athenahealth Inc. (ATHN), one of the leading providers of cloud-based services and mobile tools to medical groups and health systems, recently announced its decision to acquire Kennesaw, GA-based RazorInsights. RazorInsights is a cloud-based Electronic Health Record (EHR) and financial solutions company, serving rural, critical access, and community hospitals.
The acquisition of RazorInsights will help athenahealth foray into the inpatient hospital market, which accounts for around one-third of the U.S. hospital market. The company already has an established position in the ambulatory space, where it serves more than 59,000 health care providers and has achieved Best in KLAS recognition for its revenue cycle management (RCM), EHR, and patient engagement services.
Following the acquisition announcement, shares of athenahealth rallied as much as 2.7% in the trading session, before pulling back to close at $141.19 on last Wednesday. Notably, this Watertown MA-based company has generated a healthy return of around 26% over the last three months.
We note that in addition to positioning athenahealth to serve a new segment of the health care market, the buyout will advance the company’s connectedness across the care continuum. The addition of RazorInsights’ strong customer base, complementary and award-winning cloud model and increased network knowledge will bring synergies to extend athenahealth's presence across the health care market.
Though financial terms of the transaction have been kept under wraps, a recent Stifel report revealed that industry sources estimate the purchase price at roughly $40 million.
We believe that this acquisition is a strategic fit to athenahealth’s plans of operating as a cloud-service provider rather than a software company. However, in our opinion, it doesn’t yet lend athenahealth a competitive edge over big enterprise EHR vendors like privately-held Epic Systems and Cerner (CERN).
athenahealth also faces intense competition from the likes of Allscripts Healthcare Solutions (MDRX) and Quality Systems (QSII).
However, we believe that the HITECH Act, which has authorized the EHR Incentive program or the Meaningful Use program, presents significant opportunities for EHR vendors like athenahealth. The company’s impressive product portfolio that comprises the fast growing RCM offerings and dominant EHR products will continue to serve as key positives.
Currently, athenahealth carries a Zacks Rank #3 (Hold).
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