Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Meet Athenahealth's Jonathan Bush: The Provocateur of Health Care IT


After starting his company in his 20s, the CEO takes aim at big dog Allscripts as the companies compete for doctors who need to update their practices and records.

In the esoteric world of health care information technology, Jonathan Bush is a rabble-rouser.

Bush, the CEO and co-founder of software maker Athenahealth (ATHN), takes direct aim at his competitor Allscripts Healthcare Solutions (MDRX) and that company's CEO Glen Tullman. Bush's message: Athenahealth's web-based model works best for doctors who need to electronically store medical records, run their practices and meet government requirements.

The 42-year-old Bush pokes his rival to help foster the idea that Allscripts, which sells physical software, is a behind-the-times player, while Athenahealth is the more nimble and cutting-edge competitor. He compares last year's $1.3 billion merger of Allscripts and rival Eclipsys to "a woolly mammoth dating a dinosaur."

"The freaking Internet is finally coming to health care, and it's going to be big," Bush says sarcastically.

Can Bush, who started his company 14 years ago, back up his talk? Each quarter this year, Athenahealth delivered revenue growth of more than 30% and (non-GAAP) profit margins that average about 63%. On a comparable basis, Allscripts boasts an also healthy margin just under 50% and sales growth below 12%. Even with announced plans to spend more money on business investment next year -- a move that trims profit, Athenahealth still looks to report margins above 60%.

Investors are taking note. Though Athenahealth's shares dipped after the spending plan was announced last week at an investor meeting, the company's stock is up 20% this year, trading at $49.21 Thursday morning. Allscripts shares are down 8% this year, trading at $17.71 Thursday.

Allscripts has a $3.4 billion market cap, which is twice as big as Athenahealth's. Through nine months this year, Allscripts reported sales of almost $1.1 billion vs. Athenahealth's $231.6 million. Bush says his rival has a sales force that is more than twice the size of his own (about a third of Athenahealth's sales are completed over the phone). That said, the CEO relishes the underdog, upstart image. He refers to Allscripts as an "Orwellian bureaucracy."

To illustrate the Orwellian point, Bush pranked Tullman at a health care conference two years ago. According to Bush's account, both CEOs were scheduled to talk at the event but Tullman chose to appear on an overhead monitor because he couldn't attend the conference in person. When Tullman's face popped up on the large screen, Bush came running out on stage wearing a pair of red running shorts and reenacted Apple's (AAPL) 1984 Macintosh commercial. He threw a Nerf football at the screen. Tullman declined to comment through a spokeswoman.

"He's probably a good guy," Bush says of his competitor. In the same breath, he calls Tullman a symbol of "atrophy."

Both companies, along with closely held Epic and Quality Systems (QSII), are battling for what will continue to be a growing market: helping tens of thousands of doctors each year convert medical records to electronic files (a mandate of Obamacare). Allscripts has almost 200,000 doctor customers, while Athenahealth has about 23,000. The companies also sell products to help doctors bill patients and run their practices. The potential market for all these products is in the tens of billions of dollars.

A Bush selling point is that his billing software helps doctors collect money from insurers. Athenahealth shares the rewards as it's paid a percentage of the money collected. That's a huge marketing advantage to small and medium-sized practices, which is Athenahealth's bread and butter.

"We believe the most successful companies going forward will have sales models that are economically aligned with their customers," Leerink Swnn analyst David Larsen says in a recent note. He recommends buying the stock and sets a price target of as much as $60 a share.

Larsen points to the comparative size of the two companies, noting that Athenahealth need only add a few thousand physician customers a year to maintain 30% revenue growth, while Allscripts needs to add a far greater number to maintain double-digit sales increases.

Twitter: @brettchase

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos