September 24, 2007

1. Shares of athenahealth Soar on IPO Debut

Facts and Background

Shares of physician services vendor athenahealth of Watertown, MA nearly doubled in price on their launch day last Thursday. The company, led by Chairman, President, and CEO Jonathan Bush, reports 10,500 customers, 573 employees, 2006 revenue of $76 million, and a 2006 loss of $9.2 million. The company's Web-based practice management and electronic medical records products are designed to maximize physician reimbursement by applying a myriad of billing rules to claims before they are submitted.

Opinion

Few would have expected a small, money-losing company operating in a complex and unexciting niche market to enjoy the best IPO of 2007 so far. Services are "in", the potential market is large, and athena's customer loyalty nears 100%. The company has little to no competition, strong technologies, and a charismatic leader. What's not to like about its prospects, other than it hasn't made a dime of profit so far?

Musings

• The big share run-up is not entirely good news for the principals. They paid big-name investment houses to run the IPO, only to have them leave money on the table through what 20-20 hindsight would call underpricing.
• Market timing is important, i.e. having a sitting President as the CEO's cousin has to be worth a few dollars in the first-day pop.
• Once reality sets in, can the company support its high valuation by making money, and more importantly by Wall Street standards, increasing growth?
   

2. Big-Name Physician EMR Vendors Missing from CCHIT's 2007 Certification List

Facts and Background

Hospitals providing electronic medical records software to physicians under the Stark exception are limited to products whose CCHIT certification was obtained in the past 12 months, based on HHS guidelines. Interpretation suggests that the products of several big vendors are therefore not eligible to be provided, among them Allscripts, Cerner, Epic, GE, Misys, and Sage.

Opinion

Surely these vendors knew the rules, assuming they are not being interpreted differently. So, then, why would they not have earned CCHIT's 2007 ambulatory certification? One possibility is that it's a lot tough than the first-year requirements were.

Musings

• Several products not certified in the initial 2006 batch have time before their certification exceeds the 12-month limit. So, CCHIT 2007 is not yet required, although those products with 2006 certifications don't have much time left.
• The 2007 certified products are mostly small, less expensive, and use more modern technology. Coincidence?
   

3. Study Says EMRs Are Vulnerable

Facts and Background

The eHealth Vulnerability Reporting Program published last Monday the results of its 15-month study of the security and vulnerability of electronic medical records systems for physician office use. The conclusion: these systems are vulnerable, although no more so than systems in other industries.

Opinion

The press release announcing the study concluded with a strong hint that its sponsor had already planned to create an oversight body for healthcare IT security.

Musings

• The obvious foregone conclusion is that an oversight and reporting body should be created. Does EHRVP plan to create its own, or is it drumming up business for CCHIT?
• Hospitals often are pushed into good security practices by their internal or external auditors, both of which are missing in most physician practices. Focusing on physician systems makes sense.
• The exploits identified require either TCP/IP or physical access to the system. The latter would seem to be more important in most physician systems, which are usually running on local servers. External exploits could be launched through the vendor's remote support facility or through a portal-type product that is Web-facing.
• It would be easy to find a litany of problems with physician computing technology and practices. They are, after all, small business with minimal IT expertise. One might conclude that the lack of information exposures suggests that the risk, while real, may be overstated. As long as physician systems aren't storing credit card information, the value of their information to a hacker is minimal.
   

4. Hospital Outsources IT to Dell

Facts and Background

Seton Family Hospitals of Texas, owned by Ascension Health, announced Tuesday that it had outsourced infrastructure management to Dell, which already employs Seton's CIO.

Opinion

Running a healthcare IT organization doesn't seem like Dell's core competency. This looks like a mutual back-scratching in return for Michael Dell's donation to Seton that created the new Dell Children's Medical Center.

Musings

• Every few years, big companies look at healthcare spending and decide to loudly jump into the water. They usually slink out shortly thereafter once it becomes obvious that competitors aren't in healthcare because it's hard.
• Try Dell's help desk before deciding they can help hospitals manage physician and nurse computing.
• Dell can be a great healthcare partner for some things that are purely infrastructure related, but that hardly seems to be a good reason to entrust them with IT strategy, which if done right, should have little to do with hardware and much to do with patient outcomes.
   

5. Murtha Among "Most Corrupt" Members of Congress, Watchdog Says

Facts and Background

U.S. Rep. John Murtha of Pennsylvania was named by Citizens for Responsibility and Ethics in Washington as one of the "22 Most Corrupt Members of Congress". Murtha, chairman of the House Defense Appropriations Subcommittee, was named after threatening a fellow House member for criticizing a $23 million Murtha earmark project for a National Drug Intelligence Center in Murtha's home district, which includes Johnstown, PA. From the transcript, Rep. Murtha told Rep. Mike Rogers,"I hope you don’t have any earmarks in the defense appropriations bills because they are gone, and you will not get any earmarks now and forever.”

Opinion

Murtha has brought home a lot of federal money for Conemaugh Health System and related projects, some of involving healthcare IT work. The locals love him, of course, as do the defense contractors like Northrop Grumman, who benefit from grant money earmarked for electronic medical records studies. He's trying to jump-start a clean, high-wage industry by bring in federal dollars for healthcare IT projects, claiming local expertise through the Conemaugh connection. He has a particular interest in healthcare and has pumped billions of federal money into disease research and IT projects, much of it benefitting his home district and some of it bearing his name.

Musings

• Locals have no problem with their Congressman using his influence to obtain federal grants for what is an obvious attempt to support a sagging local economy. The rest of us might, but we don't get to vote for or against Rep. Murtha.
• There's nothing wrong with putting money into worthy projects, but installing high-tech, grant-funded operations under the guise of defense projects in remote, home district areas with little to offer otherwise seems like a stretch.
• He's only one of 22 members of Congress on the pork barrel list.
  
  

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