EM Emdeon Inc. Class A Common Stock

Leading Electronic Health Record (“EHR”) vendor for medical establishments, Athenahealth (ATHN) recently reported that HealthStar Physicians, P.C., a multi-specialty physician group catering to the Eastern Tennessee region, has chosen three of its cloud-based services.

Athenahealth and HealthStar will work in tandem to generate operational efficiencies and effective communication with patients that will lead to the delivery of coordinated medical care.

HealthStar is a solid multi-specialty group based in Morristown. Its mission is to deliver top class comprehensive medical care in its community. HealthStar’s network of physicians consists of more than 60 providers in about 18 specialties. It takes care of over 300,000 patients each year in six adjacent counties and caters to several area hospitals, such as Jefferson Memorial Hospital and Lakeway Regional Hospital.

HealthStar will adopt Athenahealth’s three cloud-based offerings, namely athenaCollector, athenaClinicals and athenaCommunicator. The athenaCommunicator product will provide patients with better access (after-hours and on weekends), streamlined patient payments and reduced no-shows, among other benefits. The three offerings, in conjunction, will provide HealthStar with a unique, singular cloud-based practice management and clinical set-up that will lead to better care and patient communication.

Athenahealth’s web-based deployment provides a low-cost scalable service while its flexible rules engine leads to higher efficiency in claims settlement. The Software-as-a-Service (SaaS)-based approach allows for a more flexible delivery mechanism that is expected to help Athenahealth win deals. The company has traditionally enjoyed high customer satisfaction rates, which facilitate a larger number of referrals.

Athenahealth’s unique business model makes it a strong provider of revenue cycle management (“RCM”) services (athenaCollector) to small physician practices. Its EHR product (athenaClinical) is a key player in ambulatory settings.  We believe that sales of athenaClinical are likely to remain robust, given the opportunity for physicians to earn incentive payments under the federal stimulus (HITECH provisions).

The company should benefit from its extensive athenaCollector client base, as only a minority of its subscriber base also utilizes athenaClinical. Cross selling represents a solid growth opportunity in the near term. In this regard, Athenahealth has made rapid strides in capturing the EHR business of physician practices. However, this segment is shrinking as hospitals increasingly absorb physician practices.

Athenahealth has geared itself for the enterprise segment through its strategic alliance with Microsoft (MSFT) and acquisition of Proxsys, both earlier in 2011. The company has recently signed on, and executed several enterprise-sized deals, which provide it with a credible and reference-able client base.

However, the federal stimulus will gradually wind down but the replacement market is growing. Competition is fierce and larger competitors may benefit from the incumbency factor. Industry stalwarts, such as Cerner (CERN), offer long-standing seamless products integrating inpatient and ambulatory-care systems. Quality Systems (QSII) and Allscripts Healthcare Solutions (MDRX) are two other well-known competitors in a crowded field, which also includes low-end players such as Emdeon (EM).

 
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