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Roughly four years after being delisted from the stock market, athenahealth is reportedly once again looking at an IPO. CEO Bob Segert floated the idea in an interview with the Boston Globe newspaper last month, but the cloud health IT vendor has since given no indication on timelines. 

The Signify View 

athenahealth is a primary and ambulatory EHR heavyweight, and partners with more than 140,000 ambulatory care providers across the US with more than 120 specialities.  

But it faces a number of challenges which could influence the timing of any return to market. In the Boston Globe interview, Segert insisted the company has created a ‘ton of value’ since 2019. Private equity firms Bain Capital and Hellman & Friedman, who paid $17B for athenahealth just over a year ago, will want to ensure the ‘ton of value’ created will offer an agreeable return on their investment before any IPO is set in motion. The company had been acquired by private equity firms Veritas Capital and Evergreen Coast Capital in 2019 for $5.7B. It then merged with Veritas-owned Virence Health, the former value-based care (VBC) division of GE Healthcare. Ex-Virence/GE executive Segert was appointed athenahealth CEO at this time.  

Positive Prospecting 

An athenahealth pre-IPO prospectus will show a company in decent overall shape, in terms of market position at least. Having profited initially from the US primary and ambulatory EHR boom (when it was achieving double digit revenue growth), the company was running around $1.2B in annual revenues before it was privatised. As well as being the leading US primary and ambulatory care EHR vendor in the US (in terms of revenues), it sits behind only Epic and Cerner in the wider EHR vendor league table. It occupies an enviable position. 

Strong Foundations 

athenahealth has built an impressive primary and ambulatory EHR portfolio. Its billing/revenue cycle management software is used by around 120,000 doctors in the US. As well as selling the billing software, athenahealth also provides billing-related services, for which it takes a commission. The company has also been successful in selling patient management and patient record solutions to many of its revenue cycle management customers. All three primary care solutions are bundled in the athenaOne product. 

Ahead of the Game 

The market will also look favourably at athenahealth’s forward-thinking approach over the last few years. For example, it was implementing EHRs in an SaaS/cloud-based environment at a time when many other EHR vendors (such as GE) were still favouring on-premise solutions. This provided first-mover advantage which reflects a nimble response to market conditions. 

athenahealth also has a well-developed marketplace where third-party software developers pre-integrate their solutions and offer them to athenahealth’s customers. This is common among ambulatory EHR vendors, and athenahealth has a leadership position in this. This is a captive market, reducing the likelihood of customers migrating to another product.  

Any IPO prospectus will also demonstrate athenahealth’s successful recent, proactive product launches. In 2020, in rapid response to the fast-unfolding Covid situation, it launched athenaTelehealth, a telehealth tool integrating video conferencing into the athenaOne EHR platform. This enables practitioners to conduct HIPAA-compliant telehealth visits within practice workflows. It also released a reworked PHM/VBC solution in 2022, expanding the company’s care management services and IT portfolio. 

A Question of Time 

Despite the above, athenahealth faces several structural and market challenges which could influence its valuation and, ultimately, the timing of an IPO. 

Firstly, it may be the market leader in terms of ambulatory revenues, but athenahealth is the leader in a saturated primary and ambulatory care EHR market with a shrinking total available market (TAM) (we discussed this recently in this Insight). The largest share of the company’s customer base is independent practices (approximately 60%), whose numbers are falling. Forty percent of its customers are IDNs, but athenahealth will inevitably lose some of these contracts to Epic, Cerner and even MEDITECH, who all offer EHR solutions in a wider cross-section of settings. The fact that athenahealth has no footprint outside primary and ambulatory care is a major constraint, especially given the trend for buyers at IDNs and big health systems consolidating on one EHR vendor across all settings.  

Getting any more mileage out of a shrinking market will require athenahealth to displace rival tier 2, tier 3 and other primary care EHR vendors. These include eClinical Works, NextGen Healthcare and Allscripts (post-Altera split), as well as a long tail of small tier 2 and 3 speciality vendors in areas such as podiatry, women’s health, optometry, dermatology, etc. athenahealth has a speciality EHR portfolio, but continued investment in these specialty solutions will be needed if it is to take share off these smaller vendors. 

athenahealth will also need to ensure the re-engineered VBC products it brought to market in 2022 are successful and can drive up average revenue per practice. 

Achieving the above will demonstrate a viable strategy for long-term growth for athenahealth. Any traction gained in this area should only improve the company’s valuation. 

Competitive Threat 

athenahealth also faces another competitive threat from Epic and MEDITECH in particular. These dominant vendors have historically only sold to large health systems, not independents, and (in the case of Epic) allowed the large health systems to resell their EHR to the independents. For example, some independents run a version of Epic’s Community Connect, leased to them by the health system, not Epic. This strategy has proved highly successful for Epic with more than 40,000 providers now accessing Epic via this solution. 

In March 2022, both vendors announced they were launching primary care solutions (Garden Plot in the case of Epic and a version of Expanse in the case of MEDITECH) that independent practices could buy themselves, outside of any relationship with a health system/IDN. This was a direct encroachment on athenahealth’s territory. Both Garden Plot and Expanse are offered as SaaS solutions enabling independent practices to implement without significant IT investment, a barrier with previous Epic and Meditech solutions.  

What Now for the IPO? 

It is against this background that Bain Capital, Hellman & Friedman, Segert and his management team must now consider when (the ‘if’ seems to be a foregone conclusion) to push ahead with the IPO. With a reliance on business with independent practices (a shrinking market segment), and a narrow focus on primary and ambulatory care products, athenahealth’s growth options look quite limited. $17B already looks like a lot of money paid out. 

But the company has put behind it a turbulent history, which included a scandal involving a former CEO and having to lay off of almost a tenth of its workforce. In 2022, it is on solid footing in primary and ambulatory care and fighting its corner against its larger EHR competitors, albeit with challenges to address. 

Athena was the Greek goddess of wisdom. Conventional wisdom suggests that an IPO for a primary care vendor in her name would represent something of a risk at this time. By all accounts, it looks like a risk the company is willing to take – but it might not happen soon if it wants a gain on $17B.