Athenahealth and EClinicalWorks CEOs Explain Their Differences, Critique Software Subsidies

10/6/10

It was an experiment. Put two rivals in the health IT game—Jonathan Bush, CEO of Watertown, MA-based Athenahealth (NASDAQ:ATHN), and Girish Navani, CEO of Westborough, MA-based eClinicalWorks—on the same stage to talk frankly about the future of their industry. Pam McNamara, president of Cambridge Consultants, showed up to moderate with a wooden gavel, if that’s any indication of the kind of exchange she expected.

So did the experiment, which was our inaugural “Xconomy Xchange,” work? If shedding real light on a key industry without (too much) verbal bloodshed is any measure, then the answer’s a decided yes. Bush and Navani lead companies with profoundly different approaches to enabling the expanded use of electronic health records in the U.S. The CEOs did an admirable job of explaining those differences, with great questions from McNamara and only a little help from her gavel.

From the outset, it was easy to see how Bush and Navani have grown their companies into enterprises with more than $100 million in annual revenue and hundreds of employees in the Bay State. They both showed themselves to be thoughtful leaders—and skillful debaters when the discussion turned to what makes their companies stand out from others.

What follows are some of the highlights from the Xchange, which was hosted in the Boston offices of the law firm WilmerHale. Keep your eyes peeled for Bush’s and Navani’s comments on the U.S. government’s recently heightened role in their industry, as it is about the only issue on which they appeared to come close to seeing eye-to-eye.

From left: Girish Navani, Pam McNamara, and Jonathan Bush.

From left: Girish Navani, Pam McNamara, and Jonathan Bush.


On Getting Paid

Athenahealth makes most of its money by taking a small cut of revenues from doctor’s offices that use its software—rather than charging a fee to use the software or some other billing scheme. EClinicalWorks charges doctors a relatively low monthly subscription fee, set at $250 per doctor, for use of its electronic health records software.

“We are a cloud-based service. We give away the software, and we change it eight times a year,” Bush said. “The reason for that is partly because we can move through the innovation curve faster. As a new entrant, we had to be able to bust through all the different features that the established software companies had. More importantly, you have to have a totally different set of economics.”

For doctors paying $250 per month for its software, Navani said, “it’s something that you’re not going to think twice about. That’s the price that we came out with in 1999, and in 2011, we will still set it at $250. This said, we’ve got 40,000 physicians paying this much and have built a very successful company.”

Clearly, Navani believes that a low-cost monthly fee from doctors is the best way to build his business. Bush thinks otherwise; Athena’s method of collecting payment from doctors based on a percentage of a doctor’s revenue is quite different from a set subscription payment.

From left: Bob Buderi, CEO of Xconomy, and Pam McNamara.

Bob Buderi, CEO of Xconomy, and Pam McNamara.


The Evolutionary Scale

Bush gave his vision of the evolution of computing, beginning with companies that provide software on disks (akin to cavemen hunting rabbits with rocks, Bush quipped), and culminating with companies that provide cloud-based services. Of course in this scenario, eClinicalWorks would be less evolved than Athena because eClinicalWorks’s products are its software.

“The software is a means to an end. It’s the store. It’s the thing that is used to bring the customer to the product. And the product is the outcome.” Bush said. “For Amazon, the product is the story inside the book. So if I could give you a piece of electronic technology at a loss and zip you stories into this Kindle, I’m accomplishing the end, I’m selling you the story. And that’s where I see healthcare needing to go.”

Navani, unsurprisingly, saw things differently. “It is not about how you deliver technology as the only point of differentiation,” he said. He noted that his firm’s model enables its software to be customized for each customer, and to be hosted on the customer’s own servers or on eClinicalWork’s servers (for an additional monthly fee, according to the firm’s website). The company has also developed a system of providing its customers with software updates sent to their e-mail inboxes rather than on the disks that so irk Bush, and the firm lets customers decide whether to adopt new versions of the software.

The bottom line: Bush sees software as a means to delivering services or products to customers—and the software itself shouldn’t be viewed as the product. Navani appears to lean closer to the point of view that software is the product, which customers want to buy and customize to suit the needs of their organizations.


Who Owns the Place?

Athena is a publicly traded company. EClinicalWorks is private and has no outside investors. That’s simple to understand. But it was interesting to hear both Bush and Navani comment on the ownership of their respective companies.

EClinicalWorks “is a self-funded business with no investors, no debt, and we focused on recurring revenues, but not planning to hit the jackpot on the first day,” Navani said. “It was supposed to be a lifestyle business. It continues to be a lifestyle business at a different scale than what it once was, and we’re adjusting it.”

Bush, the first cousin of former president George W. Bush, said: “We have exactly the opposite approach. I come from a family of public servants, I want to create a public good, and I think that the right place for a public good is to be capitalized by the public markets. I’ve raised a ton of money.”

It appeared that the ways that Bush and Navani have organized and built their companies, while vastly different, are both well suited for their goals. Navani wanted to start his own company and have control over decisions. Bush was interested in taking advantage of the capital available in the public markets, and Athena is a publicly traded company.


A Point of Agreement

Bush and Navani seemed to both be wary supporters of the billions of dollars that the U.S. government is pouring into incentives for doctors to adopt electronic medical records. At the end of the day, both Navani and Bush see their companies as disruptive forces in the electronic health records market that are, in a way, hurt by the incentives because they will support the purchase of antiquated technologies.

“What it’s going to do is create an artificial catalyst,” Navani said. “It’s going to create some incentive that wasn’t [available] before for an adoption curve that might this from maybe getting 50 or 60 percent adoption to maybe 80-85 percent adoption” among U.S. physicians.

“What we both don’t like about [the government-subsidized electronic health records] is that the GE golf outing has a whole new topic,” Bush said, “and they can jam a piece of tired , exhausted, nearly dead software down the throat of some hospital.”

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  • http://practicefusion.com Helen Phung

    Great article. With the debate about the risks and benefits of electronic health records heating up, Bush and Navani provide insight during this pivotal time of transformation.

    While $250 is a low subscription fee for doctors, Practice Fusion’s EMR is free. There is no cost for hosting, licensing, training or support, even though the product handles all aspects of a practice’s operations. We have eliminated the main barrier to adoption for physicians – cost.

    Exciting to see innovation among so many vendors in the health IT space.

  • Richard

    I wish I had that price!!! I just started orthopaedic practice and I am paying $600/month plus another $80 for gateway.