Athenahealth reports tough third quarter and layoffs
Athenahealth on Friday reported it had a tough third quarter as providers stepped back from the electronic health record vendor's products, sparking an "organizational redesign" with nearly 400 employees laid off.
Athenahealth usually collects payments on its clients' behalf and keeps a percentage, so its revenue is directly tied to provider collections, which were down in the quarter. The EHR vendor has 106,000 providers in its network, and they had fewer patient visits overall. The vendor reported $304.6 million in revenue for the third quarter, up 10% over 2016, and net income of $13 million, down from $13.9 million the year before.
"Lackluster market conditions in the post meaningful use era have contributed to a slowing of our growth rate," said CEO Jonathan Bush in the earnings call Friday.
The company intends to reinvest some of the savings from its cost-cutting measures and also boost margins.
Athenahealth said Thursday it will lay off 9% of its workforce, or more than 400 employees, as part of its "organizational redesign" to simplify the cloud-based EHR vendor's structure. In addition to the layoffs, Athenahealth is also closing offices in Princeton and San Francisco, tinkering with marketing and selling its Challenger 300 jet. The new organizational strategy will save the company between $100 and $115 million, Bush said.
"The changes we making are not a one-time cost-cutting exercise," Bush in the earnings call. "They are a fundamental change to the way we manage business."
Not only did the vendor suffer because of weak demand in the third quarter, it also hurt because of the weather: Hurricanes Irma and Harvey nicked about $4 million from the company's 2017 revenue. Both Texas and Florida are in Athenahealth's top five states by provider count.
Meanwhile, the company has been strong on the interoperability front, executives reported Friday. It plans to be connected to all eligible Epic sites and about half of eligible Cerner sites by the end of the year, thanks to the Commonwell and Carequality networks.
Alongside the earnings report, the company simultaneously issued a press release announcing its "sustained momentum" in its community hospitals business. When it comes to hospitals, smaller is better for Athenahealth. In 2016, the company had the second most new contracts with acute-care hospitals with fewer than 25 beds, according to KLAS, trailing only Cerner. That same year, no hospitals with more than 200 beds contracted with Athenahealth.
Though the company reported a strong second quarter, its CEO, Jonathan Bush, sold 4,000 shares of Athenahealth stock in early July and another 4000 in early August. The company's stock fell 3.4% in the pre-market session Friday.
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