Billion Dollar Unicorns: athenahealth Enters the EHR Market

A Frost and Sullivan report on the US Hospital Information Systems (HIS) estimates the market for HIS in US hospitals to grow at 5.7% annually over the period 2014 through 2020. Billion Dollar Unicorn club member athenahealth (NASDAQ: ATHN) is a leading player in this market.

athenahealth’s Beginnings

Back in 1997, co-founders Jonathan Bush and Todd Park set up Athena Women’s Health, a women’s health and birthing practice in San Diego, California. While their practice was doing good, the two founders realized that getting reimbursed by payers was a big challenge. It became all the more difficult because there was no easy system to track insurance claims. Realizing the market opportunity, the two got together and created a revenue cycle management system. Soon, athenahealth was born.

Their first product was athenanet, which was a web-based platform that kept track of the things that the practice could bill for and the information that was needed to eventually bill. Today, athenahealth is a leading provider of Internet-based business services for physician practices. They offer their services on a proprietary web-native platform. Their key offerings include athenaCollector, a revenue cycle management and a practice management platform for physicans and athenaClinicals, a clinical cycle management service that automates and manages medical record-related functions for physician practices. Essentially, their services help their clients with simplifying and speeding the process of receiving reimbursement from payers.

athenahealth’s Financials

athenahealth was venture funded till 2007. They had raised $40 million in funding from investors including GGV Capital and Venrock. In 2007, the company went public and raised $113 million by selling 6.3 million shares at $18 each. They haven’t looked back since.

For the recently reported quarter, athenahealth’s revenues grew 24% to $213.2 million. EPS of $0.58 was also 2% higher than previous year’s. The market was looking for revenues of $207.7 million and EPS  of $0.39 for the quarter.

Revenue growth was attributed to 31.5% growth in athenahealth-branded services. By segment, revenues from Business Services grew 24% over the year to $201.1 million and Implementation and Other revenues improved 34% to $12.1 million.

Among operating metrics, athenahealth added 2,317 physicians to athenaCollector, 1,353 physicians to athenaClinicals, and 2,480 physicians to athenaCommunicator.

They ended the year with revenues growing 26% to $753 million and EPS improving 13% to $1.31.

For the current year, athenahealth expects revenues of $905-$925 million with an EPS of $1.10-$1.20. The market was looking for revenues of $917.62 million with an EPS of $1.26.

athenahealth’s Acquisition

Earlier this year, athenahealth announced the acquisition of EHR and management technology vendor, RazorInsights, for an undisclosed valuation. Kennesaw, Georgia based RazorInsights’s solutions focus their technology on rural, critical access and community hospitals. Their solutions have been deployed across 25 leading health care provider organizations across 15 states. They were among the first to announce Stage 2 Meaningful Use for their clients and have also achieved 100% client attestation for Meaningful Use Stage 1. athenahealth plans to integrate their offerings with RazorInsights’ cloud-based open platform to expand innovations and workflow processes. The move will help athenahealth to enter into the inpatient care environment.

Athena’s stock is trading at $117.65 with a market capitalization of $4.49 billion. It touched a year high of $165.74 in April last year.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

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Photo: Paweł/Flickr.com.