Top picks 2012: athenahealth

The courts will decide the fate of ObamaCare, but the real winners in the health-care sector are actually the result of the stimulus bill, which provided funding for digital medical records.

Obama allocated tens of billions of federal dollars toward upgrading the nation�s medical records infrastructure, taking it out of the 18th Century filing room and into the 21st Century cloud.

Using the Medicare program (which buys most of the health care in this country) the administration required every hospital, clinic, pharmacy and diagnostic center to switch to digital records.

Proponents of the measure, who can be found on both sides of the aisle, say the cost savings � stemming from fewer duplicated medical tests, reduced errors, increased professional work flow and other efficiency gains � could reach into the billions of dollars per year.

The plan also would help improve both patient care and the patient experience. Once implemented, people will wait less for better care. Well, whatever.
Whether these gains materialize ultimately will be a matter for the Congress to deal with. �

In the meantime, from now until the 2015 deadline, there�s basically a land rush going on, and the handful of companies that can build digital medical records software are cashing in huge.

The estimated spend on these new systems is $100,000 per licensed hospital bed.

With 944,277 hospital beds in this country, that�s a $95 billion chunk of business to get the ball rolling � federal dollars will cover about half -- and then a whole new industry will emerge to support and maintain the new system.

My best pick of 2011, and one that I see continuing at the top of the leader board throughout the next year, was one of the leading providers of electronic medical records systems.

This company, athenahealth (ATHN) focuses on small and mid-sized hospitals and clinics. �

Because of the surge in business, it�s seen its top-line grow quarter by quarter and year by year � 20% in the past four quarters alone and more than 150% in the past four years -- and shareholder equity has followed suit.

The company has no long-term debt, it�s sitting on more than $110 million in cash or near-cash on top of $50 million worth of receivables.

The shares have been on a tear this year, rising more than +40% since I first recommended them. ATHN continues to post stronger and stronger earnings, and despite a heady P/E ratio, one need not look too far to find a $75 price target. �

I think that�s conservative, and so do a number of institutions, who have snapped up most of this company�s shares. They�re worth adding to your portfolio for 2012 if you can get your hands on a few.