Athenahealth Is Now Taking Over Big Hospitals

by
Laura Lorenzetti

@FortuneMagazine

January 21, 2016, 4:37 PM EDT

Athenahealth struck a new deal with University of Toledo Medical Center (UTMC) to bring its cloud-based medical records system into a major hospital for the first time, expanding its reach beyond the doctor office. The move is a significant step towards implementing health care systems that go beyond the silo-ed medical records of past years to new systems that can share information across care settings, from a primary care physician to a hospital to a pharmacy—and beyond.

UTMC will implement AthenaClinicals, the company’s platform specifically focused on hospitals and health systems, across its organization, replacing its current traditional electronic medical records system. It’s the first time Athenahealth is moving into a large hospital. Up until now AthenaClinicals was being used in hospitals with 50 beds or fewer. For comparison, UTMC has about 250 beds. For UTMC CEO David Morlock, it was a decision that simply made better business sense.

“The old approach is flawed in some ways. It has really high capital costs to get started, then also really high ongoing costs to maintain,” said Morlock. “It needed to make more business and analytic sense than that. The opportunity with Athenahealth is that the incentives are aligned.”

Rather than pay a large upfront sum for a software package like those offered by traditional electronic health record providers like Epic, Cerner CERN , and McKesson MCK , UTMC and Athenahealth established a deal whereby the two will share the cash flow generated over time, said Morlock. Also, Athenahealth was a known entity for UTMC. The medical center has worked with Athenahealth for over a year within its doctors’ offices (i.e. non-hospital units), so it was familiar with the service. UTMC is able to easily connect its doctors’ office records with the hospital, seamlessly sharing patient information across sites.

One of the biggest challenges in health care today is what’s referred to as interoperability, meaning the ability for software systems to seamlessly share information between different providers. Up until now, electronic medical record systems have been sold as complete software packages where companies pay a large sum of money for a program that’s designed and installed specifically for a provider. Those systems are self contained within each medical center and don’t allow other systems to plug in to seamlessly share data.

That creates a roadblock when a patient is transferring between medical centers. The information that may have been collected at his or her doctor’s office isn’t in her hospital file—and vice versa. Each facility needs to collect the information from scratch, meaning that unintentional gaps can occur. This can happen again when a patient moves from the hospital to a separate rehabilitation facility when they once again enter a whole separate medical records system.

“The current conversation between providers is clumsy. It’s like eighth grade dating,” said Jonathan Bush, CEO of Athenahealth. “We wanted to create a hospital platform that more sophistically talks between providers, from acute care to laboratories to final billing.”

AthenaHealth ATHN is trying to link up systems via the cloud, either by spreading their own platforms or by providing APIs that allow outside providers to link into their databases. The ultimate goal is to create a new information technology system within health care that connects hundreds of thousands of patients to their own records, who can then share that data across providers. It’s also a system that can be implemented at a fraction of the cost of traditional electronic medical records.

“Think about what’s happened to ATMs over the previous decades,” said Bush.

ATMs went from being only within each bank to then small networks that worked for multiple banks, which you’d find by checking the icons on the back of your debit card. Today, ATMs are fully interoperable. You can go to almost any ATM worldwide and know that it’s going to seamlessly connect to your bank to get the cash you need—or even just check your balance.

“That’s the kind of change we are working toward,” said Bush.

To be sure, it’s a huge undertaking, one that many established and emerging electronic medical record players are also slowly working towards. It’s going to be years in the making, requiring companies big and small to take part in the transformation. At the end of last year, the Office of National Coordinator for health Information Technology released its new Interoperability Standards Advisory for the year, which sets the annual goals for connecting health care infrastructure. The ONC calls the commitment to connecting the industry a “critical element” for driving better patient care. The goal is to ultimately make sure “electronic health information is unlocked and securely accessible.”

HealthTap wants to provide hospitals with their own ‘operating system’

by
Laura Lorenzetti

@FortuneMagazine

October 28, 2015, 8:18 AM EDT

Telemedicine startup HealthTap has built what it calls an ‘operating system’ for hospitals to help them centrally manage everything from patient records to appointments and medication to lab test prescriptions.

Dubbed HOPES, which stands for Health Operating System, HealthTap’s new system aims to replace the patchwork of various software programs and tools—and even old-school methods like paper forms—that most hospitals piece together to manage their business. Instead, HOPES lets hospitals do everything through one system, which also connects officials with HealthTap’s database of doctor-created (and vetted) content, and connect with patients through smartphone applications.

The Waikato District Health Board in New Zealand is among the first hospitals to implement HOPES. The district will use the software to manage its more than 2,500 doctors and healthcare providers, as well as connect with more than 1 million residents in its community.

In the case of communities like the Waikato district, the ability to connect with patients—many of whom live far from the hospital—via smartphones is critical in providing individuals with regular healthcare, the company says. This is right in line with HealthTap’s original business that connected patients with health information and doctors straight from their phones via messages and video chats.

It’s also notable that HealthTap’s new system isn’t used yet by hospitals in the U.S., something that likely stems from the high levels of regulation that goes along with the country’s healthcare industries. Hospitals and healthcare providers also typically take years to switch over to new or different technology, in part, due to their reluctance over learning how to use new tools, much to the frustration of their patients. Another challenge is the lack of interoperability (the ability of different technologies and software to communicate and exchange data) between different vendors’ products. This continues to make it difficult for most software providers to truly provide a universal solution for hospitals.

HealthTap is, of course, far from the first or only company to attempt to unify healthcare management tools. Established companies like Athenahealth ATHN and McKesson MCK are already providing similar systems for hospitals and clinics, while cloud-based software giants like Salesforce CRM are joining the race with their own twist on healthcare software.

Nevertheless, HealthTap could distinguish itself from other companies with its focus on patient tools. Last month, it unveiled Compass, a product for employees at large companies that lets users easily manage their healthcare benefits through an online portal that connects with their employer’s insurance provider. Compass, as does HOPES, includes patient access to HealthTap’s database of health information and its network of more than 71,000 licensed physicians, which provides virtual consultations via desktop or mobile applications.

Founded by Ron Gutman, Sastry Nanduri, and Dr. Geoff Rutledge, HealthTap has raised $35.5 million in funding to date from investors such as Mohr Davidow Ventures, Khosla Ventures, Mayfield Fund, and Asset Management Ventures.

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Athenahealth CEO Jonathan Bush: As a leader, how do you keep it real?

by
Laura Lorenzetti

@FortuneMagazine

January 29, 2015, 11:17 AM EDT

I make it my business to fail – usually in unobstructed view, sometimes in grand fashion. I don’t for one minute mind exposing missteps however. Some might see that as a weakness, but I suspect it’s my vulnerability that helps me sway the hearts and minds of the people who follow me and my company on our mission to fix health care.

In business, you hear a lot about ‘authentic leadership;’ this is great, as long it’s encouraging leaders to go off the rails more. If leaders are truly in it for the mission, doing what feels good usually won’t be wrong, even if it goes against the approved path and conventional style. Even when it is wrong, there will be a lesson along the way. What I’m noticing is that the vulnerable, soft edges of leadership aren’t encouraged enough. “To err is human,” after all, so why does the world cringe so often at leaders’ unscripted, honest moments.

I believe great leaders show their whole selves. Does anyone remember “Mo” Cheeks, former NBA player and coach? In this one-minute YouTube video, you can see great, authentic leadership at its best: his actions are driven from the gut, are not something everyone would do, and after you hear the man’s singing voice, just try and tell me this is not a vulnerable moment for him. My point is that great leaders are not shackled to talking points or cycling through canned speeches. Really great leaders build or solve things differently for profound impact where most don’t even know it’s possible to tread. Apple used to call them the “crazy ones – round pegs in the square holes… the ones who see things differently..”

When I started Athenahealth in my twenties, never in my wildest dreams did I think that the fine pages of a national business magazine would care about anything I did, but alas some of my own genuine, vulnerable, and impulsive moments have been cataloged in the January issue of Fortune. I’d like to think this attention is due to the fact that Athenahealth is fundamentally different from all others in health care. It’s because we’re disrupting the status quo; we bring patients closer to caregivers, information closer to the moments of care, and connect the care continuum.

In any event, Fortune captured the real me. In some ways this is disarming and a little jarring, but it’s not bad. Surround me with inspiring entrepreneurs and colleagues-in-arms who want to make health care work the way it should and I get very excited (increasing my likelihood to have fun, drink beer and play games). I wasn’t exposed for anything that I’m not. As we learned from Brene Brown, we must combat the idea of perfectionism and “dare to show up and let ourselves be seen. This is vulnerability. This is daring greatly.” How could the fraternal nature of like-minded enthusiasts out to create and bring innovation to health care be anything but good.

In health care, what needs exposure aren’t the after-hours antics of enthusiastic CEOs, but the gonzo state of disconnectedness in this profoundly dysfunctional industry of ours, and perhaps the many leaders whose actions and inactions are propping it up. It should be startling that we live in a world where the fax machine remains standard across our country’s best hospitals. This industry, which has put some $30 billion against digitizing patients’ medical records, is failing. Saying this out loud is a necessity because anything less propagates the falsehood of advancement. How will this change? We need more leaders in health care to be authentic, not be afraid to fail, and to find comfort in their own vulnerability.

Jonathan Bush is CEO and President of athenahealth, one health care’s fastest growing tech companies. He is author of, Where Does it Hurt?: An Entrepreneur’s Guide to Fixing Health Care. He serves on the Harvard Medical School Board of Fellows.

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

by
Laura Lorenzetti

@FortuneMagazine

January 15, 2015, 11:10 AM EDT

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 30^th 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.

Bush vs. Einhorn: How Athenahealth’s CEO met his short-seller

by
Laura Lorenzetti

@FortuneMagazine

May 28, 2014, 6:58 PM EDT

FORTUNE — With a few swipes on his iPhone, Jonathan Bush, the animated CEO of Athenahealth and cousin of former president George W., zooms in on a chart of his company’s stock price displayed on the screen. He doesn’t normally bother to check the share price of Athena ATHN , he says, but it’s been an unusually volatile week: prominent hedge fund manager David Einhorn has publicly announced that he’s shorting the stock, on the eve of the release of Bush’s first book, “Where does it hurt?: An Entrepreneur’s Guide to Fixing Health Care.”

Now, as the chart comes into focus, Bush points to where the line drops so sharply that it looks like a cliff. “See that hole?” he says, “I call that hole ‘David.’”

Bush had only learned the name of the Greenlight Capital founder a few days earlier, when he was home in bed. Suddenly, his phone started blowing up with text messages; Bush, who says he typically gets about two texts a day, received 32. On stage at Lincoln Center in Manhattan—the same stage on which the New York Philharmonic perform—Einhorn was giving one of his notorious market-moving presentations at the annual Sohn Investment Conference, laying out his reasons for betting against Athenahealth. The company’s shares promptly shed nearly 15%, or $20 each, in the next two days of trading. (The stock has since rebounded almost 17%, but was still down nearly 1% from its price before the May 5 presentation, and more than 4% so far this year, as of market close on May 27.)

MORE: How to run the U.S. health care system like a business

While making his case against Athenahealth, Einhorn mocked the cloud-based health records company (for example, its decision to keep the “A” in Athena lower-case in company documents) as well as Bush himself: Video clips of the CEO comparing his company to Facebook FB , OpenTable OPEN , Salesforce.com CRM , and Airbnb in his signature fast-talking, evangelical manner played in the background as Einhorn spoke.

At the time, Bush contends, he didn’t have a clue who Einhorn was. Indeed, while visiting Fortune’s New York office recently, he claimed to have already forgotten the hedgie’s name. “We just got a huge short from what’s his name,” Bush said, adding that he originally “thought it was the Scarsdale Diet guy” who had shorted the stock.

After Googling Einhorn, Bush went to his staff the next day and asked if they had a copy of the investor’s Sohn presentation. They didn’t. So Bush emailed Einhorn and asked to see it. He also requested something short-sellers rarely provide the companies they bet against: a personal explanation to the CEO.

Within hours, Einhorn had sent the PowerPoint (which is now linked on Greenlight’s homepage) to Bush’s Yahoo email account, and soon they were on the phone. (Technically it was an online conference via WebEx, Cisco’s virtual meeting program. And Einhorn’s team had some difficulty setting it up, Bush recounts, grumbling: “This company is evaluating a web company and it can’t even load WebEx?”)

In the 45-minute call, Einhorn took Bush through his slides–and though the hedge fund manager didn’t back down or apologize, Bush says he came out with respect for his adversary, and that he is stronger for the experience. “He earned his lightning stick,” says Bush, noting Einhorn’s famous bet against Lehman Brothers before it collapsed. “He made a fortune; we got a scab.”

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In an exclusive statement provided to Fortune, Einhorn’s Greenlight Capital defended its short position. “Athenahealth shares are in bubble territory in part because its CEO is highly promotional. The presentation used the CEO’s own words to undermine the investment community’s bull case,” a spokesman says. “The company has failed to provide any rebuttal to the substance of the presentation.”

Ironically, Bush even seems somewhat flattered that Einhorn used Athenahealth to exemplify what the investor called a bubble in “cool kid stocks.” Bush is aware that his eccentric manner can make him an easy target. (“On blogs, people are seriously thinking of having me committed,” he admits.) And he doesn’t blame Einhorn for picking on him. “Oh, come on, it’s so much fun,” he says, taking some jabs of his own at the money managers at the Sohn Conference: “This is school pride day for hedge fund geeks.”

Nor has the incident soured Bush against hedge fund activism, which he doesn’t think is “that bad.” He even supports famed activist Nelson Peltz in his crusade to split up PepsiCo PEP : “The problem with PepsiCo is that he’s right,” Bush says.

After all, Bush has lately established some investor cred of his own. Athenahealth owned 8% of Castlight Health CSLT —the two companies share a co-founder—which had a very successful IPO in March, a triumph that has led Bush to invest in more companies. “We bought an airplane and we made enough on that to buy a bunch of airplanes,” Bush says.

His More Disruption Please program for entrepreneurs now counts more than 300 member companies—those that Athenahealth believes have a viable product, and may eventually invest in. Besides Castlight, Athena has also funded Vitals, a doctor directory site. Bush adds that he would also appreciate some company in the world of healthcare technology, because while Athena isn’t the only one in the industry, it’s “the only one who can afford an office in Washington.” That won’t be true for long, if he gets his way. The purpose of his new book is to encourage entrepreneurs to start more health technology companies.

Update: An earlier version of this story included stock performance figures through May 23. Numbers have been changed to reflect closing prices as of publication.

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