Hedge Fund Billionaire David Einhorn Bashes Athenahealth, But Its Customers Don't

Athenahealth shares fell nearly 14% a day after David Einhorn of hedge fund Greenlight Capital disclosed at an industry conference he’s short the stock, and expects an 80% drop. Federal stimulus money for electronic health records has sent stocks flying for most of this sector, with athenahealth shares climbing more than 6-fold since 2009 to a high of $195 this past February. For investors looking at price to earnings multiples, there’s no question that the stock is overvalued.

But then Einhorn made this disparaging remark about the company’s straight-talking founder: “Jonathan Bush likes to compare athenahealth to Amazon because they both have websites.” In an interview with Bloomberg TV, he added that athenahealth is really not a cloud company because “it doesn’t really present them [health care providers] with a competitive position that allows them to earn huge excess profits over a long period of time.”

Ascension Health disagrees. Nearly a year ago, the largest Catholic health care system in the country with 21 million outpatient visits a year from affiliated practices picked athenahealth precisely because of its cloud-based services, which include practice management, medical record, and data analytics tools. “Think of the savings we can get potentially,” says Samson Jesudass, who oversees the athenahealth implementation. Ascension, which uses Cerner in its hospitals, is paying less than what it would have for a server-based electronic health record—an expenditure affecting many health care systems’ bottom line.

The Ascension deal—athenahealth’s biggest, was a coup. The health care industry has yet to embrace the cloud on a large scale because of reliability and privacy issues, but for Jesudass it is nonsense. “Do these people buy on Amazon?” he asks.

Over the last four months, Ascension has deployed athenahealth at four sites in Indiana and Oklahoma involving 1,400 doctors. Although Ascension gave its doctors the option to turn down athenahealth’s medical record, practices overwhelmingly voted so far to ditch their existing electronic health record. It took two months for Ascension to implement athenahealth at St. Vincent Health in Indianapolis, its first site, a record time for what is an immensely disruptive undertaking for a practice. Ascension expects to complete rollout to all 4,000 doctors by June 2016.

With Medicare payment reforms rewarding providers for keeping patients out of the hospital, Ascension also chose athenahealth because the cloud allows it to look across its provider network and see how well doctors are managing their patient population. With a patchwork of incompatible systems, it is harder for Ascension to do so now. “Systems choosing us look at the inpatient system as a commodity; outpatient as a point of differentiation,” says Ed Park, athenahealth’s chief operating officer.

The company currently has 37,000 providers on its platform, almost double from 2010, representing 3% of the market. “Revenue growth is still the appropriate metric,” says Michael Cherny, a health IT analyst with ISI Group. Kind of like Amazon.

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