THCB

Categories

Tag: Jonathan Bush

Matthew’s health care tidbits: Athenahealth & Private Equity

Each week I’ve been adding a brief tidbits section to the THCB Reader, our weekly newsletter that summarizes the best of THCB that week (Sign up here!). Then I had the brainwave to add them to the blog. They’re short and usually not too sweet! –Matthew Holt

For my health care tidbits this week, it’s time to delve into the private equity firms’ buying and selling of Athenahealth. That’s of course the practice management/EMR firm bought by private equity companies led by Elliot Capital Management–they of the Israeli spy agency dirty tricks division–for roughly $6.5bn in 2018. Many (including me) have wondered how, given it was already doing about $1bn a year in revenue then, Athenahealth could be sold for $17bn three years later. After all it’s hardly likely to have tripled its revenue in a mature market! This comment by “Debtor 23” on @histalk is very instructive:

“Elliott did quite a bit better than 3x on its investment. The original deal was funded with about $4.8B of debt and $1B of equity from the hedge fund sponsors. Add in the acquisition cost of Centricity (call it $500M of equity, $500M of debt) and the equity investors are all-in with $1.5B of equity and $5.3B of debt. They sold off some assets for a total of ~$600M in cash, so net equity in play is $900M. They turned that equity into $11.7B (assuming no interim debt pay down), which is a 13x return. 13x feels ridiculous….but….if you’d invested that same levered-up $6.8B in the Nasdaq (QQQ) on the same timeline (Elliott began buying ATHN in spring 2017)…you could sell today for $18.1B. Absurd as this whole deal sounds, it has actually underperformed the market. This story is more about tech multiple expansion/bubble broadly than it is about improving management or running the business.”

So much like Renaissance and other hedge funds that rely on leverage, essentially Elliott leveraged Athenahealth up with debt to the tune of 80% of its value. So after slashing and burning R&D, selling assets (like the HQ which they apparently got $500m for) they probably got costs down & profits way up. When it was public under CEO Jonathan Bush, Athenahealth never tried to be that profitable. It was always fixated on the next big thing (the last one was building the future state inpatient EMR with Toledo & using the BIDMC tech it bought from John Halamka). That’s one reason its PE ratio was 100+.

So if Elliott can get some sucker to pay up and manages to turn $1bn into $13bn, how do the next greater fools–H&F and Bain Capital–do it? Well they need to layer Athenahealth up with even more debt (as money is currently so cheap) and keep generating enough cash to pay the debt. Of course at that price and with this mature a market it’s going to be super hard to grow the company enough to justify another leap in sales price, but it might be doable to service or even pay down some of the debt and take it for an IPO for a couple of billion more if the market stays nutso. So if H&F and Bain Capital basically shrink their equity portion down to $1-2 billion, and get it to IPO in a year or so for say $20Bn, they will at least double or triple their money. Not quite 13 x but not terrible.

And if it all goes wrong and Athenahealth can’t service the debt? Well the beauty of leverage and debt is that it attaches to the company – not to the PE fund that put it in that position. So all the new owners will have at stake is a reasonably small amount of equity. Of course if the shit hits the fan and Athenahealth goes bankrupt the employees and customers may not be so happy, but who cares about them? (Apart from that hasbeen CEO who got kicked out!)

Jonathan Bush Launches Zus with $35M & “Build-Your-Own EMR” Proposition for Health Tech Startups

By JESSICA DaMASSA, WTF HEALTH

Jonathan Bush has “More Disruption Please-d” himself and is back at it with a new company, Zus (get it…like the father of Athena) backed by a $35M Series A led by Andreessen Horowitz, F-Prime Capital, Maverick Ventures, & Rock Health.

“It’s ‘Build-A-Bear’ for EMR, patient relationship management, CRMs…” says Jonathan, and meant to help digital health startups work around incumbent EMR companies by providing a developer kit of components common to the “middle” of a health tech stack — AND a single shared record backend where all Zus clients can land and access patient data.

The intention is to help digital health startups reduce the time and cost of developing their tech by eliminating the redundant, generic aspects of building a healthcare tech stack in the same way companies like Stripe or Twilio have taken the burden out of writing code to process payments or integrate messaging. Zus intends to be the go-to for code used to make an appointment, create a patient profile, connect to a telehealth platform, etc. And the shared record on the back end? Does that make Zus a next-gen EMR company?? Find out more about Zus’s business model, current client list, and why, exactly, Jonathan believes that NOW is the time that the dream of the shared patient medical record is within reach.

Firefly Health’s CEO & Exec Chairman on $40M Raise & Becoming a “Bloat-less Kaiser”

By JESSICA DaMASSA, WTF HEALTH

Virtual-first primary care company Firefly Health is becoming a health plan! Backed by a $40M Series B, CEO Fay Rotenberg and Executive Chairman Jonathan Bush stop by to explain how they’re providing “half-price healthcare that’s twice as good.” (Or, as only Jonathan can put it: “we’re a bloat-less Kaiser.”) All kidding aside, some big-name health innovation investors are not only behind this raise (Andreessen Horowitz led, F-Prime Capital and Oak HC/FT dipped back in), but also this idea to wrap a benefit around Firefly’s digitally-driven comprehensive care model. Already in-market, the new benefit-plus-care product is aimed squarely at mid-sized/small, fully-insured employers – shops with 50-500 employees which, right now, have limited options for dramatically changing their healthcare spend or being able to build out their own benefits the same way large self-insured employers can.

Fay and Jonathan get into the details about how they’re extending their “Marie Kondo-ing” of healthcare delivery – which has thus far netted some pretty impressive health outcomes, cost savings, and a 92 Net Promoter Score – into healthcare financing.

BONUS: Tune in around 25:30​ and stick around for a few minutes as Jonathan weighs in on the health tech funding boom, how it compares to the EMR arms race days of ole, and whether or not he thinks he can beat Glen Tullman’s $14.5B valuation if/when Firefly goes public. HA!

More Disruption from Jonathan Bush…This Time It’s Primary Care | Jonathan Bush, Firefly Health

• 1

By JESSICA DaMASSA, WTF HEALTH

Health tech rabble-rouser, Jonathan Bush, marked his return to digital health with an appearance on the Health 2.0 stage, and quick chat with WTF Health about his new role as Executive Chairman at Firefly Health. As if conquering EMRs wasn’t enough, JB’s planning on disrupting primary care for his second act. With $10.8M series A funding and a huge addressable market, this may not be such a crazy idea after all. So, what made us miss this guy so much during his year-long hiatus from health tech? Just watch. This interview goes from the “Kabuki theater of the doctor’s office visit” to “Marie Kondo-ing” healthcare to Machiavelli and universal healthcare’s impact on the health tech market. Welcome back, JB.

Filmed at the Health 2.0 Conference in Santa Clara, CA in September 2019.

Health in 2 Point 00, Episode 95 | Health 2.0 Wrap-Up Edition

Jess and I are at Health 2.0 for Episode 95 of Health in 2 Point 00! To wrap up the conference, Jess and I talk about Jonathan Bush’s reappearance in health care on the stage at Health 2.0, with Firefly Health, with echoes of this direction in primary care by Tony Miller on the insurance panel. We talk about all the winners at Health 2.0, including the RWJF Challenge winners, Ooney with Prehab Pal and Social AI Impact Lab, and Omny who won Launch. My favorites from the conference were Indu Subaiya’s Unacceptables panel with two amazing speakers, Melissa Hanna, CEO of Mahmee & Joia Crear Perry, Founder and President of the National Birth Equity Collaborative. Catch highlights from Jess’s panel on social movements in health care as well! —Matthew Holt

Think Medical Billing, Not “EMR First”

By JONATHAN BUSH

I have heard from our sales force (and at more than one cocktail party) that most hospitals and practices around the country are focused on Electronic Medical Records (EMR) these days and not so much on medical billing or Revenue Cycle Management (RCM) now because they want to “Do EMR first.”

But what if you are doing EMR first for revenue cycle reasons?

Isn’t the bonus money offered for “Meaningful Use” of an EMR the main driver behind the rush to implement them?  And isn’t the rush intensified by the threat of reduced Medicare rates for those who don’t “meaningfully use” health information???

Okay, so how will you get the incentive money?  My guess is that you will claim to the Feds—through the attestation process—that you are a meaningful user, right?  Claim it?  Like as in file a claim?

I don’t care if it’s MU, PQRI, BTE, or LFG for Do-Re-Mi, if you are going to be glad you moved to EMR, it’s going to be because you’re able to include clinical information in your medical billing system! If you don’t have this in mind from the get-go, you will lose LOTS and LOTS of money on your choice to do “EMR First.”Continue reading…

It Looks Like the Head of HIMSS Likes Us

By JONATHAN BUSH

The headline said that the chief of HIMSS sees “seismic shifts” in the health IT landscape.

I sure hope so because I’m betting on it.

As many of our employees know, HIMSS is a massively important leader in our space, and their annual conference—this year it was held in Orlando and set an attendance record of over 30,000 people and 1,000 vendors—is our chance to feel small and uninvited. It is a club of large vendors and large buyers. Very large deals, you might say ‘seismic’ deals, requiring long-term multimillion dollar commitments in EHR and practice management systems, go down at the HIMSS conventions.

Obviously, our consistent criticism has been that the balance sheet impact of such investments is not sustainable by any health care institution for long, BUT ALSO, the information that comes from such investment…well…sucks.

It doesn’t suck because the IT departments that buy and run these EHR andpractice management systems are bad (they may or may not be, I have no idea, but that isn’t the problem). It isn’t because the systems being purchased don’t work as advertised (I have no idea if they do, but I assume the answer is ‘yes’).

Continue reading…

EHR and Practical, Tactical Outcomes

By Jonathan Bush

I hope people are watching the news around the Meaningful Use attestation data released by CMS recently, because it is so instructive as to the difference between where we are in health care and where the deliverers of keynotes THINK we are. Since last September, we’ve been publishing our Meaningful Use (MU) dashboard data and as of this week for example, we know that 83% of our Medicare MU doctors have attested to the measures.

But our constraints as a marketplace are at the practical, tactical level. According to our analysis, some 48% of what doctors order does NOT turn into a documented update to the chart within 60 days of that order. And we all know the average EHR makes docs go slower—causing employment by hospitals in large numbers—at large losses to the hospital. And NOW, based on the CMS data, it looks like a large percentage of docs are on track to miss a bloody lay-up of a bonus from the federal government! Do you guys really think we are going to build integrated ACOs that drive down hospitalization?

Pass it on—we are further behind than we think we are, and we need to hold ourselves accountable for PRACTICAL, TACTICAL outcomes before we even talk about grand outcomes like “total quality.” So what do we do? So glad you asked. I hazard three guesses, and you guys can throw in more… or challenge mine.

1. Make a market for health information exchange. Today, HIE is universally used as a NOUN. It’s a thing you buy from Aetna or Lockheed Martin or IBM. In every other information supply chain I know of, people who WANT info PAY others to give that info to them. They pay only when the info is delivered in usable form. This is, of course, not allowed in health care, but it can be. We should get behind legislation that allows for the most rudimentary mechanism for exchange in the history of man.

Continue reading…

Health in 2 Point 00, Episode 30

Jessica DaMassa asks me about Jonathan Bush’s exit and the future of Athenahealth, celebrity suicide and the future of mental health apps, and who Amazon/Buffet/Chase should choose to be their CEO — Matthew Holt

Health in 2 point 00, Episode 22

In this edition of Health in 2 point 00 the tables are turned! Jessica DaMassa is at the upstart HLTH conference, which will make those of you with long memories of the first ehealth bubble laugh. So today I’m asking Jessica the questions, including whether Jonathan Bush likes the buyout idea, what Alex Drane (Walmart’s most extraordinary cashier) said, and whether there was anything about sex at HLTH or whether that was just at YTHLive!–Matthew Holt