Meditech reported a first-quarter loss of $26 million after posting a profit in the same period a year earlier due to the impact of the COVID-19 pandemic on the stock market.
The electronic health record (EHR) vendor swung from a quarter-over-quarter profit of $36 million to a loss of $25.7 million due to COVID-related stock losses and a decline in product bookings, according to the company's Q1 2020 financials.
The Massachusetts-based company reported $143 million in revenue in the first quarter of 2020, up 24% from $115 million in the first quarter of 2019. Product revenue rose 77% to reach $58 million and service revenue was up 3% in the quarter, coming to $84 million.
The company pointed to gains in product revenue primarily to a larger backlog and more implementations, including $16.5 million not recognized upon product installation in 2019, but collection deemed probable in 2020, the company reported in its quarterly report.
Service revenue increased by $2.2 million primarily to more customers going live.
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Meditech's effective tax rate of 15.8% changed to an effective tax benefit of negative 34.5% due primarily to a decrease in unrealized marketable securities gains.
"During the first quarter of 2020, the fair value of the company's investment portfolio decreased as a result of significant declines felt throughout the U.S. stock market with the outbreak of the COVID-19 pandemic. The impact of continued volatility is uncertain," the company said in its financial filing.
The company quickly transitioned its staff to working at home and adapted from live to virtual customer service and product implementation.
"Management believes there are sufficient funds for all current operating requirements, but uncertainty in future sales, staff productivity, and trade receivables could have a substantial impact on business," the company said.
The impact of the COVID-19 pandemic on the healthcare industry is a significant unknown, company executives said in the quarterly report.
"Change in medical procedures and processes will reverberate throughout the industry and could adversely affect our ability to procure new business and maintain operations as done today," the company said.
Adapting to the changes
The company pivoted to focus on software tools to help its provider customers transition to virtual care during the COVID outbreak. The company offered its Scheduled Virtual Visits capabilities to all its customers for free during a six-month period so providers can virtually screen and treat patients during the health crisis.
Meditech had been on an upswing as it climbed back from a three-year backslide and reported its third straight year of revenue growth at the end of 2019.
Meditech suffered a three-year slip during which it saw revenue drop more than $117 million. The company’s sales dropped gradually since 2013 when it posted nearly $580 million in revenue. In 2014, Meditech posted $517 million in revenue and that dropped to $475 million in 2015, followed by year-end revenue of $462 million in 2016.
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The company rebounded in 2017 and reported $481 million in revenue, a 4% increase from the previous year. Meditech’s revenue continued to grow in 2018, up 1.5% to $488.2 million.
The company's revenue grew 1.2% in 2019 to reach $493.8 million.
Meditech now has a 17% market share of the U.S. acute hospital market, which increased slightly from 16% last year, according to KLAS Research. Besides Epic, Meditech was the only other EHR vendor to see a net gain in market share in 2019, a recent KLAS report found.
Meditech's Expanse EHR platform is drawing new interest from customers outside its usual small-hospital base, with a new 400+ bed health system sale in 2019 giving the market a chance to see how Expanse scales, KLAS reported.
This year, Meditech was ranked as the top-performing EHR solution for community health information services in KLAS’s annual software and services report.
In 2019, the company announced several collaborations with tech giants. In October, Meditech announced a partnership with Google Cloud, making it the first company to offer its EHR through the Google Cloud Platform. The two companies also plan to develop native cloud products and application programming interfaces.
The health IT company also has been making investments to add new tools and capabilities to its EHR software, such as population health and analytics tools through a collaboration with Arcadia Healthcare Solutions. And the company also worked with Nuance to integrate its AI-enabled voice assistant into its platform