Mr. Stockton: As far as the companies that we cover, it is primarily software companies like Cerner (CERN) and Eclipsys (ECLP) that focus on the hospital space and then other companies like Quality Systems (QSII) and Allscripts (MDRX) that focus more on the physician practice space.
TWST: What makes them appealing?
Mr. Stockton: Originally when we picked up coverage of healthcare IT, the reason
it was appealing to me was that healthcare is roughly 18% of GDP in the US, but
if you look at healthcare providers as a percent of overall IT spending in the
US, it is more like 5%. So relative to its size within the economy, health care
is a space that has traditionally significantly under-invested in technology.
That under-investment has manifested itself as a largely paper-based health
record system. There is a lot of visibility that healthcare spending is going to
grow faster than the economy overall, so that 18% of GDP is going up. I think
the Congressional Budget Office projects it will be 22% by 2020 and 30% by 2030.
So the IT spend of healthcare providers should grow dramatically. That was
originally why we as a firm chose to cover the space - we felt it was going to
be a good growth area. And then you saw President Obama really start to talk
about changing the dynamic in health care. During his campaign he said he wanted
the government to spend 10 billion a year for five years to help the transition
from paper-based medical records to electronic. Then he got the nomination and
then he won the election. I think a lot of people felt like that would be a good
tailwind for the space just because the Administration supports it. But then in
January when the stimulus package was introduced in the House and there was a
significant healthcare IT component, I think that really surprised a lot of
people.
Tickers included in this excerpt: CERN, CPSI, ECLP, MDRX, QSR
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