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Medical records important to CTG's financial health; Growing move from paper improves firm's bottom line

The push to bring electronic medical records to hospitals and doctor's offices around the country has been a boon for Computer Task Group, and James Boldt, the company's chief executive, doesn't see that changing for years to come.

CTG's health care solutions business, which includes its services to help install electronic medical records systems, now accounts for almost a third of the Buffalo information technology company's more than $400 million in annual sales and has become a powerful force behind the firm's strengthening profits.

Boldt said that growth should continue, given the federal government's backing the push toward electronic medical records with $19 billion in funding through the 2009 federal stimulus programs and other financial incentives for hospitals receiving reimbursements through Medicare and Medicaid.

"We think it's the place to be for the next decade," Boldt told shareholders during the company's annual meeting on Wednesday. "We're going to continue to target faster-growing markets."

To be sure, health care spending has been growing rapidly as the U.S. population ages. Almost $1 of every $5 spent in the U.S. economy now goes toward health care, which has been the country's fastest-growing industry over the last five years and is forecast to retain that title over the next decade. Some projections peg spending on health care to grow twice as fast as the overall economy in the coming years, Boldt said.

"We want to be part of that growth," he said.

That growth already has been a big part of CTG's expansion in recent years. At the end of March, CTG was working on 18 large electronic medical records projects, with four more bid proposals awaiting decisions from potential clients. CTG has been successful on 78 percent of the electronic medical records contracts that it's bid on over the past five years, Boldt said.

The company expects its sales to grow by about 7 percent this year to around $425 million, with its profits jumping at an even more robust pace because most of the revenue growth is coming from CTG's more lucrative solutions business.

CTG is predicting that its earnings per share will jump by about 21 percent this year to 86 cents, compared with 71 cents in 2011.

That's because the company earns about 10 cents for every dollar of revenue its solutions business brings in. That's more than three times the profitability of its staffing business, which accounts for about 60 percent of CTG's revenues but earns only about 3 cents for every dollar of revenues.

As CTG's solutions business has grown, in tandem with the expanding health care solutions segment, so has its profitability. The company's profit margin now averages about 5.6 percent of its sales, up significantly from its 3.6 percent profit margin in 2009.

Once CTG hits its goal of having half of its revenues come from its solutions business -- possibly by the end of 2013 -- then Boldt said he expects the company to earn 6 cents to 7 cents on every dollar of sales.