AthenaHealth, A Case Study, Part 1

AthenaHealth is the most interesting company in healthcare IT. They've developed the most stable, cash-producing, low-risk business model by solving one of the biggest problems in healthcare.

For the uneducated, AthenaHealth tries to offer an end-to-end suite of practice management services for doctor's offices spanning the administrative and clinical aspects of medicine. Not only does Athena provide software for scheduling and billing patients and electronic charting for physicians, they also offer a full suite of billing and AR management services. They also offer a variety of other services to help doctors more effectively run their practice.

Before Athena, most doctor's offices performed their own billing. They paid and managed administrative staff, who usually worked in office, to bill and collect on claims. Of course, these were relatively high turn-over staff, who had a tendency to steal and cause all kinds of daily operational problems. Even without strict regulatory requirements, billing was an enormous operational and management pain for doctors.

Athena started by providing web-based scheduling and billing software for doctor's offices. Soon after, they came to understand that billing was a much bigger problem for most doctors. And they realized they could perform billing functions for their clients better than their clients could do it themselves. Because Athena was already hosting all of their clients billing data on their cloud database, they built a UI to the data from the back-end and hired a team of medical billers to send claims and manage their clients' AR. Over the years, they've expanded the breadth and depth of these services. And obviously, they also built an EHR somewhere along the line.

Athena did $422M in revenue in 2012, and has a market capitalization of $3.3B today. They are widely renowned for delivering the best service at what they do. And they will always be, because 1) Athena has complete and seamless access to all the data and b) economies of scale. No one can deliver outsourced billing and AR management cheaper than Athena, period. It's like trying to compete with Walmart on price. It cannot be done. Athena has everything going for it, including direct access and the best economies of scale in the business.

Some may observe one existential threat for Athena: hospitals buying up clinics. As hospitals do so, they may try to coerce the physicians onto the hospital billing systems. However, hospitals will probably find it cheaper to stick with Athena. Even in health systems with 10,000+ employees, Athena can still do it cheaper because of the 2 key reasons outlined above.

Looking forward, Athena has enormous opportunities ahead of it. A few examples:

1) refer patients into clinical trials

2) sell statistical analyses of the data to pharmaceuticals and device makers

3) allow other companies to tap into their network via APIs to deliver ground breaking new products and services (see AthenaNet).

4) provide HIE-like connectivity (see AthenaCoordinator)

Regardless of which initiatives they pursue, Athena can continue to thrive off a beautiful cash cow business while building greater and greater network effects. Because of the size and nature of their business, they will always provide the best value for most physicians most of the time. They can utilize that large and growing base as a phenomenal launching point for all new products and services. This company has a very bright future.

My next post will cover how AthenaHealth compares to Jack Dorsey's Square.

Disclosures: 1) VersaSuite has competed with AthenaHealth on a few deals, though it has been a rare occurrence. 2) I intend to purchase AthenaHealth $ATHN stock in the next 90 days.

The Cost of Being Wrong

Is always higher than you think.

We have been working on these hospital deployments at work at full steam for 8 months. Our first timeline was end-user training and go live in 4-5 months.

This happens all the time. I would venture to guess that more than half of all major IT projects fall behind schedule. It's human nature. Most people make aggressive planning assumptions most of the time.

I've found a mental framework that really helps me think about major planning decisions to avoid this pitfall: What is the cost of being wrong? And how does will that cost vary the more wrong I am? 2 stark examples:

If he had considered that cars and people move randomly on a public road, he might have chosen a better place to ride his bike backwards.

Nokia is perhaps the most glaring example of a modern company that failed to really think about the cost of being wrong, twice. In 2007, when the iPhone launched, Nokia was king of the world. They were incredibly wrong about the future of mobile computing. And when they did finally realize that in 2011, they chose the wrong partner. Now, it seems that Nokia's only chance for survival is acquisition by the company that banked on to turn themselves around: Microsoft.

We decided today to stick to our plan to go live on March 1st. I was against it, though things are looking better than they did 24 hours ago. A few requirements have been scaled back. As we finalize our hospital deployments at work today, I can't but think to myself, what is the cost of being wrong with regards to functionality? data conversions? training and go-live methodology? support?

The problem of course is that these are all very difficult questions to accurately assess. Even still, forcing myself to think in the "what if I'm wrong" framework helps make better business decisions.

Incentives Matter

Incentives Matter

Within the healthcare IT community, it's widely known that Health Information Exchanges (HIEs) have had a sustainability problem since their inception. Everyone wants to reap the benefits of exchanging information, but no one wants to pay for it. In economic terms, this is a classical "public goods" problem. A widely used example of a public good is roads. Other key examples include clean air/water, and parks. Everyone wants awesome highways, pristine air and beautiful parks. Someone has to pay for them.

Given that the HIE sustainability problem closely mirrors a problem that we've been solving for hundreds of years, why don't we just implement the same solution that we have been for so long? 

Tax'em!

We could tax hospitals, clinics, labs, pharmacists, and everyone else that would access the HIE data to generate sustainability revenue, but that seems politically unlikely because all the parties involved have a vested interest in keeping their own taxes as low possible. With no tax revenue and no sustainable business model in sight, HIEs will continue to struggle.

However, HIEs have an interesting opportunity within large healthcare delivery systems. It's common knowledge these days that healthcare enterprise are growing, mostly through mergers and acquisitions. Hospitals are buying up clinics left and right, and many hospitals and health systems are merging. They're trying to reduce overhead through increased overhead synergies, and to negotiate better more favorable contracts with payers.

So we have a situation where large healthcare organizations are buying up lots of entities with disparate EHR, PM, and patient portal systems. Some hospitals are offering their newly owned clinics an opportunity to adopt Epic or Cerner for their practice at a discount. But many of the doctors are hesitating to jump into the new system after having just purchased their own EHR recently. The small doctor practices are rightly worried that adopting big brother's system will give the hospital new insight and ultimately control over their practice. They know that if the hospital can't see into their practice, the hospital can't control their practice.

The environment described above is perfect to foster the growth of private integrated HIEs. Lets pretend to be the CMIO of a major health system that now operates a dozen hospitals and 200 clinics with a total of 500 disparate IT systems, of which perhaps only a few dozen talk to each other. We have 3 fundamentally different options:

1) Coerce thousands of people onto our Epic/Cerner database, and open ourselves up to enormous HIPAA-risk (a significant number of the comments in that HIStalk post regard clinic access to the hospital's database) and vendor-risk.

2) Maintain the status quo, and work with an inadequately funded, small 3rd party HIE to enable interoperability within parts of our health system and parts of other nearby health systems. We know that this HIE will split its resources among our organization and others, creating more opportunities for delays and failure, and less value for us.

3) Develop and manage our own HIE organization (an entity, not software; that can be easily purchased), and mandate it among all of the participants within our health system. Given that we currently eat the cost of re-collecting patient information 20 times within our own health system, we have a strong incentive to make it easier for our providers to get the information they need from other providers instead of re-collecting it 20x over. This option also reduces the substantial vendor-risk associated with putting all of our eggs in Epic's or Cerner's basket.

Although HIEs haven't had a great track record so far, I'm optimistic about their future. I don't think they will manifest as many were hoping they would - as independent entities that connect separate healthcare delivery systems - because of the fundamental incentive problem. But within a large health system, the there are incentives to build, manage, and maintain a robust HIE.

Moral of the story: People will do what you pay them to do, not what you tell them to do. Incentives matter. Make them want to do it, and they will.

A Roller Coaster Ride: My Weight

I have had a tumultuous history with my weight and fitness. Although I was fat, out of shape, and un-athetlic throughout most of my childhood and adolescence, I have swayed to both ends of the fitness spectrum multiple times over the past 6 years.

I spent the first 16 years of my life as a fat kid. It was in my genes, and I hadn't yet started to care about girls or appearance or leadership, so I had no reason not to be fat.

After a semester of cross country during Fall of 2005 of sophomore year of high school, I leaned out to 160 at a height of 5' 11". I couldn't believe how lean I was. All it took was waking up every morning at 5:30 and running 4 miles with my friends, who exerted the peer pressure that forced me to run, despite how badly I wanted to walk. Going into that season, I could barely run a 5K. By the end, I was running a 5K in 24 minutes.

The following Spring, I ran the 400M in track. Many consider it to be the second most difficult run after the 800M because you have to sprint as fast as you can for one full lap around the track. It's exhausting. And helps keep you lean. By the end of that track season, I was running a 400M in 59 seconds.

During junior of of high school, when I realized I had to catchup on academics to make it into a good college, I decided to pile on an absurd 7 AP classes. With my enormous homework load that often exceeded 40 hours a week, I quickly started skipping the gym to focus on homework. Then, as a stress-coping mechanism, I started eating uncontrollably. Unfortunately, this was also the first year I had a car, so I consumed enormous amounts of greasy fast food on a regular basis, especially Double Dave's pizza buffet and La Tapatia's greasy Mexican food, for lunch. It was the perfect storm of indulgence. Over 9 months, I ballooned from 160 to 245. I was obese, per the legal definition.

Over the following few years, I had managed to drop about 15 pounds, but it wasn't through a concerted effort. During sophomore year of college, I regained my fitness focus. During the fall, I focused on distance running. Although I started at 230 pounds, I was somehow able to run 3 miles in 21 minutes after just 4 months of training. I couldn't believe it. The following Spring, while living at Palladium (which had a gym and healthy buffet options available in my dorm building), I kicked it into high gear. My day was organized around my diet and exercise (not school), and over the course of 4 months I leaned out from 220 to 200 by May 2010.

During Summer 2010, I started finding my strength to be superfluous. Who cares if you can bench 250 or 450? I had always been fascinated with gymnastics. So I started gymnastics. I knew I was at an extreme disadvantage relative to true gymnasts, so I focused on my core asset, strength, and pursued rings. Olympic ring competitions are a test of strength more than anything else, unlike other forms of gymnastics, which require a mix of skills, all of which I lack other than strength.

I continued working out with rings and my body weight. In fact, I completely stopped lifting weights. I would only use my body weight to exercise, and would add weight to my body where appropriate. I peaked in March 2011, just before injuring my hand at Ultra Music Festival in Miami. At my peak, I was doing back levers, iron crosses, standing backflips, benching 315, doing dips with 135 pounds, planche pushups, and 1 arm pushups, 25 chin-ups, 15 pull-ups with extended legs, muscle ups, upside down pull ups, and muscle ups, power cleaning 245, deadlifting 455, and running at 5:40 mile. But the hand injury killed everything.

Just as I started recovering from my hand injury, I began working full time at VersaSuite. I was super-engaged, busting my ass well past midnight on a daily basis working with Dr. Gorin at the Jules Stein Eye Institute (JSEI) at UCLA on a project. I was probably putting in 80 hours a week for 6 months without exception. And once again, I thought my job was more important than my body, so I started skimping on the gym. Then I started eating to cope with the stress. Over the year from May 2011 through May 2012, I lost about 40% of my strength relative to my peak, and put on a total of 20 pounds. From May 2012 through December 2012, I stayed pretty stable, while rebuilding some of my lost muscle.

I started a focused diet at 228 pounds during the December 2012. As of this morning, February 2nd 2013, I'm 216 pounds. I will hit 200 this Summer.

Unlike my last 2 cutting phases, this one has been the most balanced. During both of my previous attempts, slimming down was the major focus of my life. I've known how to lose weight, but I was never able to do it as a secondary aspect of my life. Now, I work 50-60 hours per week, and I've learned to integrate a weight-loss program into my life.

First and foremost, I live and breathe on an app, Way of Life, on my iPhone. It's a simple checklist that I go through everyday of things that I need to do, and it utilizes an excellent UI and even provides graphing functions to track your progress. I absolutely love it. I have several weight loss related items on that list, including "exercise", "drink protein in the morning", "drink lots of water", "take body shots", "record food log", "weigh yourself", and "drink apple cider vinegar before sleeping." Yes, that's right. I write down everything that I eat, I take pictures of myself everyday, and I drink vinegar before sleeping. I'm crazy. But my methodology works. I use the app to force myself to do these things everyday, and doing these things keeps weight-loss on my mind all day, which makes it easier to actually lose weight. Weight-loss doesn't happen 3 days a week. It happens 24/7. When push to comes to shove and I'm crazing Doritos and cake, I need to be in a mental state where I can resist, and keeping weight-loss on my mind all day helps immensely.

Secondly, I've figured out how to love cardiovascular exercise for the first time ever. I am a super type-A personality. I love accomplishing my goals. But with long distance running, it's so easy to lose sight of the goal as boredom sets in after running for 10 minutes. I've always struggled as a distance runner, even during cross country in high school. Over the last 6 months, I've gotten back into Ultimate frisbee (UF). UF has been an essential part of my weight loss program because it acts as high intensity interval training (HIIT), which is much more effective than distance running at burning fat. But most importantly, UF provides an extremely powerful short-term goal: catch the disc, or lay out trying. I may be tired like hell, but if I don't keep sprinting, I'm not going to catch the disc and will fail my team. Fuck that. I play to win.

And lastly, cooking has helped a lot too. For years, I've been able to easily identify good foods from bad foods, but I've never been able to actually make healthy, delicious food myself. Now I can, and I'm getting better every week. I also have complete control over the food that makes it into my fridge, which has helped substantially. My apartment has no unhealthy food, period. And I will keep it that way until I die.

It's taken me about 7 weeks to lose 12 pounds. I have 16 pounds to go, so although I'm almost halfway there in terms of numerical weight loss, I know that the 2nd half will be much harder than the first half. I expect to hit 200 in May 2013, after another 3-4 months of focused cutting. Given that I'm now 6' 1" and have retained quite a bit of muscle, I'm going to be lean. It's going to be a fun Spring, and even more fun Summer.

The Power of Accessibility: Iced Water Jugs

Many people fail to realize that they prevent themselves from accomplishing what they want to achieve. Whether it's losing weight, being a better parent, or learning a new skill, there is so much you can do to make it easier to succeed in your new endeavor. It's easy to set goals; but when push comes to shove and you have to refuse that super-delicious icecream sandwich, those goals are quickly forgotten.

I have found that accessibility is the most important factor in succeeding at my personal goals. I have to make it easy to succeed. Otherwise, I will probably fail. I have limited will power. If I abuse it, I will eventually crash and binge. I already devote so much energy and effort to my job, so I need to maximize the effectiveness of my remaining will power to accomplish my personal goals.

This is first in a series of posts on the Power of Accessibility. Each post will feature an example in my life where accessibility was the primary cause of success where I was otherwise bound to fail.

About 7-8 weeks ago, I weighed 228 pounds. This morning, I weighed in at 216. I can see and can feel a big difference. Damn it feels good. My goal is 200, which should take 3-4 more months at my current progression. The more weight you lose, the harder it is to lose weight, so I've still got a long road ahead of me. I know that it's going to get harder to lose weight, not easier. So that means I need to come up with simple new ways to encourage myself to burn calories, without exhausting my limited will.

One thing I've known for a long time is that drinking water can help you lose weight simply because your body has to heat up the water, which translates into easily burned calories. And to make it better, the colder the water, the more you burn. It's oxymoronically awesome.

Right now, I carry my blender bottle to work, which is pretty big - it holds 28 ounces of water. That means I need to drink 4.5 blender bottles per day to drink 1 gallon (128 ounces). Although it's not that hard to do, I commonly forget to refill my water throughout the day as I bounce between projects. When I forget to refill my water, I can't drink any at my desk, and I quickly fall into a position where it's impossible to drink a gallon in a day.

Yesterday, it occurred to me that I should have a single gallon jug at work, and that I have to finish it before I leave the office everyday. The only problem of course is a temperature problem - how am I going to bring a gallon of water to 35 degrees everyday?

I can fill half of it up every night and freeze it solid. I can fill the other half up with water when I get to work. And I'll be set. I can experiment with different amounts of ice to find the optimal balance of availability and maintaining a low temperature all day.

200, here I come.