Any way you want to slice it, sickness just isn't fun. It's not fun to be sick and it's not especially fun to try and manage large numbers of sick people either. But that's precisely what health-care plans try to do, and disease management specialist American Healthways (NASDAQ:AMHC) is there to help them out.

Simply put, American Healthways offers specialized programs to help health-care plans and self-insured companies more effectively treat and manage patients with certain conditions. Offering programs for conditions like diabetes, coronary artery disease, renal disease, and osteoporosis, American Healthways attempts to work with patients to see that they are better informed about their condition, motivated to participate in their care, and more compliant with their prescribed treatment regimen.

Why should health plans care? Because roughly 70% of health-care spending in this country can be tied to about only 10% of the population, and controlling health-care costs is mission-critical for health plans. What's more, patients with chronic conditions like diabetes or renal disease are statistically more likely to slack off in their own care.

To a certain extent, I can sympathize -- taking a pill for two weeks is no big deal, but undergoing uncomfortable and/or inconvenient tests and treatments for years is a far different story. That doesn't change the fact that poor compliance in chronic patients raises costs for all of us. Nevertheless, through the company's programs, American Healthways manages to improve patient care and reduce overall costs to the health-plan providers.

Thus far, American Healthways is seeing strong growth as clients have been satisfied with the cost savings they're seeing from contracting out for the company's services. Revenue in the February quarter (the company's fiscal second quarter) climbed 32% and net income was up almost 60%.

Better still, the company managed to post sequential revenue growth of 6%, despite the fact that the second quarter sees "disenrollments" as people change health-care plans and leave the company's programs.

The company is leveraging that growth into cash, as operating cash flow more than doubled for the first half of fiscal 2005 versus the first half of last year.

Not surprisingly, American Healthways doesn't have a profitable and fast-growing market all to itself. MatriaHealthcare (NASDAQ:MATR) is a worthy competitor. What's more, many large health plans (namely UnitedHealth (NYSE:UNH)) are developing their own internal programs.

While the stock market has taken note of American Healthways' success, I don't think the valuation is too out of line for a growing company with a largely untapped market still ahead of it. While the trailing P/E is about 33 and the EV-to-FCF ratio is a robust 25, those numbers don't seem too bad for a company with such high earnings growth and a return on equity in excess of 20%.

These shares aren't for the faint of heart -- a slight earnings miss or even just a rumor of a lost contract will punish the shares mightily in the short run -- but growth investors should dig in and see for themselves if these shares could make their portfolio a bit healthier.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long, nor short the shares).