Athenahealth Wins a Client

Leading vendor of cloud-based services for physician practices, Athenahealth, Inc. ( ATHN - Analyst Report ) recently announced that Mid Dakota Clinic will utilize the company’s services to enhance administrative competency and improve patient connectivity. With the inclusion of Mid Dakota Clinic, Athenahealth’s services are now used by clinicians across all 48 states in the U.S.

Mid Dakota Clinic is a multi-specialty health care service provider catering to the rural population living in central and western North Dakota. With only 60 healthcare experts under its wings, the clinic was finding it difficult to address the fast growing population in and around the Bismarck-Mardan region, as they were overloaded with administrative work.

Athenahealth’s smart technology solution will reduce Mid Dakota’s administration-related problems on clinicians, thereby enabling better patient care. Mid Dakota will utilize Athenahealth’s various technologies such as KLAS EHR service, athenaClinicals; its streamlined medical billing and practice management service, athenaCollector; and its patient communications service, athenaCommunicator to increase clinical efficiency and tackle regulatory changes in the health care sector.

Our Take

We have a long-term Neutral recommendation on Athenahealth. The company’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. 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) 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 Corporation ( CERN - Analyst Report ) offer long-standing seamless products integrating inpatient and ambulatory-care systems. Quality Systems Inc. ( QSII - Analyst Report ) and Allscripts Healthcare Solutions, Inc. ( MDRX - Analyst Report ) are two other well-known competitors in a crowded field.