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Critical Innovation In Healthcare Claims Processing: athenahealth CEO Jonathan Bush (Part 3)

Posted on Friday, Mar 20th 2009

SM: You essentially built a patient information system.

JB: Exactly. We had plans to eventually start billing, and by 1999 we were well on our way down that route. In early 1999 we had made the decision to stay in business as a management service, but we were going to narrow our management service for a while so that it would only be claims-related. We also decided to broaden our target market to be any doctor.

SM: Is that the thesis on which you raised your venture funding?

JB: Todd went out and looked for doctors while I went out and looked for venture funding. By October of that year we had more VCs than we needed and five customers. The first customer went live on January 3, 2000. On a side note, don’t try to start an Internet company on Y2K day. That was a mistake.

SM: When you signed up your first customers, how were you charging them?

JB: We owned an interest in two medical practices. In a way you could think that our first two customers were ourselves, whom I refer to as our alpha customers. We charged them a percentage of profits. The other three were our beta customers who we charged a percentage of revenues because we were not in charge of how many people they hired and what they paid them.

SM: Your value proposition was that you would retrieve their claims?

JB: Correct. We wanted 3% of what we retrieved for them. We would provide them the system, training, and do all the work associated with getting them paid.

SM: Help me understand the way you designed the system through the years. Walk me through the innovation, thinking and processes you have gone through. What were your major milestones?

JB: The original vision of the company was management infrastructure that makes healthcare work the way it should. When we changed, it became information infrastructure that helps make healthcare work the way it should. The idea was to work towards a national utility that could be used to innovate healthcare. It would be like a Visa network but with orders of magnitude more information.

One of the major guideposts was to do only things that were on mission. We had the idea to do athenaair. You have to be willing to fly athenaair if you want to be our customers. You can’t make up everything your own way. If you want to do that, go buy old-fashioned software and customize it. Don’t do that if you want to work with us, because we have tuned ourselves solely to maximizing appropriate payment.

Another key aspect was to build for the public good. We tried to have all our software development work to be done on projects that benefited everyone on the network. We tried to limit the amount of software development work or other kinds of innovation work that only benefited a limited number of customers. There are a lot of software companies that boxed themselves out of existence by building unique feature upon unique feature for their best customers. Soon their software was unrecognizable. We have done the same thing but we have tried to limit it. We sell “you are getting paid faster” with all our might, so let us do what we need to do to achieve that goal.

SM: What are some examples of software development that you would do that would eventually proliferate to your entire customer base?

JB: Rules development. Every time a claim is denied for any one doctor, it goes through a check. If it looks like a candidate for rules development, analysts will get a hold of that claim and really dig into it until they get to a root cause. Once they have the root cause they work with programmers to build a change into athenanet that prevents anybody from ever getting that denial again. There are now 40 million different scenarios in which a rule such as the one I just described will fire and correct some hourly worker, sometimes before the patient has even arrived, and get them back on track. It may only be relevant to one insurance company, but it applies to every doctor who sees patients from that insurance company. Little by little those rules accumulate into a very elaborate national knowledge resource.

This segment is part 3 in the series : Critical Innovation In Healthcare Claims Processing: athenahealth CEO Jonathan Bush
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