athenahealth Continues Aggressive Growth

SaaS within health care continues to remain a viable avenue for growth, and athenahealth’s (NASDAQ:ATHN), recently announced results were representative of the opportunities within the segment. As the New York Times notes, Congress is trying to restructure one-sixth of the US economy through the health care portion of the $787 billion stimulus package and through legislation expected to be approved by the Senate Finance Committee this week. Republicans and Democrats are far from agreeing on what kind of health care system the country should adopt. But whatever the government decides, athenahealth, with one foot in health care and the other in SaaS, should benefit. Let’s take a closer look at how this is so.

Q2 revenues for the company grew 42% over the year to $46.7 million. EPS grew 27% to $0.14 compared with $0.11 earned a year ago. Within some key metrics, the company recorded $1.2 billion collections posted to client accounts in the quarter compared to $0.9 billion posted a year ago. The number of active physicians using athenaCollectorSM, a billing and practice management system,  increased 31% to 13,591 in the second quarter of 2009. During the quarter, 20,323 active medical providers used athenaCollector compared with 13,554 a year ago.

To support their customers with the benefits available through the U.S. government’s health care funding stimulus, Athena launched a Stimulus Bonus Payment Guarantee Program. As part of Congress’s HITECH (Health Information Technology for Economic and Clinical Health) Act, signed by President Obama in February, from 2011 onwards, incentives of up to $44,000 will be provided through Medicare bonus payments to all physicians who use electronic health record services. athena’s program ensures that physicians who use athenaClinicals qualify for these stimulus dollars. The company is also deploying the newly formed Clinical Intelligence Team (CIT) to ensure that both athenaCollectorSM and athenaClinicals services are updated and comply with the reporting requirements of the HITECH Act. According to the company, this will guarantee that physicians who use their services will qualify for the program and will receive the benefit. John Halamka, CIO of Harvard Medical School, said in March that only about 17% of the 800,000 cliniciansin the United States use electronic health records — leaving athena with a lot of room to grow.

athenahealth recently announced the acquisition of Anodyne Health Partners and its proprietary Web-based BI software platform, Anodyne Intelligence, for a $22.3 million upfront payout. Anodyne services large and enterprise medical group clients and has over 14,000 medical providers under contract. Their platform enhances the organization’s ability to view, access, and extract information critical to operational and administrative uses pertaining to revenue cycle information. athena is looking to offer this capability through their national physician network, thus enriching their core services.

The CMS estimates that US health care expenditure will be $2.5 trillion in 2009 and expects it to reach $4.4 trillion by 2018. athena focuses on the physician and clinical services market, which is worth $539.1 million in 2009. athena collects nearly 1% of this market value. The segment is estimated to grow to $865.2 million by 2018, and athena is poised to benefit.

The stock is currently trading at $38.92 with a market capitalization of $1.30 billion. It hit a 52-week high of $41.13 on September 21.