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Leading vendor of cloud-based services for physician practices Athenahealth (ATHN - Analyst Report) recently reported it had expanded its relationship with Cogent HMG under which the latter will further utilize revenue cycle management (RCM) offerings. 

The longer-term utilization will support overall growth at Cogent HMG by optimizing revenue cycle management for its providers.

Medical practitioners at Cogent HMG will be largely freed from administrative hassles. They may then focus on delivering high quality medical care. Twin advantages from Athenahealth’s offerings include a drop in time required to pay a claim and higher revenues.    

By aligning itself with Athenahealth’s services, Cogent HMS has derived benefit from its proprietary rules engine which can detect and correct errors. Athenahealth also provides benefits in critical areas such as credentialing and resolution of claims.  

Athenahealth’s web-based deployment provides a low-cost scalable service while its flexible rules engine leads to higher efficiency in claims settlement. The Software-as-a-Service (SaaS)-based approach allows for a more flexible delivery mechanism that is expected to help Athenahealth win deals. The company has traditionally enjoyed high customer satisfaction rates, which facilitates a larger number of referrals.

Athenahealth’s unique business model makes it a strong provider of RCM services (athenaCollector) designed for small physician practices. Its EHR product (athenaClinical) is a key player in ambulatory settings.

We believe that sales of athenaClinical are likely to remain robust, given the opportunity for physicians to earn incentive payments under the federal stimulus. In addition, the company will harness its newer products, namely athenaCommunicator and athenaCoordinator.

The company should benefit from its extensive athenaCollector client base, as only a minority of its subscriber base also utilizes athenaClinical. Cross selling represents a real growth opportunity in the near term. In this regard, Athenahealth has made rapid strides in capturing the EHR business of physician practices. However, this segment is shrinking, as hospitals increasingly absorb physician’s medical practices.

Athenahealth is geared to enter the enterprise segment through its strategic alliance with Microsoft (MSFT - Analyst Report) and the acquisition of Proxsys, both completed in 2011. The company has recently signed on, and executed several enterprise-sized deals, which provide it with a credible and referenceable client base.

Though the federal stimulus will gradually wind down, the replacement market has been growing. Competition is fierce and larger competitors may benefit from the incumbency factor. Industry stalwarts such as Cerner (CERN - Analyst Report) offer long-standing seamless products integrating inpatient and ambulatory-care systems. Quality Systems (QSII - Analyst Report) and Allscripts Healthcare Solutions (MDRX - Analyst Report) are two other well-known competitors in a crowded field.

Tennessee-based Cogent HMG is the country’s biggest hospitalist entity. It is engaged with over 120 hospitals in its endeavor to create top-class hospitalist and intensivist offerings.

We have a long-term Neutral recommendation on Athenahealth. The stock currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

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