In a Treasury report released earlier last week, the U.S. government’s net financial position for the year ended September worsened to $13.5 trillion deficit from $11.5 trillion deficit reported a year ago. The fiscal deficit for the period grew to $2.1 trillion from $1.3 trillion a year ago. On a brighter note, the cash budget deficit did drop marginally from $1.4 trillion a year ago to $1.3 trillion. But analysts expect this number to remain above the $1 trillion mark due to the continuation of tax cuts in the current year. To control the growing deficit and manage health care administration costs, a year ago, the Obama administration released the government’s health care funding stimulus with benefits such as a $30 billion federal aid for hospitals adopting electronic records. Existing manual processes in the industry add to the expenses. For instance, a call for an eligibility benefits check costs the insurance company as much as $11 and has cost the country as much as $9 billion. It is thus not a surprise that health care IT companies are having a strong run in recent quarters.
The company’s revenues grew 33% over the year to $63 million and exceeded the market’s expectations of $62 million. EPS of $0.18 was higher than the Street’s projected EPS of $0.13.
In the current year, Athena has been focusing on building their salesforce. A year ago, they reported sales and marketing expenses of 18% of revenues. For the current year they expect these expenses to increase to 21% of revenues. In the current quarter, they are expect to adding 10 salespeople to ramp to an 80-member sales force.
For the coming year, athena projected revenues of $300 million–$315 million compared with the Street’s estimated $308.5 million. However, EPS of $0.68–$0.78 for the year was significantly shy of the market’s expectations of $0.85.
athena continued to expand their partnerships within the industry. Last quarter, they tied up with Humana, a national health plan provider with over 10.3 million medical members and 7.3 million specialty-benefit members. Through the partnership, Humana’s Primary Care Rewards members will be able to connect with athena’s electronic health record (EHR) service. This is the first time that a national health plan has collaborated with an EHR solution player to jointly deliver information to physicians to support patient-centered care.
As part of the alliance, Humana will subsidize the implementation cost of athenahealth’s EHR service for physicians who are interested in and eligible for participation. The two will promote the program to Humana’s national provider network of approximately 20,000 family and internal medicine physicians. Humana will subsidize the implementation cost for 100 small and large multi specialty physician practices covering 1,000 physicians.
athenahealth’s stock is trading at $41.40 with a market capitalization of $1.42 billion. Earlier in the year, it touched a new 52-week high of $47.82.
There are multiple places where healthcare administration costs can be controlled through application of IT. Automating processes such electronic medical records, claim filing, and payment processing can help save the exchequer close to $100 billion. Companies like athenahealth are geared to help drive those savings and thus have my vote of confidence.