A Piper Jaffray analyst said Wednesday that many U.S. hospitals will be required to update and modernize their electronic record keeping, which will benefit health care IT companies like Cerner Corp. and Eclipsys Corp.
Analyst Sean Wieland said Congress has expanded a program that allowed for independent audits of health care companies and hospitals, determining when a company had been overpaid or underpaid for treatments and helping Medicare recover money when necessary.
In late 2006, Congress called on the Centers for Medicare and Medicaid Services to hire independent auditors, called recovery audit contractors, to identify incorrect payments to health care companies. He said a two-year tryout of the program was successful, as the auditors identified $371.5 million in improper in three states in 2007.
As a result, Wieland said, Congress wants the program to go nationwide at the end of 2009.
Wieland said hospitals, health insurers and physicians have a wide-ranging mix of record keeping systems, which can include various kinds of electronic and paper systems, and human error can complicate things further. He estimated more than half of all hospitals do not have the systems they would need to respond to this type of audit.
Companies like Cerner and Eclipsys make software that can help the hospitals respond to the audits and "improve adoption of integrated electronic medical records systems," he wrote.
"While information technology is not a cure-all, automation of the revenue cycle is a necessary part of the solution," Wieland said.
He added that revenue management software maker MedAssets Inc. and HMS Holdings Corp., which provides cost recovery services to government health care programs, will also benefit from the program.
As the markets slipped lower in afternoon trading, shares of Cerner gave up $1.13, or 2.4 percent, to $45.46.
Eclipsys shares picked up 5 cents to $21.05.
HMS stock declined 33 cents to $18.79.
MedAssets shares rose 8 cents to $15.99.
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