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Athenahealth on How Acquisitions Led to
New Products

Karl Zachar is VP of business development at athenahealth and deals with mergers and acquisitions. Zachar will participate in a fireside chat: The Anatomy of a Successful Partnership at Spring Fling: Matchpoint Boston. Read other interviews from the series here

Matthew Holt: You guys have actually created a couple of new products in part by acquisition. So I want you to talk a little bit about what the product line is now and how it came to be.

Karl Zachar: I think you were referring to athenaCoordinator which really was something we had on the drawing board for several years here at athena and was really kicked off with our acquisition last fall of Proxsys, which was based in Birmingham, Alabama, which we acquired and helped us launch our athenaCoordinator product which essentially, for the first time, allows the real economic sustainable model into the referral patterns for connecting hospitals with sending providers.

So, we’re excited about athenaCoordinator because it’s a real-life example of Health information exchange or HIE with a sustainable business model where we’ve essentially matched up receivers and senders in our terminology. So health care senders which primarily are private practice PCP, Private Practice Physicians, to send patient into specialists or hospitals.

We’ve finally created a unique model to be able to exchange information and make that information flow seamless and more efficient in the transfer of a patient from their primary care physician into a specialist or hospital.

Matthew Holt: And that also contributes to the bottom line, but also the physician and the hospital in terms of not only making efficiency but also some revenue transfer there as well.

Karl Zachar: Sure, and so that was almost at the core of our thought process which ultimately led to this acquisition is how do we create an economically sustainable model where both the sending physician, in this case, the primary care physician, and the receiving physician, in this case, the specialist or the hospital, how did both benefit from this transaction and that was the basis for the acquisition for the strategy of athenaCoordinator.

Matthew Holt: Why don’t you sketch up sort of the general directions that you guys are going in now and then we’ll talk a little bit about what that might mean in terms of products and things you like?

Karl Zachar: Sure. So, two of our products in our line of business have come for acquisitions both the Communicator and Coordinator. So back to the question where are we looking next? There’s really four areas we’re looking towards for the next five to ten years from athenahealth standpoint.

One is the consumer. It’s the risk-based model, helping providers get better tools, so that they can survive and try in a new risk-based model that inevitably is where reimbursement is going. So the whole ACO model, athena believes we are uniquely positioned to help health providers take on that risk in a new reimbursement model.

The third area we’re focused is Data, and we believe that athena’s platform being a single instance software, being a cloud-based platform, allows us to have very valuable data which could be very interesting to some other players in the ecosystem whether it’d be the payers, government, manufacturers, pharma, employers, a whole host of people that might benefit from the data that we’re collecting within athenaNet.

And then finally, is the Enterprise where we’re looking at large providers where -– and how do we add value? Coordinator clearly was the first step into the enterprise where most hospitals are very concerned and very interested in expanding their presence in the community, and expanding their ability to interact and be better partners with physicians that are in the community that aren’t necessarily employed by the hospital, but that are affiliated with the hospital.

So, we’re looking for creative ways very much in the athena style of how do we increase productivity; how do we increase – what value can we provide into the enterprise space, and primarily two factors. One is, can we increase the revenue? Can we increase their market share? That’s one side.

The second side or the flipside of that would be, how do we help them with all the multitude of task and work that they can do, whether there are things that athena can help them do and make their operations more efficient. So those are the four things we’re focused on.

Matthew Holt: So in terms of, and that obviously gives you a large range of options in terms of things that you can plug in. There are probably two different ways of thinking about this and we’ve had some discussions with athena about both of them.

One is obviously, you can make acquisitions, plug-in, add another products on. The other you can do is, and I think Ed Park talked a little bit about this, is open up the API and have other people build into that and work in partnerships. So there’s sort of combination of things you can do to grow the ecosystem. Now you have obvious large basis of solutions you are using. Can you give a sense of where you guys are in that patent now and then I’ll also ask you a little bit more philosophical questions about how you go about this.

Karl Zachar: Athena is very interested in speaking with companies in all difference stages of their development that have a focus on increasing or giving physicians tools to become more efficient and more productive in doing what they do best, which is helping patients.

So, as you can see, we’ve been somewhat active on the acquisition part. But we’ve been more active and we’re spending more of our effort on a partnership strategy, on inviting unique companies to come into the athena network of physicians which today numbers about 35,000 providers and to basically play on our platform, to provide their services on the athenaNet platform.

And so, over the next 12 months, I think you will see us develop many more partnerships with companies that share a similar philosophy to ours, of increasing productivity that have a very strong return on investment proposition to new physicians. We’ll partner with many of those companies and allow them to interact on the athenaNet platform.

Matthew Holt: Fantastic. Okay, very last thing. If I had Jonathan Bush on the line with me, what would he say athenahealth would look like in 10 years time in terms of an organization or company, those areas you serve? Would you be comprehensive across all those scales or would you be still rooted in the physician market?

Karl Zachar: Jonathan has surprisingly stayed very focused on aligning himself with the physician. We want to be the physician’s most trusted business partner, and to that extent, we’ve been successful; we’ve been able to grow 30% per year.

Our goal in athena has always been, I just talked about the 35,000 providers, our goal has been to reach, to get to a 100,000 providers. And once we get to 100,000 providers, I bet we’ll share a higher goal. But that’s our most immediate goal right now, and in that respect, we want to create this platform, which is unique in health care where we could invite many disruptive companies become partner with us and take advantage of the network that we’ve created, and mutually beneficial, I think partners will benefit and clearly the athena physicians will benefit.

And I think Jonathan would like to see athena become the health information backbone for all our providers rather than be known as three or four or five-product company. We want to be known as a platform company for a wide variety of providers. I think that will make our shareholders, our physicians, our employees very happy.

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