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What Does the Future Hold for athenahealth, and Its Customers? Industry Insiders Weigh In

June 19, 2018
by Heather Landi
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athenahealth is known for disrupting the healthcare IT market, but recent developments have disrupted the company's leadership
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More than a week ago, the co-founder and CEO of athenahealth, Jonathan Bush, announced his was stepping down and the health IT company he started back in 1997 announced plans to explore a potential sale.

These latest developments at the Watertown, Mass.-based company occurred as athenahealth has been fighting a takeover offer for $160 a share from Elliott Management, an activist investor, and on the heels of damaging allegations of sexual harassment against Bush, an outspoken industry leader known for his colorful personality and viewed as the definitive face of athenahealth.

The company got its start in the health IT space as a developer of practice management systems for physician practices and has steadily expanded its suite of network-enabled services for revenue cycle management and medical billing, electronic health record (EHR) systems, patient engagement, care coordination, and population health services. The company ranked at No. 13 on the Healthcare Informatics 100 list for 2018, with $1.2 billion in revenue.

These events effectively close one chapter in the 20-year-old company’s journey, and begin another one. The athenahealth board of directors has initiated a search process to identify qualified CEO candidates. In a statement, Jeff Immelt, executive chairman, said the company is approaching this process “with an open mind and a commitment to continuing to strengthen the company – including its rich data asset, platform strategy, and culture of innovation.” And he stated, “The Board and Jonathan agree that this change in leadership is appropriate as athenahealth turns to its next chapter.”

“It will be really interesting to see how all this plays out," Erik Bermudez, senior research director at Orem, Utah-based KLAS Research, says. "athenahealth is a disruptor in a market that is ripe and ready for change, and with a possible sale, with new leadership and new management coming in, there’s a lot of changes that are happening, both on the provider side and for athenahealth on the vendor side."


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Potential Suitors

When athenahealth announced June 6 that Bush had stepped down, it also announced that it would explore a potential sale or merger or it may continue as an independent company. Before the announcement, the stock was at $151 a share, about 6 percent below the offer price. Ahead of the announcement, athenahealth shares were halted, and they initially rose nearly 6 percent once trading resumed.

That same day, senior research analyst Sean Wieland with Piper Jaffray, a U.S. investment bank and asset management firm, raised his target price for athenahealth from $155 to $179.  “I think the bid on the table from Elliott for $160 represents the ‘downside’ here,” Wieland says, adding, “With these publicly traded vertical SaaS (Software-as-a-Service) companies, the median about is about 5x times revenue, so I think [athenahealth] is worth $179.” On June 19, athenahealth’s stock was at $160 a share.

In a research note, Sandy Draper, a Wall Street analyst with investment bank SunTrust Robinson Humphrey, wrote that Bush’s departure increases the likelihood of a sale, nothing that Bush has been the company’s only CEO, so far. With Bush stepping down, it will easier for potential buyers to make substantial changes “without having to go around him,” Draper wrote.

Also, Draper anticipates that recent developments will cause some near-term uncertainty and distraction, which could potentially benefit Cerner, Allscripts, CPSI and Quality Systems over the next few quarters.

Wieland contends that athenahealth “is among the best asset in health IT,” citing the company’s technology platform and noting that “the company's presence at the point of care and ability to crowd-source best practices in clinical and financial workflow are unsurpassed.” He also notes that the company’s decelerating growth of late is more a reflection of industry dynamics.

“If you look across the EHR space, the demand for EHRs has slowed. The stimulus from 10 years ago brought forward a decades’ worth of demand into a period of three or four years, so everybody ran out and bought something, and now we’re in this dry spell of demand,” he says, adding, “So, athenahealth’s revenue growth decelerates to ‘only’ 10 percent, which I would note is still higher than just about every EHR company out there.”

He continues, “I think the company has been under pressure for financial performance because of the slowing growth, which I think is endemic of the market. There still remains a huge opportunity to take the friction cost out of healthcare by connecting all these users using various EHRs, and the challenges around interoperability. I think athenahealth has an interesting way to solve those, and I think it will solve those, no matter whose hands it’s in.” He adds, “We believe athenahealth is going into this process from a vantage point of strength.”

So, who are likely suitors in a potential sale? The list of strategic buyers are many, Wieland says, including mega software companies such as Microsoft, Oracle or Salesforce. And financial buyers are also keen on the company's recurring revenue and strong ability to drive incremental margins, he notes.

In a blog post, Jacob Reider, M.D., a family physician and healthcare consultant who previously served as Deputy National Coordinator for Health IT, wrote that Apple, Cerner and Microsoft all were unlikely to buy Athenahealth, while also offering up other potential buyers, including Phillips, Roper/Strada Decision, Amazon and IBM.

Wieland contends that Amazon is not a likely buyer, noting that “They’re in the business of trying to leverage their core asset, their distribution capability, which they are very good at.” He adds, “Amazon doesn’t need one EHR company, they need all of them; they need to have relationships and they need APIs built with everyone, so I don’t think it’s Amazon.” While Apple is moving further into healthcare and is building APIs into health systems, “it’s the same situation that Amazon is faced with; Apple needs relationships with all the EHR companies, not just one,” Wieland says.

“I wouldn’t rule any of those out,” he says, adding, “In my opinion, a sale to a strategic buyer is the most likely, followed by a financial buyer, because there’s already one at the table.”

athenahealth’s Performance and Impact to Customers

Known in the market for its ambulatory cloud-based EHR systems, athenahealth jumped into the hospital EHR market in 2015 with the acquisition of RazorInsights. Since then, provider interest has skyrocketed, with athenaOne for Hospitals and Health Systems being the third most frequently selected hospital EHR solution in the U.S. in both 2015 and 2016, according to an October 2017 report from KLAS Research.

In a three-year-timeframe, athenahealth went from acquiring RazorInisghts to being KLAS-validated for providing an integrated patient record, inpatient to ambulatory. “That’s incredibly fast,” Bermudez says. “Time will tell how they’ll continue to disrupt this market. That’s not to say that they don’t have performance and execution challenges with this new [hospital] market, but they definitely have made inroads in terms of contracts and sales.”

A May 2018 KLAS report examining the acute care hospital space in 2017 found that 80 percent of new EHR contracts involved smaller hospitals, 200 beds or less. That report notes that athenahealth saw a significant number of acute care hospital “wins” in 2017, gaining 28 hospitals, all among hospitals with under 50 beds. athenahealth is capitalizing on smaller hospitals’ hunger for new technology, KLAS noted.

“athenahealth’s inpatient solution continued to gain traction, garnering more contract wins among small hospitals than any other solution. The cloud-based platform is particularly attractive to the smallest hospitals, who require minimal IT footprints and up-front costs,” the report states.

Bermudez cites several reasons for athenahealth’s early success in the hospital market. The company’s vision resonates with healthcare executives, he notes. “This market of small hospitals is ripe and ready for disruption; they’re ready for new models. athenahealth has a new offering, but also on top of that, a new cost structure, which is web-based and based on a percentage of its clients’ collections,” he says.

athenahealth’s hospital customers like having an integrated clinical/RCM solution for their hospital and clinics without a large up-front capital outlay, he says. “Most feel athenahealth’s innovative cost structure and web-based solution can help community hospitals stay financially viable and decrease IT and security resources in coming years. They feel that the cloud-based model will allow them to more quickly develop the solution to meet future healthcare needs,” the KLAS report states.

While the company seems to be gaining momentum in the hospital space, how will these latest developments and leadership changes impact new and existing customers?

Bermudez says he has asked a number of key athenahealth customers about the potential for new management. “What I heard is, because of athenahealth being who they are and because of the strong culture that they have built, they are less worried about athenahealth than they would be if it were another company. And, they indicated that it might be a good thing.”

He continues, “It’s been a public company and it’s really hard to serve two masters, Wall Street and customers and other stakeholders. Customers I talked to indicated that a sale would bring in new ownership and perhaps bring in a different set of priorities, and that could really help athenahealth get back to their roots and back to the culture they had when they began. I think there’s still a lot of excitement, and there’s some hesitancy as well.”

He adds, “It’ll be interesting to see how all these changes ultimately impact the customer experience and customer success.”

Before Bush’s departure, several of the company’s top leaders had stepped down, including Todd Park, who had co-founded the company with Bush, and then left in 2009 to take the position of chief technology officer of the United States in the Obama administration. Kyle Armbrester, who served as the company’s senior vice president and chief product officer, left the company back in April.

“We’re looking, potentially in the next six months to a year, at a brand-new management team that didn’t exist two or three years ago. It will be interesting to see the impact to the customer,” Bermudez says.

Elliott Management's Takeover Bid

Challenges at athenahealth began back in the spring of 2017 when Elliott Management, a New York hedge fund led by billionaire Paul Singer, said it had acquired a 9.2 percent stake in the company. According to reporting from The Boston Globe, the company’s stock had been in steady decline by the time Elliott Management began its campaign. In early 2017, the company reported revenue shortfalls for the fourth quarter in 2016. Under pressure from the activist shareholder to lift the firm’s stock price, athenahealth announced in August 2017 that it would reduce expenses by $100 million and restructure its leadership. At that time, Bush stepped down as chairman of the board.

In October 2017, the company announced a new strategic plan that included shuttering offices in San Francisco and Princeton, New Jersey and cutting 9 percent of its workforce to streamline its operational efficiencies. At that time, Bush acknowledged that 2017 revenue had fallen below expectations and that “lackluster market conditions in the post Meaningful Use era have contributed to a slowing of our growth rate.” The vendor also said it anticipated $4 million in losses from hurricanes Irma and Harvey.

And then in February, athenahealth announced double-digit growth in 2017, with revenue up 13 percent, however, year-end financials came in below estimates and the company reported a $55 million dip in consolidated bookings compared to the previous year.

As previously reported by Healthcare Informatics, last month Elliott Management made an all-cash takeover offer, which would value athenahealth at $6.9 billion. The investors sent a letter to athenahealth’s board proposing to acquire the company for $160 share, stating that the proposal “represents the best path forward for athenahealth, its shareholders, its employees and its broader mission.”

“We believe that athenahealth has great potential with a differentiated opportunity to fundamentally change the healthcare IT industry. While we may (or may not) differ on the road ahead, we recognize the unique and powerful accomplishments that have taken place at athenahealth due to Jonathan’s vision,” Elliott Management stated in the letter.

However, the investors also criticized company leadership for failing to make the changes necessary “to enable it to grow as it should and to create the kind of value its shareholders deserve.”

“We are faced now with the stark reality that athenahealth as a public-company investment, despite all of its promise, has not worked for many years, is not working today and will not work in the future,” the investors stated in the letter, specifically noting the company’s problems in the areas of sales execution, service delivery, product focus, forecasting, executive turnover, capital allocation, management discipline and corporate governance.

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UnitedHealth Group Plans to Unveil Health Record for Members, Providers in 2019

October 17, 2018
by Rajiv Leventhal, Managing Editor
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Health insurer UnitedHealth Group will be unveiling a “fully integrated and fully portable individual health record,” CEO David Wichmann said on the on the company’s third-quarter earnings call yesterday.

Speaking to the insurer’s broader digital health strategy, Wichmann stated on the earnings call that the company’s consumer digital health platform, Rally—which is a website and mobile app—is now serving over 20 million registered users and will leveraged to help develop the health record.

“Rally is synthesizing information and engaging people to better manage their health, helping consumers save money by selecting the highest quality care providers, understanding their out-of-pocket costs up front, and in some markets even scheduling appointments for care. We will soon be releasing at scale a first-of-kind, fully integrated and fully portable individual health record that delivers personalized next-best health actions to people and their caregivers,” Wichmann said on the call.

While many more details are not yet known about the health record, Wichmann did say that by the end of 2019, the insurance giant has the goal of developing individual health records for the 50 million fully benefited members that it serves, as well as for their care providers.

He noted, “We would use the Rally chassis…to provide individuals in a way in which they can comprehend a tool, if you will, not only outlining their individual health record, but also giving them next-best action detail. That's what I mean by when I say it's deeply personalized. It's organized around them, not based upon generic criteria. It also assesses to what extent that they've been, and how they've been served by the health system broadly, and whether or not there's been any gaps in care that have been left behind.”

Giving a little bit more information about the vision UnitedHealth Group has in regard to the health record, Wichmann said, “You might imagine what that could ultimately lead to in terms of a continuing to develop a transaction flow between the physician and us and the consumer and us, as we us being the custodian to try to drive better health outcomes for people, but also ensure that the highest level of quality is adhered to.”

UnitedHealth Group already has its Optum business line, a health innovation company that provides health services in an array of different ways, including through its growing data analytics capabilities.

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UC Davis Health’s Physician-Specific Approach to Addressing Burnout

October 16, 2018
by Rajiv Leventhal, Managing Editor
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To combat the physician burnout epidemic, one health system is taking matters into its own hands

Physician burnout has long been a significant healthcare challenge, but in recent years with the advent of various technologies into clinical workflows, along with an array of regulatory requirements, the problem seems to be getting worse.

Indeed, there is no shortage of research that backs up the notion that physicians are overburdened, with some surveys having found that 30 to 60 percent of clinicians report symptoms of burnout, which can threaten patient safety and physician health. What’s more, EHRs (electronic health records) are consistently cited as the top burnout factor, largely due to the time one must spend in them documenting and performing other administrative tasks. To this point, a commonly referenced study published in the Annals of Internal Medicine in 2016 found that for every hour physicians provide direct clinical face time to patients, nearly two additional hours are spent on EHR and desk work within the clinic day.

Although federal health officials have been outspoken about the need to combat these issues while improving physician satisfaction, some hospitals and have health systems have been taking matters into their own hands. In Sacramento, not long ago, clinical and IT leaders at the University of California, Davis (UC Davis) Health were eager to get funding to develop and roll-out a program to improve physician efficiency levels within the EHR.

Scott MacDonald, M.D., the health system’s EHR medical director, says that in order to get that funding, his team needed to show the organization’s leadership, via a pilot project, that a program designed around improving physician efficiency in the EHR was worthwhile and valuable. They ended up getting a small team together, mostly volunteers from various UC Davis Health locations, and piloted two high performing clinics and two low performing ones, based on efficiency data from Epic, MacDonald recalls.

In order to determine which clinics were doing well with their EHRs, and which ones were not, the UC Davis Health team looked at a number of factors. For one, they would examine a given individual physician to see if he or she was spending more than the average amount of time on certain EHR “in-basket” tasks, explains MacDonald. “We would then look and compare that data to others in that physician’s department and specialty to see if there were outliers. So that’s a useful tool for us to recognize that this person is efficient with chart reviews but inefficient with writing notes, [for example].”


How to Harness Your Hospital System Data via Advanced Content Management

For years, healthcare institutions have attempted to manage paper documents and electronically captured PDF files. These documents can be electronically stored in various databases like EHRs, ERPs...

MacDonald says that they would also survey the physicians to see what they personally feel they are most inefficient with in the EHR. “We wanted to make sure that we address their biggest areas of frustration,” he says, noting that the organization is also looking to add a chief wellness officer to help accomplish this.

Problems in the Trenches

MacDonald says that his team, based on anecdotal conversations with physicians, believes that it’s “patently obvious that doctors are frustrated by EHRs and IT, as well as the other factors from the changes in the healthcare system over the last few years, as well as the regulatory environment.”

That said, MacDonald doesn’t believe that EHRs are hurting the physician-patient relationship; more so that they are “blamed” for hurting it. “Because of what’s happened over the course of the last decade, with lots of regulatory requirements, even going back to the 1990s with CMS [the Centers for Medicare & Medicaid Services] billing regulations, all those things have been addressed in a lot of organizations through the EHR. So people tend to shoot the messenger and blame the EHR for these ills. But the EHR is really just a tool, and if that tool is built and trained well, it’s certainly a real boon to the quality of care we deliver,” he says. “If people know how to use the tool effectively when they are seeing a patient, [it will] become a partner in the care with the patient, rather than a mediator of the care,” he emphasizes.

Providing some more context, MacDonald believes that if doctors have the computer screen up between them and the patient, and all the patient sees are the wires coming out of the back of the monitor, that doesn’t make for a good experience for the patient. “But if you are in a triangle with the patient and the monitor, and you are engaging the patient in the data you are looking at, then it could be a real positive. Across the U.S., we have not trained our physicians in that aspect of modern medicine. How we use the tool is part of the relationship with the patient,” he says.

A Program Designed for the Physician

UC Davis Health’s Physician Efficiency Program (PEP), modeled after the pilot project in the four clinics last year, tapped program manager Melissa Jost, who oversees six analysts. Teams of three are deployed to clinics to train and build features within the Epic EHR platform. What’s more, Jost supervises two builders and four trainers, an approach that MacDonald believes makes this program particularly unique. “We integrate the building and training in one team. So when we go out to the clinics and work with [physicians], we can not only show them how to use the tools that exist, but also build the tools if one doesn’t exist and there is something that is workflow-specific that’s needed.”

Each team spends up to six weeks in a clinic monitoring workflows, reviewing EHR-use metrics and working one-on-one with each physician to personalize and optimize their use of EHR tools. Clinics also reduce each physician’s patient schedule by 50 percent to allow time for the training sessions right in the clinic during normal clinic hours, with team members also available for follow-up questions or sessions on site, according to officials, who also note that the goal is to engage all primary and specialty care ambulatory physicians by 2020.

MacDonald admits that to date, the data isn’t perfect, but it gives his team broad strokes about how effective individuals, clinics and groups are using the EHR system. Nonetheless, officials point to some encouraging results from the program—namely a 12-percent increase in physician satisfaction, 24-percent increase in physician efficiency, and an average reduction of 25 hours less per month in time spent working after hours per physician trained.

And in terms of anecdotal physician feedback, MacDonald says that they love the program so far. “We have been getting rave reviews,” he notes, noting that he recently asked physicians at one clinic their feelings about the program and how it can improve, to which the near universal response was, “When are you coming back?”

When asked if physicians feel that the core problem with EHRs is the documentation requirements, or technical flaws in the systems themselves, MacDonald chalks it up to a “mix of everything.” He says that this type of tension is common in informatics, and people ask, “Why can’t Epic just do [X]?” But MacDonald notes that oftentimes the system actually can do that thing and the physician might not know how to do it. “Often, people’s frustrations can be easily met with simple training because the tools are already there from the vendor. But that’s not always the case, and that’s why we do additional build work to customize it,” he says.

MacDonald adds that in healthcare, there is always this “undercurrent of external requirements that don’t appear to people to have much clinical value,” such as reporting on quality measures, data collection, and regulatory requirements, but most physicians do reluctantly accept the necessity of these things by working in the modern healthcare system. “But if we can mitigate [the burden] by giving them a faster way of doing it, they will appreciate it,” he says.


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Report: athenahealth Has Multiple Bidders for Sale of the Company

October 15, 2018
by Heather Landi, Associate Editor
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Watertown, Mass.-based health IT company athenahealth has attracted interest from at least five potential bidders for a possible sale of the company, people familiar with the matter told Bloomberg.

In an article posted Friday, Bloomberg reports that private equity players including Bain Capital, Hellman & Friedman, Clayton, Dubiliar & Rice and TPG are considering bids for athenahealth, the people said, asking not to be identified because the matter is private. Elliott Management Corp., the sometimes-activist fund run by billionaire Paul Singer, is also weighing a bid, people familiar with the matter told Bloomberg.

Elliott, which owns 9 percent of athenahealth, may keep that stake if it is unsuccessful in acquiring the company, the people said.

“athenahealth has received indications of interest above $135 a share, the people said, with final bids due by the end of the month,” Bloomberg reported.

As previously reported by Healthcare Informatics, in May, Elliott Management made an all-cash takeover offer to buy athenahealth, at a valuation of $6.9 billion. The investors sent a letter to athenahealth’s board proposing to acquire the company for $160 per share. In the letter, the investors criticized leadership at the electronic health record (EHR) vendor for failing to make the changes necessary “to enable it to grow as it should and to create the kind of value its shareholders deserve.”

The story continued to take turns throughout the summer, particularly following the resignation of CEO and President Jonathan Bush in June. Bush’s resignation came just a few weeks after Elliott Management’s takeover bid, and just a few days after reports surfaced that the athenahealth chief had allegedly assaulted his ex-wife more than a decade ago, and also created a “sexually hostile environment” at the company.   

Following the news, various companies, both inside and outside of healthcare, were brought up as possibilities to buy athenahealth, including the Kansas City-based EHR giant Cerner Corp.

According to a report in the New York Post published in early September, Elliott Management was cited as the favorite to win the athenahealth takeover bid, reporting that Cerner and UnitedHealth declined an opportunity to acquire the health IT company.

The Sept. 6 report noted that “The healthcare companies that would most logically be interested in athenahealth, including Cerner Corp. and UnitedHealthcare, have taken a pass…” As such, Elliott has now teamed up with investment firm Bain Capital on its bid, the New York Post noted at the time.

Bain Capital owns Waystar, a healthcare technology company that was recently formed by combining Navicure and ZirMed, two revenue cycle management vendors. Waystar may benefit if Bain buys athenahealth, an industry banker told the New York Post.

However, almost two weeks later, another report in the New York Post indicated that Elliott Management had backed away from its $160-a-share bid for athenahealth. “As a result of Singer’s retreat and the lack of robust interest from others, athena has extended a final bid deadline by 10 days — to Sept. 27, sources said. Singer backing off the promised bid is a stark turnaround in the battle for the health care tech company,” the New York Post article stated.

According to an October 11 article in the New York Post, suitors whose offers were deemed too low months ago are being invited to take a second look, according to sources. Bids are now believed to value the company at no greater than $135 a share.

“athena first sought final bids by a Sept. 17 deadline. Then, it extended that deadline by 10 days. Now, the company will likely not make a decision until next week at the earliest on how to proceed, two sources said,” according to the article.

“The seller is deciding between a full sale, a merger with Pamplona Capital’s NThrive or to continue as a listed company,” the New York Post article reported.

The New York Post article also reports that if the company decides not to sell or merge, it will have to find a new CEO to replace Bush, sources said. Former GE chief Jeff Immelt has been running Athena as its executive chairman since the summer.

“They definitely need a CEO that is not Jeff Immelt,” the analyst said in the article. “If I’m the candidate, I would want to know what Elliott’s perspective is going forward.”

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