On a buying binge, Athenahealth CEO Jonathan Bush aims to own the “healthcare internet”

Jan 15, 2015

Athenahealth (athn), the cloud-based medical IT company run by presidential relative Jonathan Bush—and the target of a short bet by hedge fund manager David Einhorn of Greenlight Capital—is on a shopping spree.

The company announced on Wednesday that it has acquired RazorInsights, a cloud-based hospital software firm, for what Athena said was an “immaterial” price somewhere under $268 million (less than 5% of Athena’s $5.37 market cap). Athenahealth also added two more health care startups to its new “More Disruption Please” accelerator this week, investing an estimated $250,000 in each portfolio company.

Bush, Athena’s ceaselessly energetic CEO, views the More Disruption Please program—which also includes partner companies that don’t receive funding from Athena—as a holding pen to shepherd in future acquisitions: “Oh, hell yeah. This is our nursery. This is our farm team,” he tells Fortune. (For more on Bush and his strategy for Athenahealth, see “Is Jonathan Bush in a bubble?” from the January issue of Fortune.)

It comes as a bit of a surprise, then, that Athena chose to buy RazorInsights, which was not part of More Disruption Please. Presumably, buying RazorInsights will help Athena, which offers a web-based electronic medical record, gain a foothold in the inpatient hospital market that Athena is trying to enter. Athena’s shares rose nearly 1% on Wednesday, and traded up as much as 2.7% during the session.

But Athena is still struggling to eke value out of its prior acquisitions, such as the $293 million purchase of Epocrates in 2013. Epocrates, a mobile app for doctors, has since lost more than half of its revenue due to declining ad sales, and Bush now admits that “the business model was weak.”

The experience with Epocrates prompted Bush to rethink Athena’s takeover strategy and to develop a better M&A on-ramp and vetting process through the More Disruption Please program. “Companies that we bought that were already partners with us, we inhabited well,” says Bush. “Companies that we were coming at from outside, ones we were coming at cold, we didn’t do so well,” he adds, citing Epocrates: “They were putting more and more lipstick on it.”

Still, Bush isn’t losing sleep over the lost chunk of revenue: “We don’t need that. It’ll bother the analysts for a while but it won't bother me.”

Certainly, some Athena bulls support Bush no matter what’s on his shopping list—even if the CEO is still figuring out how to make M&A pay off for the company. “You think of Bezos at Amazon(amzn), or Reed Hastings at Netflix(nflx)—having that CEO who can identify what’s coming next and is not afraid of change is really important right now in this industry,” says Stifel analyst Steve Rubis, who specializes in digital healthcare. “I think the biggest disservice Athena does is they don’t compare themselves to Google (goog).”

Bush has also assembled an expert team to build out Athena’s acquisition pipeline and groom its portfolio companies. Leading the More Disruption Please program is Kyle Armbrester, Athena’s head of business development. Armbrester sold two tech companies of his own before his 30th birthday, one while he was still in high school. Now, he is charged with finding innovative health care companies and products that could enhance Athena’s core business, but would take too long to build in-house. “There was a lot of talk internally about building little skunkwork teams to go create stuff,” he says. “But that takes overhead, and you can’t keep running 100 miles per hour with all these threads. Frankly, Athena’s a big company now, so you want some of the small, nimble entrepreneurial companies, and you want them failing fast.”

For the entrepreneurs, working out of the accelerator space at Athena’s headquarters outside Boston also comes with an unofficial perk: They share office space with Nancy Brown, a partner at venture capital fund Oak HC/FT, which focuses on healthcare and financial tech. Brown has yet to be charged rent, but she’s assumed a sort of “den mother” role in the space, doing dishes and informally mentoring the founders of the first accelerator company, Smart Scheduling, who love having their own resident VC. “We've been joking with her that she needs to reserve money for us when we raise our Series A,” says Chris Moses, CEO of Smart Scheduling, which predicts appointment no-shows so doctors can rearrange their agendas accordingly.

The new companies joining the accelerator include CredSimple, a doctor credentialing service that helps health care organizations verify medical providers’ qualifications, and RubiconMD, which reduces unnecessary patient referrals by soliciting opinions from specialist doctors.

Driving Athena’s startup investments and acquisitions is Bush’s ultimate plan to create the “healthcare Internet,” offering cloud-based medical services for all aspects of the healthcare system. Still, even Bush can’t yet imagine everything that might entail: “It’s the dog that’s not barking; its market doesn’t exist yet,” he says. But whatever it is, Bush plans to own it.

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