Electronic Medical Records as a Stimulus Play

Hot on the heels of my column last week on Wabtec (WAB - commentary - Cramer's Take) as a way to play the presidential stimulus package when it comes to regional high-speed rail projects, I received some comments from readers looking for other ways to play the stimulus plan. The plan will affect many businesses, and one that interests me is electronic medical records. Our health care system has problems in need of solutions, and they are likely to linger.

Electronic medical records is a tricky area but an interesting angle in the stimulus plan, given the sheer size of the industry, the number of lives it touches and the current state of its infrastructure. I say tricky because the infrastructure needed to make it work is not only large but also expensive.

Consider that a small percentage of the 5,000 domestic hospitals and the 800,000 physicians use common computerized record-keeping systems. Several studies from Harvard and RAND estimate that the cost to implement such technology across the domestic hospitals would cost $75 billion to $100 billion over a 10-year period.

Another view of the potential cost comes from the commonwealth of Massachusetts. Massachusetts piloted an electronic medical records program and concluded that it would cost up to $340 million to build a computer system to convert to electronic records at its 14,000 physicians' offices by 2012 and its 63 hospitals by 2014.

Such a conversion would bring long-term cost savings and job creation. It's no secret that health care costs have been skyrocketing in recent years, and some studies suggest that these costs are growing at three times wage growth. Consider the current economic environment and rising unemployment, and it's easy to conclude that the number of people without health care coverage is going to increase.

It's also no secret that the U.S. health care system is antiquated and that in its current form, it is susceptible to mistakes, some of which are deadly. Roughly 100,000 Americans die every year from medical errors, according to the Institute of Medicine. Let's not forget the new jobs to be created by implementing this technology as well as the need to train or retrain people in how to utilize such a system. Clearly, this would be huge.

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At the time of publication, Versace had no positions in the companies mentioned above, although positions may change at any time.

Chris Versace is a founder and managing partner of Agile Capital Management in the Washington, D.C., area. ACM uses a thematic perspective coupled with an ecosystem lens based on the methodologies that Versace used during his 13 years as an equity analyst at Salomon Brothers, Donaldson, Lufkin & Jenrette and Friedman Billings Ramsey.

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