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Is Athenahealth CEO Jonathan Bush in a bubble?

December 29, 2014, 12:00 PM UTC

Jonathan Bush is having a lot of fun for a guy under attack. As he barrels around his 387-acre Maine resort at night in an all-terrain vehicle, weaving through trees and bumping over curbs, the co-founder and CEO of health care technology company Athenahealth doesn’t appear to be worried at all about a short-selling assault by hedge fund manager David Einhorn, who is very publicly betting against Athena’s highflying stock. Moments earlier, Bush—nephew of President No. 41 and cousin to No. 43—was regaling his guests with tales of the time he nearly had sex at Camp David. Now it’s past midnight, and he should really be getting to bed, because at 7 a.m. he’ll be leading a group on a jog to a serene but bone-chillingly cold pond for a swim. Then the ATV rumbles up to the “afterparty cabin,” where a few dozen venture capitalists, investors, health care startup CEOs, and Athena execs are playing drinking games, and Bush can’t stand to miss out. The night before he had ended up shirtless while playing something called flip cup. And when a Morgan Stanley portfolio manager, Athena’s largest shareholder, joked that he was selling his stock because Bush was buying everyone beer, Bush threw his hands in the air and yelled, “Yayyyy!!!”

Athena Health founder Jonathan Bush
The nephew of one President and the cousin of another, Bush has seen his company prosper in the age of Obamacare.Photograph by Andrew Hetherington for Fortune
Photograph by Andrew Hetherington for Fortune

Welcome to Athenahealth’s fourth annual More Disruption Please conference, the Animal House of corporate gatherings. The setting for this early-fall event is Point Lookout, a resort Athena purchased in 2011 as an employee-training and client-entertainment facility. A four-hour drive north of the company’s headquarters outside Boston—and some 120 miles up the Maine coast from Walker’s Point, where the presidential side of the family spent summers in office—Point Lookout also doubles as a wedding venue, a vacation destination, and the local bowling alley. Despite the rustic surroundings, there is rarely a quiet moment whenever Athenahealth’s hyperactive, no-filter goofball of a chief executive is around. Bush, who last May published a book titled Where Does It Hurt? An Entrepreneur’s Guide to Fixing Health Care, says the ultimate point of his antics is to foster irreverence for the status quo. At MDP he brings together investors with startups that might someday make his own company obsolete. Bush’s rallying cry, as always, is the need to reform the U.S. health care system through innovation—and by whatever means necessary. And he’s not afraid to look like a doofus in the process. “I’ve got to go past the rules of this game to the new game,” says Bush, 45, in a typical moment of rhetorical crescendo. “And I’m going to win the new game, even though it hasn’t been invented yet. You can call that visionary—a willingness to withstand emotional pain and isolation.”

Bush’s gonzo approach to corporate leadership has worked spectacularly well at Athenahealth (ATHN) so far. Since the company went public in 2007, its shares had returned 266% through mid-December—more than double the Nasdaq (87%) or the Russell 1000 Health Care Index (130%) over the same period. The rocketing stock price has pushed the market value of the company to around $5 billion. Investors have been attracted to the company’s rapid growth in a vast market that is suddenly undergoing radical change thanks to Obamacare. Athenahealth has seen average revenue gains of 32% a year by selling cloud-based software services to doctors’ offices, including electronic medical records—a business that, spurred by government incentives, has caught fire in recent years. The global health care IT market, now worth about $40.2 billion, has grown 35% in the past five years and is projected to surge another 64% over the next five, to more than $66 billion in 2020, according to Global Industry Analysts. And research firm MarketsandMarkets predicts that health care cloud computing in North America will nearly triple by 2018.

Athena Health founder Jonathan Bush
Bush hanging out in Athenahealth’s Arsenal office complex in Watertown, Mass., which the company bought for $168.5 million in 2013. The campus now features a frisbee golf course, and, soon, a beer garden.Photograph by Andrew Hetherington for Fortune
Photograph by Andrew Hetherington for Fortune

But skeptics, chief among them Einhorn, have begun to doubt that Bush and Athenahealth can maintain the company’s momentum, or come close to justifying its dizzying stock valuation. Last spring Einhorn, of the $10 billion Greenlight Capital, went onstage at New York City’s Sohn Investment Conference and described Athenahealth as the poster child of a group of “bubble stocks” that he was shorting. Athena shares slid nearly 14% the next day. Through mid-December the stock was down about 3% for the year, and more than a quarter of its shares were being sold short by investors betting on further declines. At a recent price of $130, Athena’s shares were trading at an eye-popping 3,547 times its earnings over the past 12 months. “The valuation is so high that even if the revenue was growing considerably faster, it would still be too high,” Einhorn tells Fortune.

The outlook that Athenahealth presented at its investor day in early December might seem to validate Einhorn’s doubts. The company said revenue would reach at least $740 million in 2014—that represents 24.3% annual growth, down from more than 40% the previous year and a smaller increase than Athena has ever posted as a public company. The company expects to lose as much as $7 million in 2014 and again in 2015.

In Bush’s view, however, short-term results are not the point—and investors who focus on them will be missing out on something radical, and probably pretty big. He believes that he is in the middle of building the next great technology company. “The plan is we’re going to create and curate the health care Internet,” says Bush.


Bush takes comfort in one thing about Einhorn’s short-selling campaign: He believes the hedge fund manager doesn’t really understand what Athena does. Then again, many of Athenahealth’s own investors struggle to fully grasp its business model. Henry Ellenbogen, manager of T. Rowe Price’s $15.3 billion New Horizons Fund and one of Athena’s largest shareholders, says that last summer one of his MBA-student interns was assigned to write a report on the company. “It was the hardest thing we could have asked anyone to do,” he jokes.

Jonathan Bush
Bush dressed as fictional talk show host Ali G. at an Athena event in 2012, at the White House with cousin George W. in 2006, and driving an ambulance in New Orleans during College.President photo: Kimberlee Hewitt—Courtesy of the George W. Bush Presidential Library and Museum
President photo: Kimberlee Hewitt—Courtesy of the George W. Bush Presidential Library and Museum

Athena’s core business is handling insurance claims for small physician practices: Its original billing service, AthenaCollector, is ranked first among practices with up to 75 doctors, according to KLAS, which rates health care technology. That product still generates more than 60% of the company’s revenue, Citi estimates. Athena’s newer electronic medical record product, AthenaClinicals, scores almost as highly. In the exceptionally fragmented and competitive market for electronic medical record systems, Athena’s cloud-based technology is increasingly perceived as an advantage.

To date, Athena’s billing system has penetrated just 5% to 7% of the out- patient doctors market, while its electronic medical record product has a less than 3% share. Neither is used in the hospital inpatient setting yet, but the company aims to change that. In 2015 it plans to launch a cloud-based medical record product specifically for inpatient care, and, Bush says, it’s developing products to infiltrate every corner of the health care landscape. Indeed, Athena’s vision has lately shifted from automating physicians’ back offices—“scutwork,” as Bush calls it—to a grander idea of becoming a “national backbone” for the health care industry. At the MDP event, Athenahealth execs were busily scouting startup talent as potential partners for Athena’s new online marketplace. Launched in 2013 on AthenaNet—effectively the homepage for Athena’s doctor customers—the marketplace is what Athena unofficially refers to as its “app store.” But Bush says the model is actually more akin to that of Amazon, which lets other vendors sell on its site, or Salesforce, which distributes products made by other companies alongside its own suite of business software. “Over time we believe customers will eventually choose another competitive product, even another medical record—but on AthenaNet,” says Bush. “And we’d rather have them doing that than pissed or feeling trapped or leaving us altogether.” The initiative is slowly beginning to pay dividends to Athena, which takes a cut of up to 20% of each marketplace sale: Athena says it will handle $5 million in MDP partner transactions in 2014, and expects that amount to grow to $100 million in five years.

As Athena pursues bigger markets, it is increasingly bumping up against large competitors like Epic Systems, the privately held leading electronic medical record provider, as well as health IT heavyweights Cerner (CERN), which has some $3 billion in sales, and McKesson (MCK), No. 15 on the Fortune 500 last year, with around $122 billion in revenue. Those deep-pocketed conventional software companies are entrenched because hospitals have spent billions to install their technology and aren’t eager to replace it soon with unproven systems. “What Jonathan is talking about doing is absolutely revolutionary,” says David Francis, an analyst at RBC Capital Markets, who recently downgraded Athenahealth to underperform. “But we think they’re going to have to go through hell before they get to heaven.”

Einhorn isn’t buying Bush’s vision thing. And he’s dubious about Athena’s ability to take down larger rivals. The company wants to position itself with the other “cool kid stocks” that are in a bubble right now, said Einhorn at the Sohn event. His presentation included a montage of YouTube clips in which Bush compares Athenahealth to Airbnb, Facebook, and even OpenTable. “They’re a niche provider way out on the periphery with a tiny market share,” he tells Fortune. “I don’t see how they’re going to become a backbone of anything.”

Even Athena’s most ardent supporters agree that the bullish case for the company is predicated on a new and improved health care system that currently exists only in the imagination. And the transition to that more open, digital future could be treacherous. “The reality is that today Athena makes most of its money on an old-school model of insurance billing and collection,” says Brandon Hull, co-founder of health care venture capital firm Cardinal Partners, who was an early investor in Athenahealth and is now the lead director of its board. “But nobody believes that will exist in 15 years. The company must reinvent itself. It must disrupt itself. It must put itself out of business.”


Bush co-founded Athenahealth in 1997 with Todd Park, a fellow former health care consultant who left Athena in 2008 and started Castlight Health, before being tapped by President Obama to serve as the U.S. chief technology officer. Since late August, Park has served as a government technology adviser in Silicon Valley. “They were offended as Americans that health care is as dysfunctional as it is, and they had a zealot’s sense of mission to make it better,” says Hull of Bush and Park.

Athena health co-founders Jonathan Bush and Todd Park
Bush (left) in 2005 with his Athenahealth co-founder, Todd Park.Photograph by Michael Edwards
Photograph by Michael Edwards

The company’s original business plan was to buy and run a chain of women’s ob/gyn centers. But, struggling to extract insurance reimbursements, it commissioned Todd’s engineer brother, Ed Park— now COO of Athena—to build the web-based software that formed the foundation of AthenaNet. At the height of the dotcom era, the team threw themselves into the new trajectory of the business.

The company’s early success surprised even members of Bush’s own clan. Jonathan managed to score a meeting in the Oval Office with President George W. early in his first term. Reenacting that visit, Bush imitates the incredulous look on his cousin’s face when he mentioned Athenahealth: “He was like, ‘You’re CEO of a company?’ And in my head I was like, ‘Well, if you can be President, I can be CEO!’”

As Athena has grown, it has ramped up spending on everything from R&D to sales and marketing. “The reason we continue to have relatively flat earnings is because our investors think it’s best for us that we invest all of our leftover resources in growth,” says Park, the Athena COO. “Everyone basically says, ‘You guys are crazy not to just grow and try to take over a great part of the market.’” But some on Wall Street have lost patience waiting for an earnings payoff. “I think this company can earn outsize margins. I’m just not sure it’s going to be under Jonathan Bush, because he’s wedded to the idea of growing Athena into this big behemoth of health care IT,” says Oppenheimer analyst Bret Jones, who downgraded Athena to underperform last March. “If he can take over the world, more power to him.”

Those who still believe in Bush are willing to take a longer view. T. Rowe Price’s Ellenbogen, who closed his top-performing small-cap growth fund at the end of 2013 out of concerns that tech stock valuations had hit alarming heights, doesn’t see Athenahealth as being anywhere near a bubble. Over time, he believes, health care will inevitably replace its “closed” legacy software systems with “open,” cloud-based ones like Athena’s—allowing the company to leverage its network. “The worries are: Is the core business going to continue to grow and fund the other parts of the business?” says Ellenbogen. “And there are a lot of issues if the closed systems win.”

Athenahealth has already scored one major hit in startup investments. From the top of Point Lookout, Bush gestures to an island a stone’s throw away, where he says he and Park conceived a blueprint for Castlight Health (CSLT), which now sells cloud-based health care comparison software to employers ranging from CVS to Tesla. Athena, which invested $1.1 million of venture capital in Castlight, profited big when Castlight went public in March: Athena’s stake was worth $74.3 million at the end of the first quarter, nearly as much as the $75.8 million Athena made in total revenue the year before its own IPO. (Bush likes to refer to Athena’s new company plane as “the Castlight jet.”) So far it’s the biggest success in Athena’s startup portfolio, which also includes Vitals, a doctor directory and review service, and an Indian company named Access. If Bush has his way, there will be much more to come. “By having a lot of new companies get born around us, you can influence a new star, and then they’ll build their products in your image, which makes Athena much more attractive,” he says.

Bush, who is dyslexic, seems to have a nonstop flow of unconventional ideas—not all of which are popular with his board. According to Hull, the directors say no to Bush “all the time.” For example, the board split over the $7.7 million purchase of Point Lookout, which Bush pitched a few years after Athena paid $6.1 million for an operations center in Belfast, Maine, a short drive away. “The first time it came up as a topic, it was like, ‘Are you kidding me? We’re going to buy a mountain?’ ” Hull recalls. The directors were also divided on Athena’s 2013 acquisition of Epocrates, a mobile medical information app popular with doctors, but whose value has shrunk by half because of declining ad sales since Athena bought it. As wacky and outlandish as Bush’s notions may sometimes seem, they have frequently paid off for the company in ways the board couldn’t predict—including the Belfast office, which has panned out to be cheaper and more productive than running the same operation out of the headquarters. “With Jonathan’s personality, lots of people misjudge him because of his whole unplugged, zany demeanor, but he’s an incredibly thoughtful person, and part of Jonathan’s genius is sizing up the company’s opportunities,” Hull says. “And, sure, I say no all the time. But often he winds up being right, and he’ll say, ‘I told you so. Now can we do it?’”


In the spring of 2013, Athenahealth paid $168.5 million to buy a 29-acre riverside office complex in Watertown, Mass., called the Arsenal on the Charles, from Harvard University. Bush envisions the historic site, where ammunition was stored as far back as the early 1800s, blossoming into a sort of mixed-use, East Coast Googleplex, with shopping next to the 750,000 square feet of office space housing Athena and other tech-centered businesses. The campus features local food vendors, a Frisbee golf course, and, coming soon, a beer garden. With all the new space, Bush has also been able to take the next step in his More Disruption Please master plan. In September, Athenahealth officially unveiled an “accelerator” program—the first time MDP has gone beyond partnering to actually funding startups. Athena found space for fledgling companies above an optometry office in a small building on the Arsenal grounds. “I liked the idea of having entrepreneurs on campus, because it’s the energy I’m trying to preserve,” Bush says. “We’ve worked really hard to maintain our culture. But I know there’s a natural gravitational pull that comes with size and fiduciary duty.”

The accelerator space is now home to a startup called Smart Scheduling, which plugs into Athena’s software to optimize doctor appointment booking by predicting no-shows. More firms will arrive shortly. Serving as the unofficial den mother of the office is venture capitalist Nancy Brown, a partner at the highly respected Connecticut-based fund Oak HC/FT. Brown, who worked for Athena for six years in between selling two companies of her own to McKesson, happened to need office space in Boston recently and jumped at the chance to be back close to Athena. “I have a lot of opinions about the Athena business, and I see an endless runway for it,” Brown says. But she observes signs that Athenahealth has already lost touch with its startup roots. For instance, when Smart Scheduling arrived over the summer, it discovered that the office was wired with DSL broadband—too slow for advanced programming. So it begged until Athena put in high-speed Wi-Fi. Then the “AthenaEnvironment” department showed up, painting the walls Athena purple, green, and yellow, and inscribing quotes from star business authors Atul Gawande (The Checklist Manifesto) and Clayton Christensen (The Innovator’s Dilemma). “We kind of wish they hadn’t,” says Smart Scheduling CEO Chris Moses. “We want to tear them off the wall.” The decor screams big company trying to act like a startup. Adds Brown: “I said to Jonathan, ‘We would laugh at other companies who did that years ago!’ ”

As Bush plots the future path for Athena, he’s also redefining his own life. He’s going through a divorce from his second wife. Now he’s trying to find balance between running his company and spending time with his five kids from his first marriage. Bush took a step back this year when he took an eight-week sabbatical, taking advantage of an Athena employee policy. He skied, he traveled to the Sochi Olympics, and he spent a week shadowing an Army colonel at Fort Hood to glean leadership lessons. He says he never checked Athena’s stock price once.


On the morning after the afterparty, Bush rolls out of bed to lead a handful of guests on a run through the rain to the frigid pond. When they’re back on the trail after a bracing dip, the conversation turns to politics. Would he ever run for office? “Maybe if I changed my name,” he quips.

Discussing his hopes for the More Disruption Please program, however, his tone shifts to businesslike urgency. “It’s not my legacy, but it’s the thing that’s young and fragile, and necessary,” he says. Bush gets excited imagining how Athena could someday make its mark on everything from ambulance services to pharmacies. “Our job is to get rid of the other stuff so we can get to the cool stuff we really want to be doing,” he says. In the meantime, Bush is looking way past distractions like Einhorn and contemplating his company’s future without him. “I can see Athena getting to a place where it will be the health care Internet I know it can be, and once that’s true I don’t want to keep working there,” he says. “I think it would be almost incestuous.” But until Bush sees his vision through, he’s not going anywhere.

This story is from the January 2015 issue of Fortune.