Bob Segert is chairman and CEO of Athenahealth of Watertown, MA.
Tell me about yourself and the company.
I’ve been a serial CEO. I have been working in the private equity space for the last 11 or 12 years. This is the fourth company that I have had the privilege to run as CEO. I’ve been largely focused on software and services. This is my first foray into healthcare.
Athenahealth is going through an interesting and fruitful transformation from being publicly held to privately held. This is providing significant opportunity for us to rethink some of the old paradigms and the ways we thought about the business. This allows us to reposition ourselves to ignite against our new vision, which is to create a thriving ecosystem that delivers accessible, high quality, and sustainable healthcare for all.
What do you bring to the table as someone with no healthcare experience?
The real advantage I have is that I can ask all the silly questions and not feel like I should already know the answer. That allows me to get to first principles.
We are all users of healthcare, so we’re all somewhat familiar with some of it, but it’s cursory knowledge. You understand some of the steps. That at least allows you to focus in and have an objective view on the data that you hear.
The value that I bring to this enterprise is that I’ve been a longtime software and services exec and I’ve been in a lot of different industries across the United States and internationally. That allows me to think about this platform business and the apps that we have a different way.
I think about Athenahealth as being a technology company that provides solutions that help doctors be more efficient and effective in what they do. But the underlying core assets that we need to continue to improve and drive value with are, fundamentally, software and services assets. That’s where my strength and background has been in for the last 20-25 years.
What opportunities do you see with the Athenahealth network that connects hundreds of thousands of users on a single platform?
It’s the most powerful asset that Athena has. We believe in an open ecosystem. That’s why our new vision is about creating that thriving ecosystem.
Ecosystems must be dense, resilient, utilized, and open. Think about Athena in that context. We are the only platform out there that has that type of capability. We are fundamentally a SaaS-based application. All our customers are on the same code. We don’t have versions of the code. We update our software every night. Everyone gets it. You don’t have to reinstall it. If you want to get a new code, just refresh your browser and it’s there.
This allows us to powerfully change our rules and change our workflows to be more reactive to changes in the healthcare system and ways to make things better. We don’t have to wait for the next release a year from then. We don’t have to wait another three years for our customer base to adopt it.
The other thing that we’ve invested in, which is an amazing asset, is the data lake. We’ve abstracted all data out of our relational tablespaces that we have for each of our customers into a data lake. We have a full API gateway that is opened up to that. With permission, any person can get into that network of data and provide additional services, whether that’s the hospital system or ambulatory system on their own or whether that’s a third-party provider that has authorization from that practice to access their data. They can now access that seamlessly through the data lake.
Our real advantage comes from the scale of that network and the openness of that network. We have 160,000 providers that are part of our company today. We process over 10 billion transactions every year. It’s a massively scaled platform, open at its core, that fundamentally will continue to be a vanguard and leader in interoperability. Healthcare needs platforms that break down the silos, the information asymmetries, and the incentive asymmetries to enable a fragmented system to thrive.
How does Athenahealth work with vendors that don’t sell EHRs but offer add-on or complimentary products?
We have the Athena Marketplace, with almost 300 partners. Frankly, I think we have underutilized the benefit and the potential of that. I’d like to see 2,500 to 3,000 partners in our marketplace.
We want to make our network open and extensible. We will let anybody come and play in that network and add value to our customers. We think it also adds value to the healthcare system. We think it drives better outcomes, whether it be accessibility, quality, or sustainability.
We are very open to driving that open marketplace and we will continue to invest in that. That’s a key part of our strategy as we think about the business going forward.
We are also committed to driving interoperable solutions at an experiential level, at a physician level. One patient, one chart. The ability to schedule and refer across ambulatory and acute care settings. We want to be able to do that with every single EHR out there that’s willing to connect with us.
Our goal is not to hoard relationships or try to be a closed system. Our goal is to enable better healthcare outcomes. If we can do that, we will prosper, and the American public will benefit.
Do you see a role in helping those companies develop a business?
We have done that in several cases, where we have worked with small businesses that are exclusive partners to Athena to help them gain traction with our customer base. We’ve provided lead referrals. We’ve provided free office space in our main headquarters building in Watertown so people can develop their products and solutions. We’ve been a big proponent of trying to help our partners be successful.
I think we have a lot more that we can do. There are investments we want to make in marketing and onboarding and enablement that will allow us to treat that with a channel support-type mindset so that we can enable the success of those partners.
Of course, there are always opportunities for us to have a broader relationship with the companies that really take off and are doing well within our customer base, for us to have a broader relationship with them. That could be a joint venture, a minority interest investment, or even ultimately an acquisition by Athena.
What is your relationship with Walmart and their use of Athenahealth systems in their Walmart Health pilot in Georgia?
We are doing work with Walmart. We see that as a significant opportunity for us as we move forward. It’s a pilot program right now, but we see that hopefully being able to expand to many more sites over the coming months. We have a lot of other programs in the retail space that will be similar. We think it will be a big growth area for us going forward.
We are seeing demand there because of our SaaS-based platform. People who are trying to use cloud-based technology, SaaS-based technology, to enable outcomes naturally gravitate towards the type of platform that we have. It is dynamic, flexible, configurable, and adaptable.
Competing vendors seem to be addressing a mature EHR market by either expanding into areas that haven’t been big EHR users or cultivating relationships with pharma. Are either of these areas attractive?
We’re not focused on the pharma space. That’s not where our strategic intent lies. You’re not going to see us pivoting into pharma, either from a data standpoint or a broader services standpoint.
Where you will see us focused is on alternative sites of care. You’ll see us increasingly in employer clinics, retail clinics, the ER, and eventually in virtual medicine and telemedicine in the home. We want to be able to meet our patients where they are and help our physicians create a seamless, end-to-end experience across the care continuum as we expand our service offerings and our capabilities in those spaces.
But fundamentally, where you’ll see us double down is investing in our fundamental clinical workflows at the front door of medicine. Peds, OB-GYN, internists, primary care physicians — that’s where we are going to focus. We’re going to focus a lot of dollars on improving that EHR, improving those workflows, and then enabling the exposure of data to help them close care gaps in real time, when the patient is in front of the doctor. That is the key thing that we think we can drive in the industry that others have a hard time matching.
It was a seemingly odd mash-up of cultures to combine the old Athenahealth with the GE business to form the new Athenahealth. How would you characterize the company’s focus and culture now compared to what it was in those previous companies?
I would say it’s evolving. We are leveraging some of the best traits of both businesses.
In Virence, the old GE Centricity business, you had some long-tenured, expert capabilities — specialty workflow experts, anesthesiology, cardiology. You have hospital-related capabilities and RCM. GE had discipline, while Athena was traditionally more freewheeling, with an entrepreneurial, founder-led culture and all those elements that has made Athena such an amazing place to work.
You take that additional expertise and specialty workflow capability and pair that with that front door capabilities that Athena had, where because of its SaaS-based platform, it could succeed with one- and two- doctor practices, because that the delivery model makes so much sense for them, whereas premise-based software doesn’t. It’s a nice mash-up between the two.
We are right in the middle of it since it has been around nine months since the transaction closed. The cultures are coming together nicely and it’s going to continue to evolve over time. You don’t move cultures quickly — cultures evolve. We’re committed to taking the best of both and bringing them together to be even a more dynamic and exciting place to work.
Athenahealth seemed to struggle in its final publicly traded days with a post-Meaningful Use mature market. How does that affect your business strategy?
There’s no doubt that Meaningful Use, the emergence of EHRs, and the incentive to adopt EHRs floated all boats. A lot of companies sprung up because of that. As the Meaningful Use hurdles get higher and higher each year and certification become more and more difficult, I think you’re going to see increasing pressure on some of the smaller EHRs that may not have the engineering wherewithal and financial background to be able to survive.
It is a replacement market. It’s going to be a consolidating market. You’ll see some of the smaller players thrive less than they did in the past. Some specialized small players will continue to do extremely well and grow based upon a focused strategy. You’re going to see some of the bigger players like Athena working to differentiate ourselves in the marketplace, trying to gain relative share as these opportunities come up for replacement.
My view, and what I’ve seen since being inside the tent, is that we have amazing products that people really, really love. We’re not perfect, but people love these products. When we get into a demo environment, when we get a chance to get in with the physicians and show them what Athena can do, we win more times than we lose.
Our big challenge right now is how to get market awareness of the brand, what we’re doing and the favorability around the brand, and to get more at-bats. We know when we get in the batter’s box, we tend to get a base hit or more.
Is it difficult to get the attention of those small practices cost-effectively to earn a sale?
I don’t know if difficult is the right word. Each market segment has a different set of tactics that you need to employ. Small groups, those practices with six doctors or fewer, make up a different market mix. It’s a lot more online advertising. It’s business development resources that are calling and trying to reach doctors and try to set up meetings.
It’s very fast deal cycle. You set up a meeting, have a phone call, set up a meeting two weeks later, and go do a demo. Two weeks after that, you have a signed contract. You literally need two weeks to 30 days to sign a contract. It’s more of a flow business. You must have the resources upfront to canvas the marketplace to make those phone calls. That must be supported with good marketing campaigns that are focused, with real content and intellectual property that gets the doctors to step up and notice.
In our major cities, we just launched the “State of the Smart” campaign. You’ll see a lot of out of home advertising. We just had a full page in the Boston Globe on Sunday. We’ll have another one coming up. You’ll see a lot more Internet-based advertising and print advertising as we continue to position our brand out in the marketplace.
Enterprise is a little bit different. Sales cycles are longer and it’s more of a direct sales relationship sale. But we have a strong engine. I would say almost 40% of our bookings are coming in the small group space. We see that as being increasingly an area of strength for us as we move forward.
Who are your most significant competitors, taking into account the spread of Cerner and Epic into smaller practices and Allscripts saying it will develop a new EHR?
It’s a very competitive market. We compete with all the major players. We compete with all the specialty EHRs when it comes to some specialty practices. We compete on a broader outsourcing model with the companies that are providing broader RCM solutions. It’s a dynamic marketplace for sure.
Everyone is focused on trying to create value for customers. We’re no different. We believe that our core advantage sits around our expertise, the type of people that we have. It sits around our platform and the open interconnectedness into it. It sits around our ability to drive value from data analytics and benchmarking from the real-time execution of our processes. That enables us to differentiate ourselves in the marketplace vis-a-vis some of those other competitors.
Hospital consolidation will continue, there’s no doubt. Hospital bed stays are going down. More and more procedures are moving into the ambulatory care setting. Clinical advances, along with patient experience and preferences, are driving that. We are going to continue to see a robust and valid market in our core segment of ambulatory care. Even if there is some additional hospital consolidation, it’s not going to take the lion’s share of the market. There’s plenty of room for us to continue to grow and thrive.
Are you still planning to release an inpatient hospital system?
We had developed an inpatient EHR platform and sold it to several customers. We will continue to maintain that platform, the rules engine, and certification. We are not actively selling that in the marketplace today. We are redirecting our full focus into core clinical workflows, rev cycle, and the ambulatory care market. But just to be really clear, we will continue to support that hospital product.
We are also strong in hospitals with our Centricity assets. If you look at Virence and the Centricity Business platform, it has a world-class central billing office capability that cuts across both the acute and ambulatory care settings. It is focused on large IDNs and research hospitals. It is one of the gold standard rev cycle products out there in the market today. We are fully committed to Centricity Business. We will continue to invest in that and we see that as being a long-term part of the Athena portfolio going forward.
What about Epocrates?
Epocrates is a part of our business. It’s a relatively small portion of the company today. We see additional opportunity in Epocrates. We believe that there’s more that can be done, more that can be leveraged as we think about how to extend the value of that platform to physicians.
We know that the people who use Epocrates love Epocrates. It’s got a very good brand reputation. We see people using the product and it influences their drug prescribing decisions. It has value in the market. We see that as an asset that can be further invested in and leveraged. Epocrates is part of our family. It’s a smaller part of our family, but we believe there are opportunities there.
Private equity acquisitions often involve cutting costs and selling off non-core businesses to boost profit, then flipping the company or going public three or four years later. How do you see Athenahealth’s future given your background working with companies that grew in different ways?
The right mindset to have with private equity is that they are equity investors. Whether it’s private or whether it’s public equity, equity value and firm value magnifies itself with growth. Every great private equity investor is trying to drive growth. Our investors are no different. This is not about us trying to maximize and take every cost dollar out of the system we can.
We have seen things that we think can be done better. We can be more efficient. We can reprioritize some of our assets and investments outside of areas where we were investing and reprioritize those in other areas. Private equity has a specific focus on value levers and how you drive value creation.
That’s the way you should think about our owners, as being people who want to invest in the business. We made a big, one-time investment in technical debt to improve the platform so that we have a more solid foundation to continue to innovate on. They are very focused on us driving growth. They are very focused on us being innovative.
They have been great partners in the process, and they’re all about creating a great company. They are not about squeezing every last nickel out of the business, because that’s not the way you create long-term value. It needs to be a sustainable enterprise.
My experience with private equity has not been about crash and burn. It’s been about focus, re-prioritizing investment on the things that drive the highest level of growth, and creating the most value for customers. If you create the most value for your customers, then you get to take some of that value yourself.
Do you have any final thoughts?
Athenahealth is an amazing company. It has an amazing heritage. It’s a business that has the right to succeed and the right to thrive. We have a set of unparalleled assets in our employees, our customers, and importantly, the platform and the ecosystem we’ve built. We now have a leadership team in place, a team that’s behind us, and investors who are focused that will allow us to make the smart investments that we need to make to reposition the business for long-term growth and prosperity. That will benefit all the physicians in the United States and the entire system as we create a thriving ecosystem that delivers accessible, high quality, and sustainable healthcare for all.