Stimulus Package Expectations Drive Up Health IT Stock Prices

Expectations for the federal stimulus package have fueled a rise in stock prices for many health IT companies, despite the ongoing recession, according to a new report by Healthcare Growth Partners, Modern Healthcare reports.

The report, titled "Q2 2009 Healthcare IT Transaction Summary," found that health IT stocks outperformed many other sectors of the economy this year. The industry had a 30% gain compared with the Standard & Poor's 500 index, which rose by 2%.

In addition, several health IT firms posted higher second-quarter stock prices this year compared with the end of 2008.

Christopher McCord, principal of HGP, said the stock prices reflect an assumption that the federal economic stimulus package's health IT provisions will compel health care providers to purchase electronic health systems during the next several years.

Jason Baker, managing director of HGP, added that the stock prices are "clearly based on future expectations" because they do not reflect the firms' current financial performance.

The report also noted that 48 mergers and acquisitions occurred in the health IT industry during the second quarter this year, compared with 56 during the same period in 2008. The analysts said the recession likely accounted for the drop in company transactions (DerGurahian, Modern Healthcare, 7/30).

Kurt Grossman
We had a "Dot Bomb" before. We will see prices drop but that is not to say that these companies will collapse. HIT is here to stay. HIT standards need to be pushed by Providers and government. The prices should fall dramatically based on the amount of people jumping into the market. That is where the Open Source alternatives come in. If we promote a strong Open Source competitive solution then companies will be forced to lower the "Sticker Price." Otherwise, they will make investors happy and suck the wind out of our HIT sails. Let's make sure that investors don't take money away from kids, adults, and elderly who need healthcare services!
James Barnett
I also beleive that there will be a follow-on story to this subject that will read that IT stock prices are trending downward following a backlash of health provider sticker shock and lack of federal direction and guidelines. Providers are really taking a second look at IT systems pricing and Stimulus gold rush mentality that is fueling sales and projections. I beleive that there is a huge backlash of wait and see following the lack of direction and clarification being provided at the federal level. Stimulus money will not sustain new systems five to eight years from now and with a promise of healthcare reimbursement cuts on the horizon there is a fear of uncertainty growing exponentially in all provider communities.

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