Cramer recommends Allscripts Healthcare Solutions Inc. (MDRX)

Allscripts Healthcare Solutions Inc. (MDRX)... The top company for electronic medical records and electronic prescriptions... The new Medicare bill contains both incentives for using e-prescribing systems that will run from 2009 to 2013...

And an e-prescribing mandate that will penalize doctors and hospitals that don't start using e-prescribing software by the end of 2010. Doctors have been notoriously slow to adopt their new technology. They want to keep using their awful handwriting... They want to keep using the same old, same old, that result in pharmacy having to call the doctors office 30% of the time because the print is illegible for these crucial drugs... Not to mention the numerous accidents that occur... But now that the government is going to start providing pay incentives for using this software and penalties for not using it, physicians and hospitals actually have a pretty good reason to change their evil ways in order to protect the bottom line.

Why MDRX?... After digesting its recent merger with Misys Healthcare, a deal that's expected to close in the third quarter, MDRX should have a client basis of roughly 150,000 doctors and 700 hospitals... That's a quarter of the doctors in the US. MDRX has relationships and sells software to all of these doctors, but e-prescribing, the e-prescribing market is still small... Only 2% of the 1.47 billion new prescriptions and renewals eligible for election rally were transmitted electronically in 2007... It has enormous room for growth ... Especially with the e-prescribing mandate coming down from Congress, which might as well just be a check made out to MDRX... As they're already selling software to a huge portion of the market, they are poised to capture the new e-prescribing business that the Medicare boondoggles will bring. This is exceedingly bullish... Buy, buy, buy...

Also, MDRX has a product called ERX, now it's software that they give away for free so doctors don't have to invest in new hardware or even pay for the software... This is a great Gillette kind of razor blade business model ... MDRX gets paid whenever there's a transaction, but there aren't any upfront costs. The main thing that MDRX precipitously from $28 to $8 was its failure to deliver on its electronic health records platform. There were bugs and the company had execution issues, given it was trading at 60-times earnings, any little slip-up would send this stock to growth purgatory, and its share holders, frankly, to Hades, for losing 20 straight points. That's exactly what happened... But, according to MDRX, they expect to resolve this issue by the end of the year with a new less-buggy version of the platform...

MDRX is a comeback stock. It gets 82% of its revenues and over 90% of its profits from its software services division, which provides e-prescribing solutions... And the number of prescriptions filed electronically are expected to grow by 400% this year. The stock is at 18-times earnings, 40% earnings growth, long-term growth rate of 23.5%...

With the help of the new Medicare bill, essentially mandating the hospitals and doctors to use MDRX's product, the stock is going to get its 25 multiple back in 2009... We're talking a 44% gain.