Computer Task Group chief executive James R. Boldt sees good growth in high-tech health care.
Between the continuing push to establish electronic medical records systems across the country and new services that can help doctors and health care organizations better manage the treatment of chronic – and costly – conditions, Boldt thinks CTG’s health care focus will keep paying off in the coming years with strong revenue growth.
“We’re very optimistic about our future growth,” Boldt said Wednesday during CTG’s annual shareholders meeting at its headquarters in Buffalo.
Much of that optimism centers on the work that CTG does to help hospitals and large physician practices install electronic medical records systems – a major push included in the Obama administration’s health care reform program.
The 2009 federal economic-stimulus program included $19 billion in funding for electronic medical records systems, although only about $1 billion has been spent so far. In addition, another $40 billion to $45 billion in reimbursement funding is available from Medicare and Medicaid for physicians and hospitals that adopt electronic medical records systems.
“We’re absolutely focused on the fact that the U.S. government is going to spend about $60 billion on electronic medical records,” said Boldt, who is CTG’s chairman, president and CEO.
The company currently is working on 15 medical records projects, with three more set to start this spring after being delayed from a first-quarter launch. Decisions on three other proposals for EMR projects also are pending.
So far, the installation work has been concentrated mainly on the larger hospital networks and physician groups. But the pace of the work has been affected by uncertainty over federal Medicare and Medicaid funding, which has squeezed revenues at CTG’s health care customers. Those concerns prompted the delay in the three projects whose start was pushed from the first quarter into the second, Boldt said. In addition, midsize and small hospitals and physician groups have been slow to embrace electronic medical records work because of the upfront investment that it requires, he said.
“It’s not trickling down to the smaller hospitals. They don’t have the money to do the implementation upfront and then get reimbursed,” Boldt said.
Boldt’s suggestion: Set aside $9 billion in upfront funding from the stimulus program to pay for electronic medical records projects at the nation’s 2,700 midsize hospitals. Then allocate the remaining $9 billion to the health care exchanges that are being set up in communities across the country as part of federal health care overhaul to pay for establishing electronic medical records systems at smaller hospitals in those communities.
Even so, the push for electronic medical records has been good for CTG. Its first-quarter revenues grew by 5 percent, while its earnings per share jumped by 20 percent because the solutions work that the company does for its health care clients is about 10 times more profitable that the staffing services that account for about 60 percent of its total revenues. “We’re getting more solutions into our revenue mix,” Boldt said. “They’re producing more profit for every dollar of revenue.”
CTG earns about 10 cents per $1 of revenue that it generates through its solutions business, compared with about a penny for every dollar that it generates in staffing sales.
Boldt expects the growth to continue this year, with CTG’s earnings per share rising by about 22 percent, to $1.07 per share, while revenues grow by 7 percent to about $455 million. Wednesday, CTG’s shares closed at $21.41, up 14 cents.