IRVINE, Calif. (TheStreet) -- Health care information stocks have been under intense stock pressure of late, and Quality Systems (QSII) made a move to alleviate some of that pressure on Thursday, announcing a deal to acquire Opus Healthcare Solutions.
Quality Systems has been among the leaders of health care information companies moving physician groups to adopt electronic records -- the federal government is promising physician groups $25 billion in reimbursement for the transition.
With health care investors coming around to the idea that the earnings benefit to these health care information companies from the federal stimulus may be gradual across the next three years, the diversification by Quality Systems into an under-served market make sense as part of attempting to diversity earnings potential.
Health care investors have been keeping these health care stocks, including Quality Systems, on a very short leash in this earnings season, with the pullbacks in stock price -- even after in-line earnings as was the case with Quality System -- leading to double-digit share price declines.The health care information sector has been largely split between companies focused on the hospital market, such as Cerner (CERN), and companies focused on the physician market, such as Quality Systems. Cerner delivered a strong fourth quarter earnings on Wednesday, bucking the recent trend, but even the Cerner big earnings did not rally the health care information stocks as a group. The acquisition of Opus Healthcare allows Quality Systems to target the most under-penetrated of health care markets: community hospitals of less than 100 beds, primarily in rural areas. This is a market that has been the focus on Computer Programs & Systems (CPSI) and Healthland, a private company owned by venture investor Francisco Partners. Quality Systems' move into the target market of CPSI and Healthland will certainly alter the competitive landscape in what some analysts view as the market with the largest opportunity for growth -- not in dollar terms, but by percentage growth. There have also been rumors that Healthland will be taken public by Francisco Partners within the next six months. Francisco Partners' officials did not return call about Healthland.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV