Healthcare software forecast: partly cloudy with a chance of innovation.
Can athenahealth’s cloud healthcare products overcome traditional installed solutions from established providers?
Value Proposition
Athenahealth’s value proposition has evolved over time. Initially a revenue cycle management product, broadened capabilities now provide a suite of healthcare solutions paired with data analytics.
Initial Value: reduce administrative burden by managing reimbursements and payments for small healthcare providers.
- Cloud analytics and back-end support to streamline reimbursement and ensure providers get paid on time with reduced administrative overhead. Submitting claims for reimbursement can be an opaque and unpredictable process. athenahealth manages healthcare provider revenue cycles by handling reimbursement claims and payments.
- Low implementation costs relative to competition.
Current Value: improved portfolio of software capabilities.
- Electronic medical records (EMR) solution provided through athena’s cloud interface.
- Patient outreach tools provided through athena’s cloud interface.
Potential Future Value: provide easy access to an ecosystem of cloud healthcare services for both small and large healthcare providers.
- Cultivate an ecosystem of software collaborators to build a portfolio of innovative software solutions.
- Generate enough value in cloud analytics and partner companies to convert larger hospitals to the athenahealth platform.
Operating Model
Athenahealth has three key assets to create the above value for its customers:
- athenaNet, a single instance of cloud software deploying services to all customers.
- A centralized database of information and associated algorithms.
- A network of 72,000 interconnected healthcare providers as of Q3 2015 [1], growing at 20%-30% per year over the ten years from 2005-2015. As of November 2010, the network boasted a 97% retention rate [5].
Cloud-deployed continuous improvement: The first component of athenahealth’s operating model relates to its ability to provide continuous improvement for its existing products. Access to customer data allows athenahealth to identify improvements, and its cloud application allows instant deployment.
- Example 1: Feeding reimbursement results into analytics and machine learning algorithms allows development of optimal strategies for dealing with insurers. For each round of improvement, new strategies can be deployed instantly to all users of athenaNet.
- Example 2: Seamless updating to adapt reimbursement processing as the Affordable Care Act is implemented.
- Example 3: Updated check-in procedures were deployed within 24hrs in response to the Ebola crisis.
More Disruption Please (MDP): MDP is a combination of efforts to develop an ecosystem of partners by incentivizing 3rd party innovation and product development. The program allows for the development of complementary products outside of athenahealth’s core expertise. These complementary services enhance the value of athenahealth’s network and potentially allow expansion into larger hospitals, where customers demand significantly more specialty services from their software providers.
The program is enabled by a simple cloud programming interface (API), the MDP Marketplace, and the MDP Accelerator. The MDP Marketplace was developed to deploy partner software to athenahealth’s full network. The MDP incubator program provides office space, funding, and access to athenahealth resources and customers.
- Example 1: Chiron Health partnered with the MDP Marketplace to provide a telemedicine application. According to the Chiron Health CEO, “This partnership now allows thousands of athenahealth clients to seamlessly integrate video visits into their existing clinical workflow.” [2]
- Example 2: Smart Scheduling, founded by four MIT engineers, partnered with athenahealth’s MDP Incubator to develop a predictive analytics tool for “intelligent overbooking” similar to the airline industry. CEO Chris Moss praised MDP’s accelerated “build-measure-learn loop”, providing easy deployment to pilot customers. [6]
Competitor Operating Model (for comparison): Epic Systems, current market leader.
- Decentralized software running on customer servers.
- High levels of customization for each customer implementation.
- Massive installation costs often ranging from $100M to $1B and taking years to deploy.
- Many specialized solutions, such as blood-bank and pharmacy management.
- Major handicap: partner companies, such as Geisinger’s xG, have run into significant hurdles attempting to scalable deploy innovative software solutions across customized hospital systems.
Alignment and Prospects
The operating model chosen by athenahealth leads to two important tradeoffs:
- Deploying a single instance of athenaNet cloud software requires sacrificing customer customizability and control in favor of cloud analytics and streamlined deployment.
- Relying on the “More Disruption Please” program to drive 3rd party innovation sacrifices control over the broader portfolio of software solutions.
It remains to be seen whether this model can be translated to ensure continued growth. Legacy software solutions have some distinct advantages: customizability, control, and stability. Many players, however, are starting to see healthcare software as ripe for disruption. For example, IBM’s Watson division is betting on healthcare cloud analytics as its first target market [4]. athenahealth’s value proposition and operating model give it a good chance of delivering on the emerging promise of cloud health software.
References
[1] ATHN Q3 2015 Prepared Remarks 10.22.15
[2] Chiron Health partners with athenahealth’s ‘More Disruption Please’ for telemedicine offerings http://www.beckershospitalreview.com/healthcare-information-technology/chiron-health-partners-with-athenahealth-s-more-disruption-please-for-telemedicine-offerings.html
[3] Is epic future proof? http://www.healthitoutcomes.com/doc/is-epic-future-proof-0001
[4] IBM pushes Watson into healthcare with new business unit http://fortune.com/2015/09/10/ibm-watson-health/
[5] Finding Competitive Advantage in Adversity https://hbr.org/2010/11/finding-competitive-advantage-in-adversity
[6] How To Be Disruptive in Health Care IT: The Smart Scheduling Story http://www.athenahealth.com/blog/2013/02/27/how-to-be-disruptive-in-health-care-it-the-smart-scheduling-story
Great article!
Really interesting to see how athenahealth’s early business model decisions – a focus on small provider groups that couldn’t afford major capital expenditures or high implementation costs – shaped its business model – adoption of cloud – and allowed it to leapfrog the technology of incumbent on premise EHR systems (e.g., Epic, Cerner). Given that almost every other industry has adopted cloud solutions with open arms, I wonder if/how/when this plays out in the acute care space. I’d be curious to get your thoughts on how quickly and successfully athenahealth will be move into larger health systems, given that many systems have “recently” invested in on premise EHRs and some administrators seem to harbor reservations (many unwarranted) about cloud solutions.
Athenahealth’s decision to pursue the MDP approach seem’s like a great way to quickly meet the needs of providers in the changing healthcare environment (e.g., the move from fee for service to value/risk). I wonder how the decision to relinquish control will play out in terms of product quality, impact on brand, etc.