Healthcare Technology Growth Slows After Heady Run

Orange County Business Journal, May 26-Jun 2, 2008 by Reed, Vita

Employer vs. Individual Healthcare Studied; Might Health Replaces COO Who Became CEO

HEALTHCARE

Expect some slowing in the growth of healthcare information technology, according to a recent article in industry publication Modern Healthcare.

A slowdown was expected after two years of strong growth, Corey Tobin, an analyst with William Blair & Co. in Chicago, told the magazine.

Even so, some analysts say hospitals remain committed to information technology projects, which could help software and other companies concerned about slower spending.

Tobin follows several healthcare technology companies, including Newport Beachbased TriZetto Group Inc., which doesn't directly target hospitals.

TriZetto, which sells its software and services to health plans, is being taken private in a $1.4 billion buyout by Apax Partners, a New York private equity investor.

Another local player is Quality Systems Inc., an Irvine maker of software that doctors and dentists use to manage their practices.

TriZetto reported S4.4 million in first-quarter profit in late April, down 25% from a year earlier and below analysts' expectations of $5.6 million. TriZetto said the profit drop came on a 6% quarterly revenue slide to $108 million.

Friedman, Billings, Ramsey Group analyst James Kumpel mentioned some vendors missed the mark with earnings for early 2008 in a market that he called "bifurcated."

Neither TriZetto nor Quality is part of Kumpel's coverage.

Modern Healthcare's article also looks at acquisitions. Deals will continue to play a role in the industry, Tobin said. Consolidation is natural as companies look for broader sales of products that are becoming more narrowly focused, he said.

Employer Health Coverage

A recent article by the Center for Studying Health System Change urges caution on one of the more talked-about issues in healthcare-abandoning employer-provided insurance in favor of individual coverage.

Orange County is one of 12 areas that the center, a nonprofit funded by the Robert Wood Johnson Foundation, looks at as part of its ongoing examination of the U.S. healthcare system.

The article was published in Health Affairs, an industry journal. In it, Paul Ginsburg, head of the center, wrote about the advantages and shortcomings of employerbased health coverage, how individual insurance could be a viable alternative to employer coverage and "why care should be taken not to undermine employers' role in providing coverage."

A decline in the proportion of Americans who have health insurance through their jobs has fueled concerns about the future role of business in providing coverage, Ginsburg wrote. He cited Census data showing 59.7% of Americans had health insurance from their employers in 2006, down from 62.8% in1999, a year at a similar stage in the economic cycle.

At the same time, Ginsburg wrote, "Most recognize that today's individual market is not an attractive alternative to employersponsored coverage. The presence of underwriting based on medical history and age would make insurance unaffordable for many who now obtain coverage through employment."

InSight Gets New COO

Bernie O'Rourkc is the new chief operating officer at InSight Health Services Holdings Corp., a Lake Forest medical imaging services provider.

Kip Hallman, who had served as interim chief operating officer, became InSight's chief executive last month.

O'Rourke, a 48-year-old resident of Wallkill, N.Y., who plans to relocate to Southern California, had been serving as senior vice president and general manager of InSight's Eastern division since March 2006. He's been with InSight since 2005.

InSight has some 210 centers and mobile imaging trucks in more than 30 states, including targeted regional markets of California, Arizona, New England, the Carolinas, Florida and the Mid-Atlantic states.

Bits and Pieces:

Inspire Pharmaceutical s Inc., a Durham, N.C.-based drug company that works with Irvine's Allergan Inc. on the Restasis dry eye drug, said prescriptions rose for Restasis during the first quarter. Allergan reported Restasis sales of $100 million in the first quarter, up 28% from 2007's first quarter ... Kevin Hykes, a former official at Medtronic Inc., is the new chief commercial officer of Visiogen Inc., an Irvine company that's developing an intraocular replacement lens .. used in cataract surgery. Hykes spent 16 years at Medtronic, including in leadership positions in the company's cardiac rhythm management, neurological and cardiac surgical businesses ... Raymond Cohen, chief executive of Symphony Medical Inc. in Laguna Hills, was among the honorees at the recent American Electronics Association's Orange County/Inland Empire council's 2008 High Tech Innovation awards. Symphony develops various treatments for heart disorders, including injecting drugs directly in the heart during open-chest surgery or through a minimally invasive procedure using a catheter.