Prospectus Summary
This summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider before buying shares of our common stock. Before deciding to invest in shares of our common stock, you should read the entire prospectus carefully, including our consolidated financial statements and the accompanying notes and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in each case included elsewhere in this prospectus.
athenahealth, Inc.
Overview
athenahealth is a leading provider of Internet-based business services for physician practices. Our service offerings are based on proprietary web-native software, a continuously updated payer knowledge-base and integrated back-office service operations. Our principal offering, athenaCollector, is a revenue cycle management service that automates and manages billing-related functions for physician practices and includes a practice management platform. We have also developed a clinical cycle management service, athenaClinicals, that automates and manages medical record-related functions for physician practices and includes an electronic medical record, or EMR, platform. Our services are designed to help our clients achieve faster reimbursement from payers, reduce error rates, increase collections, lower operating costs, improve operational workflow controls and more efficiently manage clinical and billing information.
Our services require relatively modest initial investment, are highly adaptable to changing healthcare and technology trends and are designed to generate significant financial benefit for our clients. Our results are directly tied to the financial performance of our physician clients, because the majority of our revenue is based on a percentage of their collections. Our services have enabled our clients to achieve first pass claim resolution rates of 93% on average compared to an industry average we estimate to be 70%. Our internal studies show that we have reduced the days in accounts receivable of our client base by more than 30%. We have experienced a contract renewal rate of at least 97% in each of the last five years, and this persistent customer base drives a predictable revenue stream. In 2006, we generated revenue of $75.8 million from the sale of our services, compared to $53.5 million in 2005. As of March 31, 2007, there were more than 10,000 medical providers, including more than 7,500 physicians, using our services across 32 states and 54 medical specialties.
We believe our innovative Internet-based business services model represents a significant departure from the model of stand-alone software used by on-site or outsourced staff to help physicians run their practices. By continuously improving all three components of our services, we drive improvement in the business results of our network of clients: we update our centralized web-native software every six to eight weeks; we add more than 100 rules on average each month to our shared payer knowledge-base; and we regularly improve our integrated back-office service operations with more efficient technology and processes. Additionally, as our database of aggregated health information grows, we are able to use this information to further the strategic position of our company. For example, in June 2006 we introduced our annual PayerView rankings of health plans’ performance with respect to the speed and accuracy of reimbursement processes at different insurance companies, which we believe increases our profile in the provider and payer communities.
Market Opportunity
The market opportunity for our services is driven by physician office collections in the United States. According to the U.S. Centers for Medicare and Medicaid Services, since 2000, ambulatory care spending increased by an average of 7.7% per year to $420 billion in 2005. As the ambulatory care market has grown, we estimate that the market for revenue and clinical cycle management solutions has grown to over $27 billion. These expenditures are primarily comprised of salary and benefits for in-house administrative staff and the cost of third-party practice management and EMR software, which was 6.4% of the payments for ambulatory care in 2005.
End box 1 END LOGICAL PAGE PAGEBREAK BEGIN LOGICAL PAGE Begin box 1In addition, growth in managed care has increased the complexity of physician practice reimbursement. Managed care plans typically create complex reimbursement structures and plan designs that place greater responsibility on physician practices to capture data and provide appropriate claims to obtain payments. As a result, physician practices must keep track of multiple plan designs and processing requirements to ensure appropriate payment for services rendered. We also believe that new initiatives by government-sponsored and private health plans will further increase the complexity of physician practice reimbursement. For example, pay-for-performance programs require submission of enhanced information to payers, and new health plan designs, known as consumer driven health plans, include provisions for increased direct payment by patients.
Physician practices are generally not well equipped to address this increasing complexity. In addition to administering typical small business functions, physician practices must invest significant time and resources in activities that are required to secure reimbursement from third-party payers or patients and to process inbound and outbound communications related to physician orders to laboratories and pharmacies. To accomplish these tasks, physician offices often use locally installed software, send and receive paper-based and fax-based communications and conduct telephone-based discussions with payers and intermediaries to resolve unpaid claims or to inquire about the status of transactions. This work is typically performed by in-house staff, although some practices hire third-party services that also use locally installed software to manage transactions.
As the complexity and number of health benefit plan payer rules have increased, the ability of physician practices or third-party billing services to use locally installed software solutions to keep up with these rules has diminished, leading to poor financial performance and decreased clinical efficiency. In addition to the time and cost of these activities, medical offices typically stop seeking reimbursement and write off associated receivables for up to 10% of their medical claims.
Our Solution
The dynamic and increasingly complex healthcare market requires an integrated solution to effectively manage the reimbursement and clinical landscape. We believe we are the first company to integrate web-native software, a continuously updated payer knowledge-base and back office service operations into a single Internet-based business service for physician practices. We deliver these services at each critical step in the revenue and clinical cycle workflow through a combination of software, knowledge and work:
End box 1 END LOGICAL PAGE PAGEBREAK BEGIN LOGICAL PAGE Begin box 1Our Strategy
Our mission is to be the most trusted and effective provider of business service for physician practices. To achieve this, our strategy includes:
Risks Associated with Our Business
Our business is subject to a number of risks which you should be aware of before making an investment decision. Those risks are discussed more fully in “Risk Factors” beginning on page 8. For example:
End box 1 END LOGICAL PAGE PAGEBREAK BEGIN LOGICAL PAGE Begin box 1Our Corporate Information
We were incorporated in Delaware on August 21, 1997 as Athena Healthcare Incorporated. We changed our name to athenahealth.com, Inc. on March 31, 2000 and to athenahealth, Inc. on November 17, 2000. Our corporate headquarters are located at 311 Arsenal Street, Watertown, Massachusetts 02472, and our telephone number is (617) 402-1000. Our website address is www.athenahealth.com. The information on, or that can be accessed through, our website is not part of this prospectus. In this prospectus, the terms “athena,” “athenahealth,” “we,” “us” and “our” refer to athenahealth, Inc. and its subsidiary, Athena Net India Pvt. Ltd., and any subsidiary that may be acquired or formed in the future.
athenahealth, athenaNet and the athenahealth logo are registered trademarks of athenahealth and athenaCollector, athenaClinicals, athenaEnterprise and athenaRules are trademarks of athenahealth. This prospectus also includes the registered and unregistered trademarks of other persons.
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