Hewlett-Packard Company (HPQ) recently signed a 5-year deal with the health care division of Nevada Department of Health and Human Services. Per the terms of the deal, HP will receive a sum of $176.0 million.
Nevada Division of Health Care Financing and Policy (DHCFP) partners with the Centers for Medicare & Medicaid Services, which is a federal agency within the U.S. Department of Health and Human Services. The combined entity provides necessary health care assistance to patients with low income and limited resources. HP will extend its Enterprise services to DHCFP to strengthen Medicaid operations, which would help bring health care reform to the State of Nevada.
HP will also act as a Medicaid fiscal agent or primary information technology provider to the DHCFP. As a fiscal agent, the tech giant will review and process all medical claims. HP’s services will also help the state to improve Medicaid programs and deliver more critical health information to a larger number of health care providers. In addition to making claim transactions smoother, HP’s services will reduce the extent of frauds with prior detection of the same, thereby eliminating risks and costs associated with the state’s Medicaid program.
HP is already serving as a fiscal agent to 21 other states’ Medicaid programs. The need for an efficient Medicaid program arises from the enactment of the U.S. Healthcare Reforms Bill. The goal of the reform is to make health care more affordable for Americans. The basic objectives of the reform were presented in the Patient Protection and Affordable Care Act. As per the Act, beneficiaries are expected to join Medicaid through a registration process requiring exchange of information regarding health. Medicaid is a joint endeavor of the states and Federal governments, designed to provide medical care to the poor, children and expectant mothers under the federal poverty level.
The U.S. government’s endeavor to expand the information technology industry to become a major player in health reform will help drive IT spending in the health care segment over the coming years. We believe that HP, with its strong position, would be able to capitalize on government initiatives.
Apart from this, we remain encouraged by HP’s leading position in both PC and Server segments, as well as its cloud exposure. But intense competition from other big technology companies, such as Cisco Systems Inc. (CSCO), Apple Inc. (AAPL), Microsoft Corp. (MSFT), as well as smaller Asian players keeps us concerned.
Currently, HP has a Zacks Rank of #3, which translates into a short-term Hold recommendation.
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