Microsoft and Athenahealth Join Forces on Health Software

2/22/11

Athenahealth (NASDAQ:ATHN) says it has formed a new alliance with Microsoft (NASDAQ:MSFT) to develop software to make their systems more compatible and easier for healthcare professionals to use together.

The new collaboration, Athena says, will enable healthcare providers to use the companies’ existing products to get a single view of patient records from hospitals and outpatient visits. The collaboration builds on the two companies’ previous efforts to connect each firm’s systems for common customers such as Cook Children’s Health Care System in Texas.

Teaming up in this way might make Athena and Microsoft together more competitive than they are on their own in their attempts to serve healthcare groups that are compensated based on the quality of care they deliver rather than volume of care provided—outfits known as accountable care organizations or ACOs. To measure quality of care, however, these groups are going to need to pull together data on each patient from disparate sources such as diagnostic labs, doctors’ offices, hospitals, and pharmacies. While Microsoft offers its Amalga software that enables large healthcare provides to assemble information on patients from multiple software formats, Athenahealth has built a Web-based network for delivering its electronic health record and other services such as billing management/collections to thousands of doctors across the country.

The companies are developing connector software that aims to streamline how health organizations make linkages between Athena’s system and Microsoft’s Amalga technology. Cook Children’s and Steward Health Care System in Massachusetts are supposed to be the first groups to begin using the connector technology in the second half of this year, according to Athena. Athena officials told me last year that Cook Children’s was becoming a great example of integrating its Web-based software with Microsoft’s technology. So this news today, which was announced at the big HIMSS health IT conference in Orlando, appears to build on the work the two companies have done together before.

Still, it’s tough to gauge how important this collaboration is for either Athena or Microsoft. Microsoft, in an effort to make Amalga more attractive to big hospitals, has been forming collaborations with other healthcare software vendors focuses on various aspects of the market such as Royal Philips Electronics (NYSE:PHG) in the radiology field and Dell (NASDAQ:DELL) for providing analytics and business intelligence for community hospitals. Early last year, Microsoft completed its buyout of Andover, MA-based Sentillion, a firm that offers software that is supposed to make it easier to access large health information systems while maintaining security.

For Athena’s part, this partnership could provide a new entry point into the market of large hospitals. Athena has been trying to make inroads with the large hospital market after first establishing its sweet spot among small- and medium-sized medical groups. John Moore, a health IT analyst and blogger at Chilmark Research in Cambridge, MA, said in an e-mail that he thinks that Microsoft and Athena are joining forces largely to appeal to large healthcare organizations. Microsoft hasn’t captured much of the large hospital market with its Amalga technology, Moore says.

Athena, meanwhile, has been rapidly expanding its (still relatively modest) share of the U.S. electronic health records market. The firm says that it had 3,348 medical providers using its EHR as of December 31, 2010, more than double the 1,471 providers using its software at the same time a year earlier. The company has been promoting the fact that its EHR is provided over the Internet and does not require doctors to invest as much in their own computer servers as they would to adopt client/server records software.

Athena investors appeared uninspired by the news about the firm’s Microsoft collaboration. Athena’s stock traded at $46.12 per share as of 1:29 pm Eastern time, down 2.76 percent on the day. The firm’s stock is trading close to its 52-week high of $50.56 per share, according to Google Finance.

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