This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Technology Will Set Health Reform Free

NEW YORK ( TheStreet) -- Last year venture capitalist Vinod Khosla wrote a white paper that was a call to arms on medical IT, a field I've been following since 2006.

The big story back then was of electronic health records, or EHRs, which would transform care by giving doctors data on their patients. I naively assumed this would benefit mainstream tech companies, like Microsoft (MSFT - Get Report) and Google (GOOG - Get Report), which had the necessary technology. They assumed as much, too.

We were wrong. Both those companies exited the market with their financial tails between their legs.

The 2009 Recovery Act included $19.2 billion in stimulus for EHRs, and politically-connected CEOs like Glen Tullman of Allscripts (MDRX - Get Report) assumed they would win the money by selling software as a service, or SaaS, requiring less upfront cost to doctors and clinics, along with faster upgrades done centrally.

The argument made sense, but Tullman, too, was wrong. Since December, he has also been out as CEO, as Forbes reported. Shares in Allscripts now sell for little more than they did when health reform was first proposed.

Instead the gains have gone to incumbent medical technology firms like Cerner (CERN - Get Report), which has quadrupled in value under this president, and McKesson (MCK - Get Report), which has more than doubled while adding a handsome dividend. The new Allscripts CEO is a former Cerner executive.

More importantly, medical care inflation still outstrips that in the general economy, according to MetricMash. Overall prices from October 2009 through October 2012 were up 7%, medical costs were up 10.5%.

Khosla confronted doctors directly in September, as Wired reported, saying "healthcare is like witchcraft and just based on tradition," rather than driven by data. He said 80% of what doctors do could be done better by computers.

Khosla blames a natural resistance to change on the part of doctors, device makers, and others in the industry. At the Health Care Blog, David Liu didn't disagree with Khosla's diagnosis, but called his entrepreneurial mind set "problematic and dangerous."

My own reading of Khosla paints a different picture. The current market failures are driving people out of the market, he writes, into the arms of companies like Walgreens (WAG) and CVS Caremark (CVS - Get Report), which already have clinics manned by nurses and physicians' assistants -- assisted by technology -- in hundreds of stores around the country.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
WAG $81.65 2.05%
CERN $68.33 0.00%
CVS $103.95 0.00%
GOOG $540.11 0.00%
MCK $240.61 0.00%

Markets

DOW 18,232.02 -53.72 -0.29%
S&P 500 2,126.06 -4.76 -0.22%
NASDAQ 5,089.3620 -1.4320 -0.03%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs