While the President and Congress were mired in health-care legislation, Athenahealth has been out in the field making reform happen. The Internet or cell phone “didn’t get to where they are because a committee of elders got together,” says Athenahealth CEO Jonathan Bush (yes, he’s part of that family of elders). “A bunch of whackos started doing it.”
Bush is a whacko about using Google-style cloud computing to usher doctors’ practices–which still, on average, each receive 1,000 faxes a year–into the modern era. He has won more than 23,000 providers to Athenahealth’s management service. That’s 22% customer growth over 2008; revenue growth exceeds 35%. Now he’s doing it with electronic medical records. “Doctors lose money on EMRs because it costs a lot up front,” Bush says. “Number one: Don’t charge money up front. We’re at about 300% of what we planned on selling” in 2009. He’s also expanded into business intelligence, letting large practices see how they compare with their peers. Athenahealth takes a percentage of a practice’s revenue, so the $1.5 billion (market cap) company succeeds when its customers do. “We are here to become the nation’s health-information backbone.”
Made (More Nearly) Perfect
“There has been really very little innovation in the delivery of health care in the course of my life,” Athenahealth CEO Jonathan Bush told analysts last December. “The doctor’s office today–still today, I’m not kidding you–is largely a paper-based experience.” His says his goal is to replace all those files and charts and faxes with a cloud-based information infrastructure that is profitable for the 22,000 providers in Athenahealth’s network and, of course, for the company itself (annual revenue was up 35% in 2009). Bush talked to Fast Company about his company’s move into business intelligence and electronic medical records–and why there should be a market for patients’ health information.
Athenahealth is growing at a healthy rate. How are you doing it?
Most of the business models around health care are broken, and you have to start at the most fundamental and basic. It’s like the first cell phone, which cost like $5,000 and fit in your trunk; you paid $2 a minute and you were amazed. It was the coolest thing ever. And people said, “These will be free and fit in your pocket in 20 years”; others were like, “That’s ridiculous.” But it happened because there was a broad and free market. Lots of people chose dud ideas in cell-phone world and went down paths that didn’t work. That’s how the wisdom of crowds works.
In health care, because people aren’t allowed to do crazy things, no one ends up with a better deal, and the wisdom of crowds is muted. I’ve found a place where it’s legal and appropriate to say to doctors, “You don’t want my billing software and a billing department.” They get on the Athenahealth network, and the network takes care of it.
Doctors seem resistant to electronic medical records. Why is that?
EMRs lose them money. Doctors embrace technology. These are the guys slipping a welder the size of a sewing needle through your heart and sealing your ventricles shut through a remote-controlled camera. But an electronic-medical-records system costs $40,000 to $50,000 per doc, up front, and it makes them go 18% slower collecting information they cannot trade on.
If there had been a legal market for doctors’ health information 20 years ago, when electronic medical records started, everyone would have an EMR system by now. Where would ATMs be if the bank data couldn’t be shared? I can use whatever bank machine I want because it’s legal for my bank to say, I don’t want to have a lot of branches but I’ll pay for anybody who will let my banking customers use their bank machine. But when it comes to health care, we say, No, you can’t do that.
When I did activity-based costing for Children’s Hospital in Boston, it cost about $120 just to admit a patient. Your primary-care doctor has already created 90% of that information to see you for your regular visit. Why wouldn’t the hospital give the doctor $100 if it was costing them $120 to do it themselves?
How can you make EMRs a profitable business for doctors?
So easy. Doctors lose money because these EMR systems cost a lot up front. Thing one: Don’t charge money up front. Solved. How hard can that be? I’d love to charge a lot of money up front. I’d love to be a software entrepreneur. You go from zero to 100% market share just like that, and your margins are, like, 90%. But doing so doesn’t solve anyone’s problems.
Adoption is one thing–20% of doctors have an EMR, but only 4% use one. It makes them go slower and they can’t use the data, so they keep using paper or whatever works for them for their little trade. But 100% of our network doctors use it because we set it up so that our staff does the follow-up and the filing of the charts. And if they don’t use it, they have to file their own charts, and they don’t want to do that. So we get the orders up, then we can follow up, match them, and file. They make money by using it and so they use it, amazingly.
You recently acquired Anodyne Health Systems. What will the business intelligence stuff do for you?
Our product is a service that is complex and very fiduciary in nature. You’ve really got to trust us before you switch over. It’s a lung transplant, basically, a business lung transplant. On any particular day, even doctors who know about us aren’t ready to do a lung transplant. So we needed a light product-something to say, Look, if you like us and all we’re saying, and you think maybe when you’re ready to switch to our network, here’s a software-enabled service that can start providing some of the intelligence you’d have if you were on this network.
We say, Don’t buy, just pay monthly for this service and let us start showing you how you’re doing. Then we go in and say, You’re doing exactly 43% worse than your peers on these three dimensions, and when you get on the network, this is the financial impact. For the 15,000 doctors on Anodyne services, we know exactly what the return would be, almost to the dollar.
What’s your take on controlling heath-care costs?
Everything is about spending more, from the government on down–which is such a bad frame when you consider the rate at which the whole thing is increasing in expense. There’s no responsibility on the part of society. When the deal is “anything you can invent to keep someone alive longer is covered,” guess what happens? We invent some amazing things. But who’s going to be the one in charge of saying, Not you anymore. Who’s going to be in charge of saying someone’s grandma doesn’t get that hip? When you create a dynamic where the government is the patron and everyone’s the client, you have a real problem with how to stop it. If you create a market where everyone can get involved, some of that value judgment goes to “Oh, a death panel.” If I had the money in play, my death panel would be much harsher on me than the wise men in Washington would be. I don’t want to be kept alive for that last year that’s 47% of the Medicare budget. It’s appalling how they can scientifically engineer the continued pumping of your heart.
Aside from Athenahealth, do you see a promising business model in the health-care industry?
There’s a company about to go on the road. I don’t know anything about it except that it’s in the business of processing medical requests for hospitals. That’s all it does. It goes and copies the chart, then scans it onto a central server and tags it. So now there’s a little node out there with that one sort of picture of that patient. The gross margin of getting that stuff together is zero. But the next time somebody needs something from that patient, the gross margin is 80%. Those models that take on the mundane and the pragmatic, those are the things that have the DNA to become the new health-care system.