athenahealth, the Watertown, Mass.-based electronic health record (EHR) vendor, expects to reduce its workforce by about 9 percent due to an organizational redesign that also involves the closure of two offices.
In its 2017 third quarter financial statement released last week, company officials said that the board of directors and management team have signed off on a new organizational structure, marketing program rationalization, and real estate optimization, including the closure of offices in San Francisco and Princeton, and other reduced overhead. These changes are expected to result in $100 million to $115 million of gross pre-tax expense savings by the end of next year, officials said, adding that while some of those predicted savings will be reinvested to drive innovation and fund other projects, the majority of the savings will likely flow to the bottom line and drive margin improvement.
The vendor did experience 10 percent revenue growth year-over-year in the third quarter, and so far in 2017 the company earned nearly $100 million more compared to the same nine month-period in 2016. But that wasn’t enough to prevent trimming its workforce by 9 percent—or approximately up to 500 jobs, according to reports.
In a statement, athenahealth CEO Jonathan Bush said, “Today, athenahealth benefits from a solid operating foundation. We are the most universally connected healthcare network in the country. The value we offer to our clients is as strong as ever. At the same time, the market in which we operate is changing. The actions we are announcing today follow a comprehensive review of our operations and cost structure, and are designed to ensure that we are best positioned to drive continued success and profitable growth in this new environment. We are changing the way we work to become a more nimble and efficient organization while directing investments to our greatest return opportunities.”
Interestingly, as reported by Politico’s eHealth team, in a conference call following the release of the announcement, Bush pointed to a few motivating factors for the vendor’s latest moves. One, according to Politico, is that the industry is coming off a “sugar high hangover” from the meaningful use program with current market conditions “lackluster.” Bush, per the report, also admitted to “pessimism about the future of EHR purchases and ignorance of whether interoperability would have some of its promised effects.”
The vendor further stated that some of its non-athenaOne revenue initiatives are not ramping as quickly as planned. It also expects a negative impact of approximately $4 million on its 2017 revenue from hurricanes Harvey and Irma.
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