Orange County Business Journal

Quality Finally Feels Effects of Stimulus Spending

HEALTHCARE: Revenue, profits jump in “solid finish to fiscal year” Vita Reed Sunday, June 5, 2011

Irvine-based healthcare software maker Quality Systems Inc. is beginning to see a jump from long-expected federal stimulus spending, its chief executive said.

Quality Systems was “positively impacted by the onset of the stimulus plan” in the three months ended in March, Steven Plochocki said on the company’s recent earnings call.

Some customers were stepping up after they received stimulus checks under the federal government’s plan to encourage an industry shift to electronic record keeping, Plochocki said.

Quality’s software creates electronic health records for doctors, dentists and hospitals. It also helps healthcare providers with billing, appointments, referrals and insurance claims.

Quality’s revenue rose 24% from a year earlier to $97.1 million in the March quarter, beating analysts’ expectation of $95.7 million.

Profits rose 42% from a year earlier to $18.6 million, beating Wall Street’s estimate of $17.8 million.

“Overall, we view the quarter as a solid finish to the fiscal year,” said David Larsen and Chris Abbott, analysts with Boston investment bank Leerink Swann LLC, in a report.

Quality Systems Inc.

• Headquarters: Irvine

• Founded: 1974

• Business: software for electronic health records

• Yearly revenue: $353.4 million

• Notable: Federal stimulus and healthcare reform began to stir market in March quarter, helping lift sales by 24% and profits by 42%

Federal Spending Boost

Quality’s been betting on federal spending to help boost its sales for some time.

Funding for electronic medical records was included in the 2009 stimulus package and the 2010 healthcare reform bill.

Quality’s Chairman and founder Sheldon Razin has described the federal spending, which provides more than $20 billion in incentives to help providers go electronic, as “pouring gasoline on the fire” of the company’s sales potential.

Regulators took their time issuing rules and certifications for electronic medical records software, finally wrapping things up late last year.

“We have spent much time preparing all facets of our organization for this important point in time,” Plochocki said. “The rubber is hitting the road as it relates to benefiting from this stimulus period. It’s been a long time in coming.”

An analyst on the recent earnings call inquired about sales of Quality’s electronic medical record software to doctors.

Quality is “seeing pretty good activity across the board” when it comes to the size of medical practices buying software, said Scott Decker, president of the company’s dominant NextGen Healthcare unit.

Expansion

The call also touched on Quality’s expansion beyond its doctor and dentist base.

Page 1 of 2

Prev