The increasing imperative within the U.S. health care system to contain costs is spawning a staggering array of administrative work. Stoking this bureaucratic machinery is the Affordable Care Act (ACA), commonly called Obamacare.
President Obama's signature domestic achievement emphasizes information management as a tactic of cost containment. A big winner of this trend is Cerner (CERN - Get Report) , the largest publicly traded provider in the U.S. of information technology solutions for health care organizations.
President Obama's signature domestic achievement emphasizes information management as a tactic of cost containment. A big winner of this trend is Cerner (CERN - Get Report) , the largest publicly traded provider in the U.S. of information technology solutions for health care organizations.
CERN data by YCharts
Cerner is among a group of stocks tapped into inexorable secular trends, making them suitable for long-term growth portfolios.
Cerner is the world leader in the booming field of electronic health readcors (EHRs). The company last week announceda string of lucrative new contracts that should fuel revenue and earnings well into 2016.
The company's "Cerner Millennium" software combines clinical, financial and management information systems that allow health care providers to access an individual's EHR at the point of care. The company's clients include physicians, nurses, laboratory technician and pharmacists.
Cerner is the world leader in the booming field of electronic health readcors (EHRs). The company last week announceda string of lucrative new contracts that should fuel revenue and earnings well into 2016.
The company's "Cerner Millennium" software combines clinical, financial and management information systems that allow health care providers to access an individual's EHR at the point of care. The company's clients include physicians, nurses, laboratory technician and pharmacists.
According to the federal government's U.S. Healthcare Efficiency Index, more than 5 billion health care transactions are conducted annually via EHRs, at a cost savings of more than $23.5 billion versus paper.
As part of the Obama administration's American Recovery and Reinvestment Act of 2009, also known as the economic stimulus bill, the Health Information Technology for Economic and Clinical Health (HITECH) Act implemented substantial financial incentives for hospitals and physicians in the form of higher Medicare reimbursements to encourage the adoption of EHRs. The incentives totaled $19.2 billion.
Advocates of EHR argue that the technology not only reduces costs and eliminates administrative waste, but also enhances the quality of care. Adding urgency to EHR adoption are HITECH's strict penalties on health care providers for not doing so.
To ensure that every dollar is used for the intended purpose of promulgating EHR, physicians and hospitals seeking to qualify for incentive payments must demonstrate to Uncle Sam that they're actually using the technology.
In addition to providing the integrated software packages necessary to digitize health records, Cerner also handles implementation and records management and helps providers prove EHR adoption to the federal government. The company routinely develops software solutions in partnership with such tech giants as Apple and Microsoft.
Cerner reported bookings in the third quarter of $1.59 billion, an all-time high and an increase of 44% compared to $1.1 billion in same quarter a year ago.
Third quarter revenue came in at $1.128 billion, a year-over-year increase of 34%. Adjusted net earnings were $188.7 million, compared to $145.3 million of adjusted net earnings in the year-ago quarter. Adjusted diluted earnings-per-share (EPS) were 54 cents, a year-over-year increase of 29% and in line with analysts' estimates.
The stock now trades at about $59, with analysts calling for a one-year price target of $82, for a gain of nearly 40%. This health care technology leader is a great buy-and-hold play for your long-term wealth building strategy.
By John Persinos
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