an e-mail from Florida Power & Light (FPL) about its smart meters. Replacing the need for FPL-employed meter readers walking from house to house, smart meters automatically transmit usage data back to headquarters, thereby reducing the cost of service.
I was also on the Florida Turnpike for a jaunt yesterday. And as I sped past the automated SunPass toll contraptions, I thought about how we used to stop and hand over singles to real people in toll booths. But I digress…
Back to our cost-bloated health care system and the cost-cutting value of technology.
Here are a handful of the health care information systems companies you should have on your radar. The chart indicates performance, relative to the S&P 500 (in white), since the beginning of 2009.
All told, last year the health care information systems market was worth about $22 billion in North America and $40 billion globally.
Looking ahead, growth rates for this sector outpace expected global GDP growth by more than five times (16% versus 3%). That estimate makes the health care information systems market worth nearly $54 billion by next year.
While some publically-traded companies in this space have already reached escape velocity – Medidata Solutions (MDSO) and Cerner Corporation (CERN) are up between 442% and 500% – other stocks are sleepers, soon to wake and blossom, like Allscripts Health Care Solutions (MDRX), Quality Systems (QSII) and Medassets (MDAS) to name but a few.
Plus, there’s likely to be a good deal of merger and acquisition activity in this space. Just recently, a private equity group bought out Greenway Medical Technology (NYSE: GWAY), sending the shares up north of 18% in a day.
I don’t think managing our health care system will ever be as simple as using SunPass to pay tolls on the Florida Turnpike. But I’m certain that health care information systems will advance by leaps and bounds over the next five years.
Over the long run, this trend should drive down the cost of health care services and pad the pockets of investors who invest in this essential and high-growth niche of the health care sector.
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