What You Need To Know Ahead of Athenahealth’s Earnings

Athenahealth

• Driving athenahealth’s success:• Ongoing migration of patient records online.• Increased communication with patients online.• Streamlining practice scheduling and billing.

• Future growth opportunity: • Significant dissatisfaction among practices.• Ongoing regulatory driven demand.

• Switch to ICD-10 (ICD-10 ready since February).• Provider incentives for coordinated care.

• Meaningful use bonuses.

Driving athenahealth’s revenueFirst, let’s consider athena’s revenue sources.

Athenahealth products:1. Electronic health records.

• athenaClinicals.2. Practice management.

• athenaCollector.3. Patient communication.

• athenaCommunicator.4. Order transmission.

• athenaCoordinator.

athenaClinicals

•15 million patients clinical records.•#2 EHR solution for 2013 by KLAS.

• 1-75 physicians•Cloud based solution.•95% Meaningful use attestation in 2013.

athenaCollector

•Medical billing and practice management.•#1 practice provider in 2013 by KLAS.•Cloud based solution.•8% improvement in collections.

athenaCommunicator & athenaCoordinator

athenaCommunicator•Improves patient engagement.•Reduces cancellations.

• 8% decline in no-shows.athenaCoordinator•Connects labs, imaging, etc with providers for more efficient ordering and fulfillment.

Driving athenahealth’s revenue

• ~53,000 providers served.• $12 billion in client collections annually.• ACA meaningful use bonuses for IT goals.

Driving athenahealth’s revenue• Significant annualized growth since 2006, including 30% YoY

growth in the first quarter.

Earnings outlook•Despite robust growth, analysts continue to over-model earnings and under-model investments in R&D and SG&A.

•Analysts have been lowering their expectations, which could provide athenahealth with an opportunity to finally begin over-delivering relative to analyst forecasts.

Fool-worthy thoughts

•~70% of 952 respondents describe their EHR investment as not worth the effort, resources, and costs. Substantial switching risk and opportunity.

•$36 billion addressable market and growing.•High gross margin business (~63%).•Significant spending on products and marketing.•Analyst’s historically over-estimate EPS.Will that trend shift given falling expectations?

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