Greenway Medical EHR to Go Public

Today I saw the news that Greenway Medical has filed to go public. The initial public offering was filed at $100 million. You can see the full Greenway Medical prospectus on the SEC website.

I really hate that they use their KLAS rankings in their prospectus. A ranking that an EHR vendor has to pay to obtain shouldn’t be part of what an investor uses to make their investment decision. Of course, if you are an investor who uses KLAS ranking to buy the stock or not, then that’s a different issue.

I also found the EHR market size numbers from the prospectus to be quite interesting:

We estimate the current market for our solutions and services to be approximately $33 billion. We believe our potential customer base includes approximately 550,000 physicians at over 230,000 practices, as well as approximately 3,500 retail and employer based clinics that contain an additional 8,000 providers. Our core EHR/PM solution, PrimeSUITE, serves an estimated $9 billion market. While 41% of the EHR/PM market is penetrated, only 10% of providers fully utilize their installed EHR solution. The markets for certain of our other solutions include $14 billion for our RCM services, $3.5 billion for our data exchange solution, and $2 billion for our speech understanding solution.

I’d like to know where they got these numbers. 41% market penetration is much higher than reality from my experience. However, they may be using a really broad brush to include things like ePrescribing or other partial EMR related software.

The $2 billion voice recognition (or speech understanding if you prefer) market is interesting as well. I wonder what Nuance would have to say about that. Plus, I didn’t even realize that Greenway had a speech understanding solution. I wonder if their product can even compete in that area.

The following is the Greenway Medical financial numbers that were included in the prospectus:

Greenway’s financial performance in recent years includes a $926,000 loss on $38.8 million in revenue in fiscal 2008, net income of $955,000 on $48.7 million in revenue in 2009 and nearly $2.9 million in net income on $64.6 million in revenue in 2010.

Looking at their financials they’re showing a loss for 2011 which seems odd after the previous trends. Plus, we’re in this healthcare IT and EHR bubble and so it doesn’t make sense that they’d have such growth the past couple years and be showing such a loss this year. Unless, they’re doing something with the numbers to delay costs until 2011. Plus, their tax number in 2011 seems off. I’m no expert on these filings, but $30,944,000 in taxes after paying $36,000 the year before seems wrong.

What’s more interesting is that Greenway Medical did $64.6 million in revenue in 2010. Not a bad growth rate from the $38.8 million in revenue in 2008. Plus, we still have a huge part of the EHR market left to adopt an EHR.

Of course, the real question is whether Greenway will be able to really differentiate itself from the other 300+ EHR vendors in the market place. Although, it does seem like the right time for technology companies to do an IPO. Couldn’t be more true than EHR company.