EMR Gaining Ground; Athenahealth Growing Steadily

The healthcare IT industry has been in the news lately as various medical authorities and organizations work together to define Stage 2 requirements of the Meaningful Use initiative. Under the HITECH Act, Stage 1 under the Meaningful Use initiative began in 2011 and referred to the capability of physician providers to transfer data to electronic health records (EHRs) and share information, including electronic copies and visit summaries for patients. According to the National Ambulatory Medical Care Survey (NAMCS), 57% of office-based physicians are now using either partial or full electronic medical record (EMR) systems. The Center for Medicaid & Medicaid Services (CMS) has begun work on defining the requirements for Stage 2, which is proposed to begin in 2014. Under the proposed rules, meaningful use for Stage 2 will include standards such as online access for patients to their health information, and electronic health information exchange between providers. The final stage for EHR meaningful use implementation will begin in 2016, where Stage 3 will include demonstration of improvement in the quality of health care. EMR services provider athenahealth is gearing up to capture this growing market.

Athenahealth’s Financials
Athenahealth’s (NASDAQ:ATHN) Q1 revenues grew 38% over the year to $96.6 million, ahead of the market’s estimate of $93.7 million. This was the fifth consecutive quarter in which athenahealth’s revenues delivered double-digit percentage growth.

By segment, revenues from Business Services grew 39% over the year to $93.5 million, and Implementation and Other revenues grew 23% to $3 million. Adoption of athenaCollector by medical providers grew 21.4% and by physicians 21.9% over the year. The use of athenaClinicals by medical providers grew an impressive 77.9% over the year. At the end of the quarter, athenaCommunicator had been adopted by 6,800 medical providers, of whom 4,820 were physicians.

For the quarter, EPS of $0.17 was also ahead of the Street’s projections of $0.08 for the quarter. Although they have exceeded market expectations, their earnings have registered a steady decline over the past two quarters. The current quarter’s GAAP EPS of $0.07 was 22% short of the previous year’s earnings. During the quarter, athenahealth’s marketing spending grew 40% over the year, which cut their margins. Athenahealth is investing heavily in marketing so as to capture a bigger share of the market as federal aid to the industry will gradually be lowered.

Athenahealth’s Expanding Market Reach
During the quarter, athenahealth continued to expand their athenaCoordinator offering. The tool was expanded through the acquisition of Proxysys and delivers their product line, including integrated revenue cycle management, EHR services, and patient communication services. Last quarter they expanded the reach of athenaCoordinator to physician receivers. They believe that their steps will help them expand their reach in the U.S. market and will bring many “new senders and receivers of health information” onto their network.

athenahealth’s stock is trading at $75.10, with a market capitalization of $2.69 billion. In May 2012, it touched a 52-week high of $79.41.