Long-term potential
The government's $787 billion stimulus plan may not revive the economy on its own. But any commitment to spend money like that creates big opportunities for some companies in the right business at the right time.
Plenty of Massachusetts companies and institutions could fit that description.
Among the more interesting: athenahealth Inc., the Watertown company that helps doctors handle billing and manage medical records electronically.
Computerizing medical records is a priority in the stimulus plan, which will dedicate $19 billion toward that goal over time. That breaks down into $2 billion for grants to create a national computerized system and $17 billion worth of carrots, in the form of higher Medicare and Medicaid reimbursements, to get doctors and hospitals to adopt the technology.
Some doctors store records on computers today, but many others don't. The software and service can be expensive and the benefit has been hard to measure. All the new carrots will probably change that.
"We think this is one of the safer bets from the Obama stimulus plan," says Steve Demirjian, chief executive of Integrity Capital Management in Boston, which owns athenahealth shares. "Healthcare is an area people have talked about for years as being behind the curve."
A handful of software and service businesses can help medical practices move onto computerized systems, and analysts say the stimulus plan will become a cash tide that probably lifts all companies to some degree.
"The stimulus obviously is good for all of them, including athenahealth," says analyst Richard Close of Jefferies & Co. "I don't necessarily think it's going to cause people to knock down the doors of vendors today. But from a long-term perspective, there's been a lot of inertia getting technology into the hands of doctors, and companies like athenahealth are definitely going to benefit."
Athenahealth got into the medical business with a technology challenge to software companies that have served doctors and hospitals in the past. It offered an Internet-based service that helped doctors manage their billing in return for a percentage of the practice's revenue. The actual percentage varies depending on the kind of practice and other factors.
That business model avoided big up-front expenses for software licenses and hardware. Athenahealth also showed doctors they could get paid more money faster using its system. All the company's clients worked from one software platform, accessed by the Internet, so athenahealth could regularly update its system for every client, unlike conventional software companies.
Athenahealth went public in 2007 and remains one of the few Massachusetts initial stock offerings of recent years that can still call itself a success. Company shares that sold for $18 each to initial public investors closed yesterday at $33.79, or a very pricey 43 times expected 2009 profits.
Shortly after going public, athenahealth began offering a medical records management service that fits ideally with the new federal stimulus objectives. Like the billing service, athenahealth charged a fee based on practice revenues and offered the service via the Internet.
The number of doctors using that service is growing, but it remains much smaller than the crowd paying athenahealth to help manage billing. By the end of last year's third quarter, athenahealth reported 17,297 medical providers on its billing service, an increase of about 50 percent over the previous year. The company's clinical records service reported just 549 clients.
Athenahealth's records-management services are newer and available only to doctors who use the company to handle their billing. But the client numbers also reflect another simple fact. A sales pitch about getting paid more money faster was simple. Computerized clinical records came at an expense, but the benefit couldn't be described in dollars and cents.
That's changing now, and Carl Byers, chief financial officer at athenahealth, believes government reimbursement rules will push doctors even more aggressively to maintain computerized clinical records in years ahead.
"What you're moving toward is multiple tiers of payment based on whether you're doing the right thing," says Byers. "The carrots are going to come before the sticks. Starting in 2016, if you haven't made a conversion, you start getting less than the baseline" reimbursement. "It's not just about doing the right thing in the exam room, it's about proving you're doing the right thing when you're billing the government."
That business cycle will take many years to play out for a company like athenahealth. Call that a long-term company stimulus plan.
Steven Syre is a Globe columnist. He can be reached at syre@globe.com. 