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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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Allscripts Sells its Netsmart Stake to GI Partners, TA Associates

December 10, 2018
by Rajiv Leventhal, Managing Editor
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Just a few months after Allscripts said it would be selling its majority stake in Netsmart, the health IT company announced today that private equity firm GI Partners, along with TA Associates, will be acquiring the stake held in Netsmart.

In 2016 Allscripts acquired Kansas City-based Netsmart for $950 million in a joint venture with middle-market private equity firm GI Partners, with Allscripts controlling 51 percent of the company. With that deal, Allscripts contributed its homecare business to Netsmart, in exchange for the largest ownership stake in the company which has now become the largest technology company exclusively dedicated to behavioral health, human services and post-acute care, officials have noted.

Now, this transaction represents an additional investment for GI Partners over its initial stake acquired in April 2016, and results in majority ownership of Netsmart by GI Partners.

According to reports, it is expected that this sale transaction will yield Allscripts net after-tax proceeds of approximately $525 million or approximately $3 per fully diluted share.

Founded 50 years ago, Netsmart is a provider of software and technology solutions designed especially for the health and human services and post-acute sectors, enabling mission-critical clinical and business processes including electronic health records (EHRs), population health, billing, analytics and health information exchange, its officials say.

According to the company’s executives, “Since GI Partners' investment in 2016, Netsmart has experienced considerable growth through product innovation and multiple strategic acquisitions. During this time, Netsmart launched myUnity, [a] multi-tenant SaaS platform serving the entire post-acute care continuum, and successfully completed strategic acquisitions in human services and post-acute care technology. Over the same period, Netsmart has added 150,000 users and over 5,000 organizations to its platform.”

On the 2018 Healthcare Informatics 100, a list of the top 100 health IT vendors in the U.S. by revenue, Allscripts ranked 10th with a self-reported health IT revenue of $1.8 billion. Netsmart, meanwhile, ranked 44th with a self-reported revenue of $319 million.

According to reports, Allscripts plans to use the net after-tax proceeds to repay long-term debt, invest in other growing areas of its business, and to opportunistically repurchase its outstanding common stock.

The transaction is expected to be completed this month.

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Study Links Stress from Using EHRs to Physician Burnout

December 7, 2018
by Heather Landi, Associate Editor
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More than a third of primary care physicians reported all three measures of EHR-related stress
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Physician burnout continues to be a significant issue in the healthcare and healthcare IT industries, and at the same time, electronic health records (EHRs) are consistently cited as a top burnout factor for physicians.

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.

Findings from a new study published this week in the Journal of the American Medical Informatics Association indicates that stress from using EHRs is associated with burnout, particularly for primary care doctors, such as pediatricians, family medicine physicians and general internists.

Common causes of EHR-related stress include too little time for documentation, time spent at home managing records and EHR user interfaces that are not intuitive to the physicians who use them, according to the study, based on responses from 4,200 practicing physicians.

“You don't want your doctor to be burned out or frustrated by the technology that stands between you and them,” Rebekah Gardner, M.D., an associate professor of medicine at Brown University's Warren Alpert Medical School, and lead author of the study, said in a statement. “In this paper, we show that EHR stress is associated with burnout, even after controlling for a lot of different demographic and practice characteristics. Quantitatively, physicians who have identified these stressors are more likely to be burned out than physicians who haven't."

The Rhode Island Department of Health surveys practicing physicians in Rhode Island every two years about how they use health information technology, as part of a legislative mandate to publicly report health care quality data. In 2017, the research team included questions about health information technology-related stress and specifically EHR-related stress.

Of the almost 4,200 practicing physicians in the state, 43 percent responded, and the respondents were representative of the overall population. Almost all of the doctors used EHRs (91 percent) and of these, 70 percent reported at least one measure of EHR-related stress.

Measures included agreeing that EHRs add to the frustration of their day, spending moderate to excessive amounts of time on EHRs while they were at home and reporting insufficient time for documentation while at work.

Many prior studies have looked into the factors that contribute to burnout in health care, Gardner said. Besides health information technology, these factors include chaotic work environments, productivity pressures, lack of autonomy and a misalignment between the doctors' values and the values they perceive the leaders of their organizations hold.

Prior research has shown that patients of burned-out physicians experience more errors and unnecessary tests, said Gardner, who also is a senior medical scientist at Healthcentric Advisors.

In this latest study, researchers found that doctors with insufficient time for documentation while at work had 2.8 times the odds of burnout symptoms compared to doctors without that pressure. The other two measures had roughly twice the odds of burnout symptoms.

The researchers also found that EHR-related stress is dependent on the physician's specialty.

More than a third of primary care physicians reported all three measures of EHR-related stress -- including general internists (39.5 percent), family medicine physicians (37 percent) and pediatricians (33.6 percent). Many dermatologists (36.4 percent) also reported all three measures of EHR-related stress.

On the other hand, less than 10 percent of anesthesiologists, radiologists and hospital medicine specialists reported all three measures of EHR-related stress.

While family medicine physicians (35.7 percent) and dermatologists (34.6 percent) reported the highest levels of burnout, in keeping with their high levels of EHR-related stress, hospital medicine specialists came in third at 30.8 percent. Gardner suspects that other factors, such as a chaotic work environment, contribute to their rates of burnout.

"To me, it's a signal to health care organizations that if they're going to 'fix' burnout, one solution is not going to work for all physicians in their organization," Gardner said. "They need to look at the physicians by specialty and make sure that if they are looking for a technology-related solution, then that's really the problem in their group."

However, for those doctors who do have a lot of EHR-related stress, health care administrators could work to streamline the documentation expectations or adopt policies where work-related email and EHR access is discouraged during vacation, Gardner said.

Making the user interface for EHRs more intuitive could address some stress, Gardner noted; however, when the research team analyzed the results by the three most common EHR systems in the state, none of them were associated with increased burnout.

Earlier research found that using medical scribes was associated with lower rates of burnout, but this study did not confirm that association. In the paper, the study authors suggest that perhaps medical scribes address the burden of documentation, but not other time-consuming EHR tasks such as inbox management.


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HHS Studying Modernization of Indian Health Services’ IT Platform

November 29, 2018
by David Raths, Contributing Editor
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Options include updating the Resource and Patient Management System technology stack or acquiring commercial solutions

With so much focus on the modernization of health IT systems at the Veteran’s Administration and Department of Defense, there has been less attention paid to decisions that have to be made about IT systems in the Indian Health Service. But now the HHS Office of the Chief Technology Officer has funded a one-year project to study IHS’ options.

The study will explore options for modernizing IHS’ solutions, either by updating the Resource and Patient Management System (RPMS) technology stack, acquiring commercial off-the-shelf (COTS) solutions, or a combination of the two. One of the people involved in the analysis is Theresa Cullen, M.D., M.S., associate director of global health informatics at the Regenstrief Institute. Perhaps no one has more experience or a better perspective on RPMS than Dr. Cullen, who served as the CIO for Indian Health Service and as the Chief Medical Information Officer for the Veterans Health Administration

During a webinar put on by the Open Source Electronic Health Record Alliance (OSEHERA), Dr. Cullen described the scope of the project. “The goal is to look at the current state of RPMS EHR and other components with an eye to modernization. Can it be modernized to meet the near term and future needs of communities served by IHS? We are engaged with tribally operated and urban sites. Whatever decisions or recommendations are made will include their voice.”

The size and complexity of the IHS highlights the importance of the technology decision. It provides direct and purchased care to American Indian and Alaska Native people (2.2 million lives) from 573 federally recognized tribes in 37 states. Its budget was $5.5 billion for fiscal 2018 appropriations, plus third-party collections of $1.02 billion at IHS sites in fiscal 2017. The IHS also faces considerable cost constraints, Dr. Cullen noted, adding that by comparison that the VA’s population is four times greater but its budget is 15 times greater.

RPMS, created in 1984, is in use at all of IHS’ federally operated facilities, as well as most tribally operated and urban Indian health programs. It has more than 100 components, including clinical, practice management and administrative applications.


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About 20 to 30 percent of RPMS code originates in the VA’s VistA. Many VA applications (Laboratory, Pharmacy) have been extensively modified to meet IHS requirements. But Dr. Cullen mentioned that IHS has developed numerous applications independently of VA to address IHS-specific mission and business needs (child health, public/population health, revenue cycle).

Because the VA announced in 2017 it would sundown VistA and transition to Cerner, the assessment team is working under the assumption that the IHS has only about 10 years to figure out what it will do about the parts of RPMS that still derive from VistA. And RPMS, like VistA, resides in an architecture that is growing outdated.

The committee is setting up a community of practice to allow stakeholders to share technology needs, best practices and ways forward. One question is how to define modernization and how IHS can get there. The idea is to assess the potential for the existing capabilities developed for the needs of Indian country over the past few decades to be brought into a modern technology architecture. The technology assessment limited to RPMS, Dr. Cullen noted. “We are not looking at COTS [commercial off the shelf] products or open source. We are assessing the potential for existing capabilities to be brought into “a modern technology architecture.”

Part of the webinar involved asking attendees for their ideas for what a modernized technology stack for RPMS would look like, what development and transitional challenges could be expected, and any comparable efforts that could inform the work of the technical assessment team.




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