Watertown, Mass.-based athenahealth, a provider of cloud-based EMRs, announced Jan. 7 it would acquire San Mateo, Calif.-based Epocrates, a mobile health company known for its point-of-care medical apps. athenahealth will pay about $293 million in cash. It’s a match hailed by the executives of both companies, and also by industry analysts, as a smart move for athenahealth.
“We believe this will help in accelerating physician adds at a reasonable cost and also provide new opportunities in monetizing their physician network,” Piper Jaffray analysts Sean Wieland and Mohan Naidu wrote in a brief after the announcement.
That’s the idea, says athenahealth CEO Jonathan Bush, who says growing the company fast enough to keep up with the needs of the market is something that’s top of mind for him. We caught up with Bush on Monday for a phone interview following his presentation at the JPMorgan Healthcare Conference in San Francisco.
[See also: athenahealth to acquire Epocrates.]
Q. Elaborate about your vision for athenahealth being the "backbone" for healthcare information.
A. We need a national health information backbone, and what I said is I want to be a health information backbone. I am open to the idea that that we’d have many, just as we have Visa and Mastercard and, you name it. We need one. We don’t have any right now. We’ve got a bunch of closed, kind of information hoarding soviets that are not good. So that needs to be blown up in a new model. What I mean by that, what I think the form it will take is that there will be a market for health information exchange. Those who are good at exchanging health information will make money by doing the trading for caregivers that sign up for them. So we've gotten the government to say it’s OK for the receiver of health information to pay the sender of health information for the information that they send. We’ve got an infrastructure that now they can clip in pretty easily to a doctor without being on any of our core services. We’ve obviously got a bunch of core services that do a wonderful job of curating and managing health information. Now, as a result of this acquisition, we’ve got 50 percent of the doctors in the United States on our application. So we're getting there. We’re actually starting to get there.
Q. What about the hospital market? Is there room for growth in that area for athenahealth?
A. Yes, absolutely. You can't very well say you’re going to be the backbone for health information as long as nobody goes to the hospital. So, of course, we’ve got to be moving in that direction as well. We already have a service called athenaCoordinator, and that service includes all the registration and pre-certification associated with hospital admission. So, we’ve crept up to the hospital door, and we’re just inside it today on athenaNet, and the goal over the years will be to connect into the rest of the hospitals. For example, we’ll be piloting making athenaClinicals the medical record of record for an inpatient facility during the year. We’re also working in the development area with companies that partner with us to do medical billing for hospitals in partnership with athena. We have to move out to doctors across all of their settings because they’re the ones who generate orders, we need to move down into all the different places that patients end up as a result of all those doctors orders.
Q. How do you compete with the Epics and the Cerners, or do you even try to?
A. You start with the fact that Epic costs hundreds of millions of dollars. You add the fact that it takes many years, and then you finish with the fact that it actually results in a closed system that can’t send information where patients want to go. There aren’t many hospitals that can afford Epic. The ones that can have already bought it. And, God bless them, they were the first movers. In a way, compared to nothing, Epic’s tremendous. But, compared to the Internet, it’s terrible. It’s atrocious. And, it’s going to be funny. A lot of these hospitals are going to go out of business. These second and third movers are going to over-commit their balance sheet to put in systems that are actually going to render them at a competitive disadvantage. They’re going to go under, and they’re going to go to Washington to ask for a bailout. It’s going to be an interesting phenomenon. They’re going to say, rightfully so, that the government pushed them into buying.
Q. It seems like the technology will have changed so much over the next 10 years.
A. That’s right, and you’ll keep current with hundreds of millions of dollars of fees to the [consulting firms] of the world, and upgrade modules and all this stuff. And, you’ll end up with this Frankenstein, or it will turn into a doorstop. Or, remember Mike Mulligan and His Steam Shovel – the children’s story? The Epic system’s going to be in the basement generating heat.
Q. The price of your stock today (Jan. 7) was $77 or more. Does that surprise you?
A. I don’t look at it. I can never figure out whether the stock’s going to go up or down. I did my best to try make sure that everybody who covers us, who has invested in us to hear our point of view why we spent this much money on one company all at the same time so we could at least get a crack at our side of the story. Whether that worked, or whether a butterfly is flapping its wings in just the right way in Japan, I don’t know. But, it seems like the world is supportive right now.
Q. Do you worry about growing too fast?
A. No. I worry about not growing fast enough. If we systematically started to grow faster than 30 percent, I would worry. We are not infinitely scalable, and we get more scalable every year. The guys in Maine and India, the automation team, make it possible to take on more revenues without requisite costs. It’s not infinite today for sure. We’ve been able to scale at that pace of about 30 percent. Some of our products are very scalable. Some are not scalable at all. But, the weighted average of about 30 percent growth seems to work for us. The problem, of course, is that 30 percent of a bigger number is 30 percent bigger than the last bigger number. And, that 30 percent is bigger than the next number, and pretty soon there’s some pretty big number. My real question is whether we can still grow at 30 percent more so that whether we’d have to worry about growing too fast. My concern about growing slow is, you know, you only have 5 percent of the doctors in this country on this network. Networks only work, having a telephone only works if there’s someone to call. So one of the key elements of this vision is that there be receivers coordinated on this network, so we need to hurry up and get more or nobody will want to be on it.
Q. How do you keep it fresh, how do you keep growing and keep up with the need to be disruptive?
A. Healthcare is so frustrating; it’s enough to put piss in your vinegar. I really feel if we don’t, I wonder who will. It’s been allowed to be so atrophied for so long. I don’t think there’s any problem with me remaining motivated. This is a very Gen Y employee base, and they’re looking for a cause. Religion is kind of not as important to people as it used to be. War has been professionalized – even protesting against war has been professionalized. So, there’s no great cause to throw yourself at, and athena and liberating health information and making healthcare less humiliating is a cause that resonates. I have no problem getting people excited, and staying excited myself.
Q. What keeps you up at night?
A. When I can’t sleep at night it’s the scratching sound of a doctor’s pen on a contract or old fashioned software because they bought an EMR or a Cerner system or whatever because they didn’t know they had an alternative, and they thought they had to buy something because of meaningful use or whatever else. So that’s what is terrifying – it’s that idea of doing all this work, but not getting enough market share to get network effect. And then actually dying irrelevant because we didn’t get the network built. I feel like I’m in a race against time and irrelevance and incompetence.
