Craneware, the Scottish IT operation quietly revolutionising the finances of the US healthcare sector, yesterday unveiled a record 59% surge in pre-tax profits and its chief executive told The Herald he expects the company to benefit "substantially" from US president Barack Obama's $787bn economic stimulus package.
The company, which is based in Livingston, West Lothian, and which specialises in billing and auditing software for the US healthcare industry, unveiled revenues for the six months to December 2008 of $10.6m, compared with $8.7m for the same period in the previous year.
Pre-tax profits surged to $2.6m for the half-year, compared with $1.6m last time on the back of the increasing uptake of its products and rising value of its contracts.
Keith Neilson, the chief executive of Craneware, exclaimed: "This has been a phenomenal past six months."
The company's biggest- selling Chargemaster Toolkit software, designed to reduce mischarging in the outpatient market, is now used in around 1000 hospitals and healthcare centres in 49 states of the US, where medical bills are extremely detailed.
At the same time, its other offerings are becoming increasingly regarded by the industry as must-haves as the recession drags on, because they not only save hospitals and healthcare centres money by making their financial system slicker and less prone to error, but they also find efficiencies that might not have been identified previously.
The company, which employs the bulk of its 100-plus staff in Livingston and was founded in 1999 by Keith Neilson and Gordon Craig, has recently launched the first offerings in two new product families - Patient Charge Estimator and Pharmacy ChargeLink.
Craneware also said that the value of new contracts signed during the period climbed to $13.8m.
However, it was the future that was of most interest to the City yesterday.
Shares in Craneware, which have outperformed the FTSE All-Share index by 131% over the past 12 months, yesterday inched up 1p to 221p, well above its 2007 flotation price of 128p.
Neilson said: "With a broadening product set and rapidly increasing revenue visibility, we not only have a high level of predictability over future performance, but are also extremely well positioned for future growth and further expansion of our market footprint."
He also highlighted that the $787bn US economic stimulus package was expected to significantly increase healthcare IT spend.
Obama's plan pumps money into infrastructure projects, healthcare, and renewable energy - with about $141bn earmarked for the healthcare sector.
That will run parallel with other initiatives to increase the access to healthcare as millions of Americans lose their jobs and their health insurance in the economic downturn, which in turn is expected to spur a greater demand for Craneware's software.
The crisis in the US healthcare system has been deepening for years, and the huge bureaucracy needed to keep it afloat seems increasingly in danger of sinking beneath its own weight.
Craneware's market exists primarily because some 80% of bills generated by US hospitals are believed to be mishandled. It is a niche market the size of the Grand Canyon.
The government and the industry are now attempting to head off what has been described as an "affordability crisis" created by a system that is infamous for excessive administration costs, inflated prices, poor management, errors, waste and sometimes fraud.
At the same time, the economic slump has forced hospitals across the US to tighten their belts, thus exacerbating the problem.
However, where some have seen only a crisis, Craneware has recognised an opportunity.
Neilson said: "Around 90% of our business is Chargemaster, but more and more of our clients are adding our financial improvement packages, which is becoming increasingly attractive in the downturn - although, it is of course beneficial during boom times as well."
The US legislative landscape is also moving in Craneware's favour. Medicare and Medicaid last year announced new measures requiring every US state to have a recovery audit contractor in place by 2010, who will have the power to audit hospital claims for errors back to October 2007, making Craneware's software an increasingly attractive prospect.
Meanwhile, Neilson said the company would also benefit from $19bn being pumped in to the US healthcare industry to promote greater use of modern information technology.
Simon Strong, an analyst at KBC Peel Hunt, added: "This plays directly into Craneware's hands."
