For a play on healthcare reform in this country, HMS Holdings (HMSY) is a small-cap to own. The company provides cost containment services for state's Medicaid programs and other third party payors by ridding the system of fraud and errors. ?Healthcare Reform should expand the number of Medicaid covered lives significantly, from 57 million to over 80 million by 2019, with estimated spending more than doubling over that same time period.
Another result of healthcare reform is the requirement that states establish Medicaid Recovery Audit Contractor (RAC) programs to identify and recover Medicaid overpayments. ?
With several RAC contract wins under their belt, management expects the company to win at least 50% of these eligible contracts. ?
The majority of their revenues are contingency-based, thus allowing them to charge little or no up-front costs (which is quite a compelling offer in this economy) while being motivated to save their customers as much money as possible. ?
Most of their contracts are multi-year commitments whereby HMS gets paid as a percentage of the money saved.? HMS grew earnings over 30% in their latest reported quarter, and we expect the company grow revenues by 30+% over the next 12 months. ?
They have an impressive track record of entering new and faster growing markets, with two recent acquisitions positioning HMS in the lucrative yet nascent market for dependent eligibility services. ?
Here, the company audits client data on a fee-for-service basis to ensure that dependents enrolling for employer-sponsored health care are indeed eligible to receive such subsidies. ?
With stock markets having retreated and most growth-story stocks in the dumps, this diamond in the rough should be on yo! ur radar .
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