Keeping The Reins On Health Claims

In July, GMIS went public at 13. Now, it's at 24 -- with a lofty price-earnings ratio of 44. But the rich p-e hasn't turned off some smart-money investors, who say the stock is a solid bet to reach 40 over the next 6 to 12 months. Why the excitement?

GMIS designs computer software that helps insurers and large corporations contain health care costs and workers' compensation programs. Analysts estimate the potential market for this business, which is still in its infancy, to be $2 billion to $5 billion. "The potential for companies that produce cost-containment information is vast," says money manager Bill Welty, a managing partner at Volpe Welty in San Francisco. Volpe Welty owns nearly 4% of the stock.

GMIS' two products are Autocoder, which helps payers automate coding of claims filed by health care providers, and ClaimCheck, a system that reviews claims to ensure that they are "clinically consistent" so that companies don't overpay health care providers. It also checks that the providers get reimbursed for the correct services.

GMIS does have competition. But the strongest -- Electronic Data Systems, the nation's largest processor of health care claims, and Policy Management Systems, the leading provider of claims-processing software -- have contracted to sublicense GMIS' Autocoder and ClaimCheck systems. Volpe Welty analyst Sally Fisher thinks EDS' business could be worth $2 million a year to GMIS initially, and PMS' about $1.7 million. Fisher thinks 1992 revenues will jump to $12.2 million from $8.5 million this year and 1990's $5.9 million. She sees GMIS earning 55~ a share in 1992, vs. 41~ in 1991 and 1990's 32~.