(QSII) Deal for Quality Systems’ NextGen

NextGen Healthcare Information Systems, a fully-owned subsidiary of Electronic Health Record (“EHR”) service provider Quality Systems Inc. (QSII), recently revealed that Benefis Health System has chosen NextGen Ambulatory EHR, NextGen Practice Management and NextGen Health Information Exchange solutions.

Benefis Health System, located in Great Falls, MT, provides health care in 40 specialties and serves patients in 15 or so counties in North Central Montana. It is verified as a Level II Trauma Center by the American College of Surgeons.

In order to enhance quality of care, Benefis will offer the NextGen technology to over 80 physicians at its hospital-owned facilities. The new platform will be implemented from June 2011 and will be completed by January 2012.

The NextGen know-how is expected to play a vital role as Benefis rolls out an integrated technology for its ambulatory business with the purpose of taking part in many health care reform initiatives. Benefis has a health information exchange (“HIE”) initiative in the anvil, which may include sharing vital patient information with the North Central Montana Healthcare Alliance, a 14-hospital critical access network.

Quality Systems reported buoyant results for the fourth quarter ended March 31, which may be attributed to the federal Stimulus that has provided a fillip to the industry in general. However, competition is intense from well regarded players such as Athenahealth (ATHN), Allscripts Healthcare Solutions (MDRX), Cerner Corporation (CERN) and others. Price discounting is frequent, particularly on the lower end, and Software as a service (SaaS) based model appears to have exacerbated pricing pressure.

Quality Systems has traditionally focused on providing solutions for physician practices. However, core ambulatory EHR providers, such as Quality Systems, will see opportunities shrinking for selling their products as physician groups are increasingly getting absorbed into hospitals. On the positive side, we derive comfort from the high proportion of recurring revenues and steady growth in NextGen pipeline. Our Neutral recommendation on the stock is supported by a short-term Zacks #3 Rank (Hold).

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QUALITY SYS (QSII): Free Stock Analysis Report

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