In buying RazorInsights, “We're acquiring an installed base of very small hospitals so we have users from day one that we can work with in the field,” said Jeremy Delinsky, chief technology officer at Watertown, Mass.-based Athenahealth. Also, RazorInsights is “the only cloud-based offering in the inpatient clinical and financial space,” Delinsky said. Athenahealth also uses a cloud-based approach with its existing offerings aimed at office-based physicians.
Terms of the deal were not disclosed because the purchase price of the privately held RazorInsights was deemed to be “immaterial,” that is, less than 5% of the value of publicly traded Athenahealth, Delinsky said. Athenahealth, incorporated in 1997 and publicly traded since 2007, has a market cap of $5.4 billion, meaning the deal is valued at less than $270 million.
Athenahealth began as a developer of practice management systems. It has since added an EHR product offering and ranks eighth among more than 500 vendors selling complete EHRs whose customers have used them to receive payments under the federal EHR incentive payment program, according to a Project Japan data analysis.
Athena holds roughly a 2.7% market share in that EHR market. The top eight vendors control about 63%.
RazorInsights, launched in 2009, ranks 16th among vendors of complete EHRs used by hospitals in an inpatient setting. Its market share in that niche is roughly 0.5%. The company offers an inpatient and ambulatory-care EHR as well as financial management software.
“They sell to the rural and critical-access hospitals” of no more than 50 beds, most with 25 or fewer, Delinsky said. “We love to sell to small group practices.”
Plus, RazorInsights' developers have “ancillary” systems—pharmacy and laboratory systems, “Athena doesn't,” he said.
There will be no sudden switchover for a “very small number” of hospital-employed physicians using its RazorInsights' ambulatory EHR systems, Delinsky said. As the products are aligned, both will have the same look and feel, Delinsky said.
Athenahealth sees opportunity in the ultra small hospital IT market. That segment was once the sole preserve of a few niche vendors, but now has become a poaching ground for larger developers such as Epic, Cerner Corp. and McKesson Corp.
Delinsky said Athenahealth has larger ambitions to work its way up the hospital market. “That's the plan in the long run,” he said. “It will take time to get there.”
In its most recent financial filings with the Securities and Exchange Commission, Athenahealth posted a third-quarter loss of $1.6 million, or 4 cents a share, on revenues of $190.4 million, compared with a loss of nearly $1.2 million or 3 cents a share on revenues of $151.5 million in the third quarter of 2013.
The company reported a loss of $11.8 million or 31 cents a share on revenues of $539.4 million for the first three quarters of 2014, compared with a loss of nearly $10.6 million or 29 cents a share on revenues of $423.4 million for the same period in 2013. Athenahealth's stock soared to an all-time high of $195.04 a share in February last year, but closed at $140.25 Tuesday.
Athena acquired mobile medical application developer Epocrates in 2013 for $293 million.
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