In an interview with Bloomberg’s Stephanie
Ruhle and Erik Schatzker Athenahealth CEO Jonathan Bush said this
morning on “Market Makers,” he “messed up” when he promised
net income growth and that he feels the reason Einhorn called out
Athenahealth was because he is the ” quintessential value guy.
He likes Apple now that Jobs is dead.” Bush said he wants investors
who “dream of a health-care cloud.”
Bush also said: “I don’t know what we’re
worth. I know we’re worth $1,000 a share at some point in the
future.”
Anchor Stephanie Ruhle concluded the interview
saying “And here we thought David Einhorn was quirky” to which
Bush replied “I am a strange guy, but I’ve found a great thing to
do with my life so I’m just happy.”
**BLOOMBERG
TELEVISION’S “MARKET MAKERS”**
Highlights:
On
promising net income was going to grow:
“I messed up. If I said net income is
going to grow infinitely and then you see this opportunity basically,
the big arbitrage for us is suddenly we’ve got – so we’ve lots
of doctors. Half of our doctors work for hospital companies.
Those hospital companies are saying you must push this network in
through our hospitals. We don’t want the cloud to be
something that happens outside the hospital and then we’re stuck on
Enterprise software inside the hospital. So we said, look, this
is a chance. They’re asking us to serve them. Let’s
double down on R&D. We finally got a good enough reputation
that we can hire as many developers as we want with our standards not
wavering. Let’s do it.”
On
growth targets:
“We believe we need to grow 30 percent a year
– or that we can and we should. To grow more than that,
you’ll have a hard time building out the infrastructure and if you
grow less than that, you might not be able to build the national
network that you’re trying to build, you want to be relevant.
We’ve always said you have to grow the margins of all products to
make them scalable and reliable. It is the natural way of
things in a software enabled service, in a network company, which we
are. So our margins have improved in every product, every
year. But when we add new products, those start at low margins
and then, as we grow them and remove the work, the scut work that is
sort of rotting the walls of health care, the margins go back up
again.”
“You have been to the doctor’s office.
I mean, the clipboard is still there and the phones and faxes.
It’s like that movie, “Brazil,” sort of this weird future where
the Internet never shows up. And finally Athena’s got a
business model that allows us to bring health care onto a secure
sector of the Internet, we call it the health care cloud, in order to
eliminate that kind of scut work.”
On
David Einhorn saying he like Athenahealth and Bush as CEO:
“In the South, that’s when they like bless
your heart.”
On
how he defends his valuation:
“I don’t know what we’re worth.
What I do – I know we’re worth $1,000 a share, no problem, at
some point in the future. And it’s up to David and others to
decide when by discounting back what they think… I pulled [the
valuation] out of my ear. I mean, the point is — what I know,
what David – the only David missed that I can see is that he
doesn’t see what a software enabled service is. So that’s —
we are not a BPO company by any stretch. We are not an
Enterprise software company. We are not even a SAS company.
We’re a company that’s a software enabled service. We give
out our software, Internet native software, to all of our customers
for free. Then we use that software to deliver a series of
complicated services that they hate and stink at. And then,
once we’re doing that, we start to realize this extraordinary
network effect where the margins go up and up and up as we eliminate
paper.”
On
why growth rate didn’t increase when he cared less about margins:
“I can have high gross margins, I just
want to put that money into R&D for new products and sales and
marketing. That income, what’re you going to do, pay 40 percent
taxes to Barack and then stop growing? We’ve got 3 percent of
the doctors; we need them all. We need at least half of them.
I’m shooting for half of the doctors, not 3.5 percent of doctors. ”
On
the Athenahealth network effect:
“So there are today there are 52,000
caregivers — nurse practitioners, doctors, et cetera — who in
their office look at a little iPad or a whatever, a laptop, a
browser, with Athenanet on it. They do all the work. In
the background, all of them are connected to one instance of one
software, one database. Every time any of them get a single
claim denied, any one guy in North Dakota, the Athena analysts in a
room not as sexy but close as this, get to the root cause, build code
that night into the network, and then no doctor ever gets that claim
denied again. So the margin associated with following up and
appealing and dealing with the insurance company turns into a new
level of profit. Similarly, a doctor wants to send a patient to
a laboratory. Athena will build a connection into that
laboratory and then any doctor in the country that ever wants to send
a patient who that laboratory is automatically lit up and connected
like you’ve added a new cable channel. That creates a huge
revenue — margin arbitrage. Because what used to be a Athena
sending a fax and receiving a fax and typing it in becomes an
instantaneous, real-time, all-margin.”
On
whether he thinks Einhorn feels he was made promises that
shareholders are not getting:
“If you ask me, the guy’s a quintessential
value guy. He likes Apple now that Jobs is dead, right, because
all they’re going to do is drive up, drive up, drive up. He’s
not going to be – Steve’s not going to be running around
demanding some crazy new space age product with all of their money,
right? He doesn’t even like Amazon. Look at how Jeff’s
pushing more and more and more into not sure we need drones, but
maybe I’m wrong. Maybe the drones are key to the grocery
business. So, I’m more in that sort of line of thinking, which is
not his. And those who buy our stocks should not be sort of
bottom watching value investors. They should be people who
dream of a health care cloud.”
On
wanting value investors to understand the company:
” I’m looking forward to the cage match
between Einhorn and Morgan Stanley, because they’re the ones who
are doing the bottom up stock pricing. David seems to be doing
well financially, so maybe there’s reasons. All I am saying
is I know that this health care cloud is a really good idea.”
On
Einhorn’s concern about getting inside hospitals:
“So lucky for us, a lot of hospitals, 550
hospitals, are already clients. We just do the doctors they
employ, and they’re saying, hey, finish the job. Move on
through. We just announced Steward Healthcare, which is a
service-backed hospital chain, that’s allowing us to start
performing services toward the in-patient side and we’re going to
roll out a new service called Enterprise Coordinator that moves
through. It’s also worth noting that hospital chains, like
Ascension, which is the largest nonprofit Catholic hospital chain in
the country, has already chosen us for billing and then said to
doctors, hey, you guys — if you want to keep the Enterprise
software that you already have for your medical records, you can, we
won’t make you leave. And six out of seven of the ministries
have switched to Athena Clinicals even though they just have these
new Enterprise software based EMRs. Enterprise software is not
a competitor to Athena; it’s a sort of previous era substitute.
And as the cloud rises up, you throw out your software.”
On
whether he sees Athena partnering with Epic:
“Totally. Run by a great lady and a
great guy. You know, they have to protect business model, which
I think is obsolete, but they do a very good job within the context
of that business model. We’ll work with them all over.”
On
hospitals having a harder time bringing doctors into the fold unless
they are willing to connect with Athena’s software:
“The average hospital today in this buying
spree since Obama was elected is up to $180,000 per doc per year
loss, subsidizing doctors to use the hospital operations and the
hospital systems. That can’t last forever. And even if
it does last for the ones they’ve bought, they’re not going
to be able to go and buy the other half of the doctors, but they’re
going to want patients. So they’re going to need to connect.”
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